The Karnataka Authority for Advance Ruling (AAR) has held that services provided by a non-profit trust in implementing and administering a State-sponsored healthcare scheme qualify as promotion of social welfare and are exempt from GST, subject to the prescribed conditions, including an annual membership fee ceiling of ₹1,000 per member.

The bench comprising Kalyanam Rajesh Rama Rao, Member (Central), and Sivakumar S. Itagi, Member (State) held that the services fall within Entry 77A of Notification No. 12/2017-Central Tax (Rate), as amended by Notification No. 14/2018-Central Tax (Rate).

Buy Now: 210+ GST Judgments E-Magazine – October 2026

The applicant is a non-profit entity registered under Section 12AA/12AB of the Income-tax Act, 1961. It was established to implement the Yeshasvini Scheme, which facilitates affordable healthcare through empanelled hospitals.

According to the facts recorded in the order, the scheme targets approximately 35–40 lakh co-operative families, including deprived rural families, farmers and identified occupational categories of urban families.

Eligible beneficiaries include members of rural and urban co-operative societies, self-help groups organised by co-operative societies, and co-operative societies of fishermen, beedi workers and weavers. Eligible family members can also enrol on payment of the prescribed contribution.

The order records that enrolled families receive a card with a unique identification number enabling access to cashless treatment of up to ₹5 lakh per family annually at network hospitals across Karnataka. The scheme covers 2,128 procedures, comprising 1,650 treatment procedures and 478 ICU-related procedures.

For rural co-operative society members, the annual subscription is ₹500 for a family comprising up to four members. An additional ₹100 is collected for each eligible member beyond four.

For urban co-operative society members, the annual subscription is ₹1,000 for a family comprising up to four members, with an additional ₹200 payable for each eligible additional member.

The State Government meets the annual membership contribution of SC/ST members, according to the order.

The trust sought clarification on whether these annual subscriptions qualify for exemption under Entry 77A.

The applicant submitted that providing affordable healthcare to its members constitutes promotion of social welfare. It argued that the annual membership contributions remain within the prescribed ceiling of ₹1,000 per member.

The trust also referred to Section 7(1)(aa) of the CGST Act, which addresses transactions between an entity and its members for consideration. Its exemption claim rested on the specific notification covering eligible membership services.

The Authority examined whether the applicant satisfied four requirements under Entry 77A: its status as an eligible registered non-profit entity, the nature of its activities, provision of services to its own members, and collection of membership fees within the prescribed annual limit.

On the first requirement, the AAR accepted that the trust’s registration under Section 12AA/12AB established its status as a non-profit entity recognised under a law in force.

The central issue was whether implementing, administering and monitoring the healthcare scheme constituted promotion of social welfare.

The AAR observed that “social welfare” is not specifically defined in the CGST Act or the exemption notification. It therefore interpreted the expression in its ordinary, natural and purposive sense, having regard to the objective of the exemption.

The Authority referred to Articles 38, 41 and 47 of the Constitution, concerning public welfare, public assistance in circumstances including sickness and disablement, and improvement of public health.

It reasoned that healthcare and medical assistance for economically weaker sections constitute essential welfare functions. Facilitating access to cashless medical treatment directly advances these objectives.

The order also referred to the Supreme Court decisions in Paschim Banga Khet Mazdoor Samity v. State of West Bengal, D.S. Nakara v. Union of India, and State of Karnataka v. Shri Ranganatha Reddy while discussing healthcare, dignified living and welfare measures.

The AAR found that the applicant’s primary and dominant objective was administration of a State-sponsored healthcare scheme for economically weaker and vulnerable sections.

It held that collecting membership fees was incidental to operating the scheme and did not impart a commercial character to the activity. Accordingly, implementing, administering and monitoring the Yeshasvini Scheme qualified as promotion of social welfare.

The Authority next examined whether the services were supplied to the applicant’s own members.

It noted that eligible individuals and their family members become members of the Yeshasvini Scheme upon enrolment and payment of the prescribed fees. Benefits, including access to cashless medical treatment, are available only to enrolled members.

Since no services were provided to non-members, the AAR held that the membership requirement was satisfied.

A significant aspect of the ruling concerns the treatment of contributions collected on a family basis.

The AAR examined the rural and urban family subscriptions and the additional contributions payable for members beyond four. It found that these amounts represented membership fees for enrolment and continuation under the scheme.

Membership Required to Access Case Details & Order Copy

To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.

Read More: Crude Cashew Nut Shell Liquid Attracts 5% GST As Vegetable Extract: Karnataka AAR