Read Order: NAGRI EYE RESEARCH FOUNDATION v. UNION OF INDIA 

LE Staff

Ahmedabad, July 21, 2021: The Gujarat High Court has ruled that the medicines sold by a Charitable Trust, even if supplied at a lower rate than the market price, would amount to supply of goods and would require GST registration. 

While dismissing the petition of a taxpayer, the Division Bench of Justice Bela M Trivedi and Justice Dr Ashok Kumar C Joshi observed that for the purpose of “business” u/s 2(17) of the CGST Act, it is immaterial whether such a trade or commerce or such activity is for pecuniary benefit or not.

The petitioner in the present case is a Charitable Trust running a medical store, where medicines are sold at lower rates without any profit motive. When the petitioner approached for advance ruling on the mandate of GST registration, the Ahmedabad Authority for Advanced Rulings (AAR) concluded that the applicant is making taxable supply from its medical store and hence as and when aggregate turnover of its medicine exceeds the threshold limit as specified u/s 22(1) of the CGST Act, 2017, the applicant has to obtain registration. This ruling was upheld by the Appellate Authority. 

Before the High Court, it was vehemently submitted by the petitioner that the activities carried on by it by running a medical store could not be said to be a “business” within the meaning of Section 2(17) of the CGST Act, inasmuch such activities can neither be said to be a trade or commerce nor for any pecuniary benefit.

“There remains no doubt that every supplier who falls within ambit of Section 22(1) of the Act has to get himself registered under the Act. As per Section 7(1) of the Act, the expression ‘supply’ includes all forms of supply of goods and services or both, such as sale, transfer, barter etc. made or agreed to be made for consideration by a person in the course or furtherance of business,” found the High Court. 

The Bench accepted that the petitioners are selling the medicines, may be at a cheaper rate, but at the same time it was for consideration in the course of their business. 

Rejecting the submission of the petitioner that such a sale could not said to be a “business” in view of the definition contained u/s 2(17) of the Act, the Court ruled that the ‘Business’ means any trade or commerce any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit.

“From a bare reading of the said definition, it clearly emerges that any trade or commerce whether or not for a pecuniary benefit, would be included in the term ‘business’ as defined u/s 2(17) of the Act. Petitioner has failed to substantiate or justify his submission as to how such activity of selling medicines to the patients for consideration could not be said to a trade or commerce,” observed the Bench. 

Therefore, upholding the ruling of the AAR, the High Court concluded that the medical store providing medicines, even if supplied at lower than the market rate, would amount to supply of goods and hence required GST registration. 

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