Charitable Trust would be required to obtain registration even if it is supplying medicines to patients with no profit.

Case Title: Nagri Eye Research Foundation v. Union of India

Court: High Court of Gujarat

Petition Number: R/Special Civil Application No. 7822 of 2021

Category of Dispute: GST Registration Requirement, Definition of Supply and Business

Date of Judgement: 09 July 2021

Relevant Sections: Section 2(17), Section 7(1), Section 22(1), Section 97, Section 107 of the CGST Act, 2017

Takeaway: Charity with Commerce—GST Registration Unavoidable for Medical Store Run by Trust

Facts of the Case

1. Petitioner No. 1, Nagri Eye Research Foundation, a registered charitable trust, runs a medical store under the aegis of C.H. Nagri Municipal Hospital, providing medicines at concessional rates. Petitioner No. 2 is its Secretary. The store earns marginal surplus solely to manage administrative costs and unexpected exigencies (¶2).
2. The Trust approached the Gujarat Authority for Advance Ruling (GAAR) under Section 97 of the CGST Act to seek clarification on:
   • Whether GST registration is required for a medical store run by a charitable trust; and
   • Whether supplying medicines at lower rates constitutes a “supply of goods” (¶3).
3. GAAR ruled that GST registration was required and the medicine supply amounted to a “supply of goods.” GAAAR (appellate authority) upheld this decision on 28.01.2021. The Trust challenged this through a writ petition under Article 226 (¶4).

Questions in Consideration

1. Whether the charitable Trust’s medical store operations amount to “business” under Section 2(17) of the CGST Act.
2. Whether providing medicines at concessional rates constitutes “supply” under Section 7(1) of the CGST Act, thereby attracting GST and the requirement for registration under Section 22(1). (¶3, ¶5)

Observation of Court

1. The Court noted that “business” under Section 2(17) includes trade or commerce even if not for pecuniary gain. Therefore, even charitable sale of medicines qualifies as business (¶9).
2. Under Section 7(1), “supply” includes sale of goods for consideration during business activity. Supplying discounted medicines for consideration still falls within this definition (¶9).
3. The Court held that registration under Section 22(1) becomes mandatory once the turnover threshold is crossed, irrespective of charitable status or intent (¶9).
4. The submissions by the petitioner that its activities are not commercial were found unsustainable in view of the statutory definitions and judicial findings of the advance ruling authorities (¶10).

Judgement of the Court

The Gujarat High Court dismissed the petition, upholding the orders of GAAR and GAAAR. It held that the sale of medicines, even at subsidised prices, constitutes a taxable “supply” in the course of “business”, thereby attracting the requirement of GST registration (¶11).

Between Fine Lines

• Charitable intent does not exempt a trust from GST obligations if its operations meet the definitions of “business” and “supply.”
• Selling goods (like medicines), even below cost or for welfare, is a taxable supply if consideration is received.
• “Business” under GST law includes non-profit activities.
• GST registration is mandatory if the turnover threshold is crossed.
• GAAR and GAAAR rulings were upheld as per statutory interpretation.

Summary of Referred Cases