Whether any particular thing (preparation and serving of food to children of government schools under Mid day Meal and government sponsored Anganwadi meals program/ sale of scrap items generated during Mid day meal program) done by the applicant with resp

PJ/Case Law/2018-2019/3517

Case:M/s The Akshaya Patra Foundation
Citation:RAJ/AAR/2018- 19/28,F.No.IV(4)26/AAR/RAJ/2018-19/134-135

Issue:Whether any particular thing (preparation and serving of food to children of government schools under Mid day Meal and government sponsored Anganwadi meals program/ sale of scrap items generated during Mid day meal program) done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services?
Brief facts:The Applicant, Akshayapatra Foundation is registered with the GSTN 08AAATT6468P1ZL, is nonprofit organization. It’s headquarter is at Bengaluru and having establishments in 12 states across India. The applicant is serving meal to more than 17 lakhs students which are studying in 14000 Schools over in 12 states across the country. The applicant have rental income and the applicant is also registered under section 12AA (i.e. charitable trust) of the Income Tax Act, 1961. The applicant strives to eliminate classroom hunger by implementing the Mid-Day meal scheme in the Government and Government aided schools. It also aims at countering malnutrition and supporting the right education of socio-economically disadvantaged Children. The applicant tries to banish hunger of the deprived economically backward and poor sections of the society and those hailing from rural area and slums in cities by every possible method, by providing free food. It seeks resort on whether Preparing and serving of food to children under Mid day meal and Anganwadi meals programme shall amount to Supply. Further sale of scrap items generated during mid day meal is covered under the scope of Supply or not.
Appellant’s contention:The appellant is operating 38 kitchens across 12 states in the country under the Guidelines wherein food grains and expenses for other ingredients, cooking cost and transportation expenses shall be reimbursed by the government. For each of the kitchen a MOU strictly as per the Guidelines of MHRD has been entered into with the respective authorities. Some important part of the Guidelines are extracted below which has a bearing on the question raised for advance ruling.
In Rajasthan a MOU entered with District Education Officer (Elementary Education), Jodhpur for serving Mid-Day meal to about 12000 Government school children dated 24th Oct 2016 which is valid for 3 years is enclosed. The key terms and conditions of the MOU which are important for the current context is mentioned below:
1. Government would provide the Food Grains at an agreed quantum per child / meal for the expected average attendance in advance. Applicant shall provide the monthly report of details covering food grains received, utilized and balance in the prescribed format.
2. For other food ingredients and conversion costs, Government would provide the cash conversion cost at agreed rates per child / meal.
3. To enable to reach nutritious, hygienically prepared quality meals to the children, applicant can raise donation, both in cash and kind to meet out deficit
4. All the additional expenses that may be required, on the preparation of the Mid-Day Meal as well as the transportation of the cooked meals to the schools in the project area shall be borne by the applicant
5. Menu will be in accordance as specified by the state Government from time to time
The applicant state that the above terms are mentioned commonly in all the MOUs entered into between the applicant with respective State Government. The copies of MOUs entered with Government of Gujarat for the implementing MDM program in Ahmedabad and with Government of Andhra Pradesh for implementing MDM program in Kuppam town provided with application as sample for reference.
The applicant raises funds by way of donation from Corporates, Trusts & Foundations and general public for meeting the expenditure incurred on Mid-Day meal program apart from free grains and food conversion cost received from government. The certified extract of official website of the applicant requesting for fund support from Donors is also enclosed, which shows the total cost, government subsidy and the deficit amount to be supported from donations.In course of providing Mid-Day Meal sometimes certain goods like spices, food grains, kitchen equipment and relevant spares (Boiler, Conveyor Belt Spares etc.), office equipment (Laptop, Computer, Stationery, Letter Head etc.), distribution vehicles are transferred from one kitchen of the applicant to another kitchen situated in a different state. It may be noted that the applicant has taken registration in various states for discharging GST liability on rental income and therefore they are 'distinct person' for the purpose of GST. During course of the activity of Mid-Day Meal, certain scrap in the form of empty oil & other tins, pipes & iron, empty bags, plastic items, cartoons, Flex & Boxes, spares parts of machine/equipment, vehicle & its parts like tyres etc. is generated which is sold from time to time. The sale proceeds of these items are recorded under the head 'miscellaneous income' in the books of accounts.
The applicant also carries out other charitable feeding programs such as Anganwadi feeding, wherein the part of the cost is met by Government Subsidy and the remaining cost is met through donations, private school feeding programs where entire 100% cost is met through donations. These programs are quite small in number and constitute about 10% of the total volume of meals. In none of the above programs, the applicant, charge/receive any money or consideration from the beneficiaries.

Reasoning of Judgement: The Respondent has undergone an analysis of the appellant’s contention that Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as,

a supply of goods and not as a supply of services

or
(b) a supply of services and not as a supply of goods.
Further, the definition of business under Section 2(17) of CGST Act includes,

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction
(d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business
(e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members
(f) admission, for a consideration, of persons to any premises
(g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation
(h) services provided by a race club by way of totalisator or a licence to book maker in such club
(i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities;~ The word 'commerce' has several definitions which are as under:-As per Business Dictionary, it means exchange of goods or services for money or in kind, usually on a large scale enough to require transportation from place to place or across city, state or national boundaries.
In view of the above observations, the activity of preparation and serving of food under Mid Day Meal and Anganwadi meal programme undertaken by the applicant is covered under definition of business.
As per the documents submitted by the applicant They observe that the applicant is reimbursed as per the rate fixed by the Government of India or by the State Government for the transportation charges for lifting food grains from Food Corporation of India godown on basis of the release order.
It is further observed that the applicant is also paid /reimbursed of the cooking cost of the meals as per the instructions/norms of GOI / State Govt.
There is no exemption granted to charitable trusts in case of supply of goods which are taxable and are not specifically exempt or Nil rated. In case of exemption, a charitable trust is required to comply with certain conditions and the applicant is not covered in any of such activities.
The activities undertaken by the applicant under Mid-Day Meal Programme and Anganwadi meals programme is a supply in accordance with the Section 7 of CGST Act, 2017. However, MDM programme is taxed Nil by the virtue of Notification No. 12/2017 dated 28.06.2017 mentioned at serial number 66 heading number 9962.
The Preparation and serving of food under Government sponsored Anganwadi meals programme which is undertaken by the applicant who receives reimbursement from the government of Rajasthan @ Rs.5.40 per pregnant women/lactating & nursing mothers/adolescent girls and Rs. 5.25 per child per day. Therefore, the above said activity is against consideration and hence it is covered under the scope of 'supply' as per section 7 of CGST/RGST Act, 2017.
As the activity of 'transfer' is covered under definition of supply under section 7 of CGST/RGST Act, 2017. Thus, the transfer of goods / capital equipments, exclusively used for Mid-Day Meal (MDM) program and Anganwadi meals program sponsored by Government, between different kitchens of applicant which are 'distinct persons' as per GST law is covered under the scope of 'supply' as per section 7 of CGST/RGST Act, 2017.
The scrap items which generates during course of the activity of Mid-Day Meal in form of empty oil 86 other tins, pipes 86 iron, empty bags, plastic items, cartoons, Flex 8& Boxes, spare parts of machine / equipment, vehicle 8& its parts like tyres etc. are sold from time to time is for a consideration. The sale proceeds of these items are recorded under the head miscellaneous income in the books of records. The sale of scrap is an activity of sale for a consideration as mentioned in definition of 'supply' as per section 7 of CGST/RGST Act, 2017.
Decision:The activity of Preparation and serving of food to children of government schools under Mid-Day meal Program of Government and serving of food under Government sponsored Anganwadi meals program is covered under the scope of 'supply'. Further the transfer of goods/ capital equipments for the programs carried out by the applicant sponsored by government is covered under the scope of Supply as per section 7 of CGST Act. And sale of scrap items generated during Mid day meal is as well covered under the scope of Supply.
Comment: The Gist of the case is that preparation and serving of food to children of government schools under mid day meal program and government sponsored Anganwadi meals are covered under the scope of Supply. Though the activities provided by the applicant is for charitable purposes registered under Section 12AA and for social cause but in order to be out of ambit of definition of supply it needs to satisfy the specified conditions.

Prepared by:Himanshu Bhimani

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PJ/Case Law/2018-2019/3517

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