Nagri eye Research Foundation V/S The union of India

The Nagri Eye Research Foundation, represented by its Secretary, has contested a ruling issued by the Gujarat Appellate Authority for Advance Ruling (GAAAR) on January 28, 2021. This ruling upheld a previous decision made by the Gujarat Authority for Advance Ruling (GAAR) on May 19, 2020, which the foundation had appealed against unsuccessfully. The foundation, established as a registered charitable Trust, primarily focuses on conducting eye research activities in collaboration with the C.H. Nagri Municipal Hospital. Additionally, it engages in fundraising and resource management to support educational and charitable initiatives related to eye research.

The case revolves around the Nagri Eye Research Foundation, a registered charitable trust focused on eye research and prevention of blindness, operating in conjunction with the C.H. Nagri Municipal Hospital. The trust also manages funds for educational and charitable activities related to eye research. The petitioner, represented by the trust’s Secretary, challenges an order issued by the Gujarat Appellate Authority for Advance Ruling (GAAAR) on January 28, 2021. This order upheld a previous ruling from the Gujarat Authority for Advance Ruling (GAAR) dated May 19, 2020.

The petitioner argues that they are exempt from certain tax obligations due to their charitable status. Specifically, they contest the requirement for Goods and Services Tax (GST) registration for their medical store, which sells medicines to both indoor and outdoor patients at reduced rates. The trust asserts that any surplus generated from these sales is solely used for unforeseen expenses or administrative costs, aligning with their charitable mission.

Initially, the petitioner sought clarification from the GAAR on two key questions: whether GST registration was mandatory for their medical store, and whether selling medicines at a lower rate constituted a taxable supply of goods. The GAAR’s ruling affirmed the need for GST registration and classified the sale of medicines at reduced prices as a taxable transaction.

Displeased with this decision, the petitioner lodged an appeal with the GAAAR under Section 107 of the Central Goods and Services Tax Act, 2017. However, the GAAAR’s subsequent order upheld the GAAR’s ruling, thereby confirming the requirement for GST registration and affirming the classification of the medical store’s activities as taxable transactions.

In summary, the petitioner contests the imposition of GST registration and taxation on their medical store’s activities, arguing for exemption based on their charitable status. However, both the GAAR and GAAAR have upheld the tax obligations, leading to the current legal challenge against the GAAAR’s order.

Mr. Uday M. Joshi on behalf of the petitioners, it’s crucial to delve into the intricacies of their case. The petitioner No.1, Nagri Eye Research Foundation, represented by its Secretary (petitioner No.2), has contested the ruling dated 28.01.2021 issued by the Gujarat Appellate Authority for Advance Ruling (GAAAR). This ruling affirmed the Advance Ruling of 19.05.2020 by the Gujarat Authority for Advance Ruling (GAAR), rejecting the petitioner’s appeal.

The petitioner, a registered charitable trust, primarily focuses on conducting eye research activities and managing funds for educational and charitable endeavors in eye research and blindness prevention. Additionally, they operate a medical store providing medicines at reduced rates to patients of C.H. Nagri Municipal Hospital, which they manage. The surplus income generated from this endeavor is allocated towards unforeseen expenses or administrative needs.

The crux of the dispute lies in the petitioner’s query to the GAAR regarding the necessity of GST registration for their medical store and whether providing medicines at reduced rates constitutes a supply of goods. The GAAR ruled affirmatively on both counts, prompting the petitioners to appeal to the GAAAR, which upheld the GAAR’s decision.

The petitioners argue that their medical store activities do not constitute a “business” under Section 2(17) of the CGST Act, as they are not engaged in trade, commerce, or profit-seeking endeavors. They emphasize their charitable objectives and the provision of subsidized medicine to patients, which they assert precludes their activities from being categorized as business activities.

Mr. Joshi, representing the petitioners, contends that since the petitioner’s activities do not align with the definition of business as per the CGST Act, the application of GST registration requirements and the characterization of their activities as supply of goods are erroneous. He highlights various schemes through which the petitioners provide benefits to patients under government initiatives, further reinforcing the non-commercial nature of their operations.

In essence, the petitioners challenge the classification of their medical store activities as business transactions subject to GST, arguing that their charitable objectives and the nature of their operations exempt them from such obligations. The outcome of this legal battle will likely have implications for the taxation and regulatory treatment of similar charitable endeavors nationwide.

The Nagri Eye Research Foundation, represented by its Secretary, challenges a ruling by the Gujarat Appellate Authority for Advance Ruling (GAAAR), which upheld a decision by the Gujarat Authority for Advance Ruling (GAAR). The ruling requires the Foundation, a registered charitable trust, to obtain GST registration for its medical store operations and considers the sale of medicines at reduced rates as a supply of goods. The Foundation operates primarily to conduct eye research and provide charitable services, including managing funds for eye research and preventing blindness.

The Foundation sought an advance ruling from the GAAR regarding the necessity of GST registration for its medical store and whether selling medicines at lower rates constituted a supply of goods. The GAAR ruled affirmatively on both counts. Dissatisfied, the Foundation appealed to the GAAAR, which upheld the GAAR’s decision.

In their petition to the court, the Foundation argues that their medical store activities do not constitute “business” under the CGST Act, as they are not engaged in trade or commerce for pecuniary gain. They contend that their activities are aligned with their charitable objectives and do not aim for profit. Additionally, they highlight the benefits provided to patients through government schemes, asserting that this further distinguishes their operations from commercial business activities.

The court must consider the definition of “business” under Section 2(17) of the CGST Act and the scope of supply outlined in Section 7(1) to determine the applicability of GST registration requirements to the Foundation’s activities. Section 22(1) of the CGST Act mandates registration for suppliers whose aggregate turnover exceeds specified thresholds.

The case raises questions about the interpretation of GST laws concerning charitable trusts engaging in commercial activities to support their charitable objectives. It also underscores the balance between regulatory compliance and the charitable nature of organizations providing essential services at reduced rates.

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