The Directorate General of GST Intelligence (DGGI) has filed submissions in the Kerala High Court alleging that the Indian Medical Association (IMA), an organisation of allopathy doctors, is not a charitable organisation but a corporate entity involved in product endorsement, land deals and profit generation.
DGGI had pulled up the doctors' body for non-payment of Goods and Services Tax (GST) last June 2023 alleging more than 90 per cent of IMA's activities are non-charitable and organisation be brought within the GST net.
IMA had challenged the DGGI and filed writ in the Kerala High Court claiming that both the contributors and participants are doctors invoking the 'principle of mutuality', which essentially means no person can transact with oneself. It claimed to be an association/club that was formed exclusively for its members, and therefore exempt from tax as both parties paying and benefiting are doctors.
The tax authorities sought to dismantle IMA’s "mutuality" argument and filed an affidavit stating that various activities of the IMA were in the form of commercial transactions that involved non-members.
The tax sleuths provided several instances of profit making by the IMA in commercial activities like a iquor bar owned by the IMA Cochin Charitable Society at Palarivattom selling liquor to non-members.
DGGI questioned the primary objectives of IMA to promote public health and not running a bar claiming to be a charitable society.
The tax authorities submitted a tax invoice that showed that a room in the IMA House Kochi was billed at Rs 2,300 a day for a non-member, the DGGI deputy director himself to prove that the rooms were given on rent.
DGGI also produced documents to show that certain profit-making entities of the IMA – IMA PEPS (Professional Equipment and Employment Protection Scheme) and IMAGE (IMA Gone Eco-Friendly) – had transferred funds to the IMA for various activities like the purchase of land and conduct of conferences which were not disclosed in its Income Tax returns.
DGGI probe revealed that biomedical waste treatment and disposal project IMAGE of the IMA processes biomedical waste on a commercial basis for 16,000 clients like hospitals and laboratories while IMA PEPS offered private hospitals expert advice on the purchase of medical equipment. “Both are commercial operations for profits but not paid tax for amounts received from these corporate entities. It is money laundering," alleged senior tax officials.
IMA was also found to generate revenues through product branding and product sponsorship engaging in partnerships with diverse industries from LED bulbs, water purifiers, oats, soaps and other products resulting in a significant financial turnover, DGGI said in an affidavit filed. The taxman gave instances ed of IMA profitably endorsing private brands by associating with Kent RO Systems and Asian Paints. The affidavit says that the IMA had taken money for its logo to be featured in Kent commercials.
The IMA defended the project was under the IMA Swachh Bharat Swasth Bharat Initiative and denied receiving an endorsement fee but IMA did receive voluntary donations from Kent RO group.
IMA headquarters in New Delhi had issued an endorsement for Royale Health Shield, an interior paint brand of Asian Paints, on its own letterhead. "Royale Health Shield which contains Silver Ion Technology, has shown anti-bacterial activity through the tests recommended by the IMA," the letter signed by IMA honorary secretary general Dr R V Asokan said.
"IMA is neither a testing nor a certifying authority," the DGGI affidavit and flagged the probability of quid pro quo in such arrangements.
