OSMCL, though a Government Entity with 100% Odisha Govt. ownership, was held not to be providing “pure services” since its activities involved supply of goods along with services, and hence not eligible for GST exemption under Sl. No. 3 of Notification No. 12/2017-CT(R).

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Facts of the Case:

The applicant OSMCL is a company incorporated under the Companies Act, 1956 with 100% equity held by the Government of Odisha.
Established via Government Resolution dated 26.06.2013, under the Department of Health & Family Welfare.

Main objectives:

Procurement of medicines, surgical goods, diagnostic and medical equipment through competitive bidding,
Quality testing of medicines before acceptance,
Warehousing, distribution, installation, and maintenance of medical equipment at health facilities,and
Monitoring of drug distribution counters.
It receivesService charge (up to 5% of procurement value, later reduced to 2.5%) from Govt. of Odisha and 1.5% testing and handling charges from suppliers.
The applicant sought clarity whether its services are "pure services" provided to Government/Govt. Authority/Govt. Entity, and thus eligible for GST exemption under Sl. No. 3 of Notification No. 12/2017-CT(R), dated 28.06.2017.

Questions Raised:

Whether OSMCL qualifies as a Government Authority under para 2(zf).
Whether OSMCL qualifies as a Government Entity under para 2(zfa).
Whether the services supplied are pure services.
If yes, whether they are exempt under Sl. No. 3 of Notification No.12/2017-CT(R).

Findings & Discussion:

Government Authority vs Government Entity:

As per Notification No. 12/2017-CT(R):

Governmental Authority [2(zf)]: Must be set up by an Act of Parliament/State Legislature OR established with 90% equity/control to carry out functions of Panchayat (Art. 243G) or Municipality (Art. 243W).
Government Entity [2(zfa)]: Includes authority/board/corporation established by Govt. with 90%+ equity/control to carry out functions entrusted by Govt.

OSMCL is a corporation established by Government of Odisha with 100% equity participation, carrying out procurement/distribution entrusted by Govt.

Held: OSMCL doesn't qualify as Government Authority but qualifies as Government Entity.

Whether services are Pure Services

"Pure services" means supply without goods.
OSMCL received funds from Govt. inclusive of value of procured goods + service charge + handling/testing charges.
Utilization Certificates also reflected procurement value + charges.
Hence, supply involves both goods and services, not pure services.
Further, under Rule 33 of CGST Rules (Pure Agent), conditions not met since OSMCL retains procurement value + charges.
Held: Services are not pure services.

Exemption under Notification 12/2017-CT(R)

For exemption under Sl. No. 3:

Since first condition (pure service) not satisfied, exemption not available.

Ruling:

OSMCL is not a Government Authority.
OSMCL is a Government Entity.
The services provided are not pure services.
Hence, not eligible for exemption under Sl. No. 3 of Notification No. 12/2017-CT(R).

GST Case Law Odisha State Medical Corporation Ltd., In re Authority for Advance Ruling, Odisha,

Citation-2025 TAXONATION 2249(ODISHA-AAR)(Click here to read full case law)

CA Naredra Gupta

canarendragupta@gmail.com
+91 8800 396 070