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2024 (12) TMI 515 - HC - GSTInterpretation of Sections 7 and 9 of the Central Goods Services Tax Act, 2017 (CGST Act) - charitable character of the petitioner - HELD THAT - Prima facie and bearing in mind the fact that the respondents do not dispute the charitable character of the petitioner by virtue of its registration under Section 12AA of the Income Tax Act, 1961, the Order-in-Original which holds its income assessable to tax under the Central Goods Services Tax Act, 2017, cannot be sustained. As is manifest from Sections 7 and 9 of the CGST Act, a tax under the CGST Act is envisaged to be levied on all inter-state supplies of goods or services or both. This takes back then to Section 7 which defines the expression supply and connects the supply of goods or services to the activities undertaken by a person in the course of or in furtherance of business. The activities undertaken by a charitable institution would, prima facie, not fall within the ambit of activities undertaken in the course of or in furtherance of business. The matter requires consideration. The impugned order dated 30 April 2024 placed in abeyance till the next date of listing - Let the matter be called again on 08.01.2025.
Issues:
Interpretation of Sections 7 and 9 of the Central Goods & Services Tax Act, 2017 (CGST Act) in relation to the charitable character of the petitioner. Analysis: The High Court considered the issue of whether the income of the petitioner, a charitable institution registered under Section 12AA of the Income Tax Act, 1961, should be assessable to tax under the CGST Act. The Court noted that the respondents did not dispute the charitable nature of the petitioner. The Court referred to Sections 7 and 9 of the CGST Act, which define the scope of supply and levy and collection of tax, respectively. Section 7 outlines that the expression "supply" includes various forms of transactions made for a consideration in the course of business. The Court observed that the activities of a charitable institution may not fall within the scope of activities undertaken in the course of business, raising a question regarding the applicability of CGST on such institutions. The Court highlighted the provisions of Section 9, which levy a tax on intra-State supplies of goods or services. The Court noted that a tax under the CGST Act is intended to be levied on all inter-state supplies of goods or services. The Court emphasized that Section 7 defines "supply" by linking it to activities conducted by a person in the course or furtherance of business. Given the charitable nature of the petitioner, the Court found it necessary to examine whether the activities of a charitable institution can be considered as activities conducted in the course of business for the purposes of the CGST Act. Consequently, the Court decided to put the impugned order on hold until further consideration. The Court scheduled the matter to be heard again on a specified date to delve deeper into the issue. This decision indicates the Court's intent to thoroughly analyze the applicability of CGST on charitable institutions and determine whether their activities can be construed as business activities under the CGST Act, warranting tax liability. In conclusion, the judgment reflects the Court's cautious approach in interpreting the provisions of the CGST Act concerning the taxation of charitable institutions. The Court's decision to defer the implementation of the order signifies the need for a detailed examination of whether the activities of charitable institutions align with the definition of "supply" under the CGST Act, thereby impacting their tax liability.
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