Thiruvananthapuram: The State Goods and Services Tax (GST) Department has cancelled the GST registration of IMAGE (Indian Medical Association Goes Eco-friendly), an entity formed by the IMA and the largest biomedical waste collection unit in Kerala. The cancellation order, issued on December 31, 2024, and made retrospectively effective from December 13, cites "willful misstatement and suppression of facts" as reasons. 

The blacklisting could explode into a major health scare as the collection of biomedical waste from over 20,000 medical establishments in Kerala, including big government hospitals, will soon come to a stop.

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"We have not stopped our operations for the moment but we cannot bill our clients. This will become unsustainable as we have more than 300 staff and there are hundred odd vehicles transporting biomedical waste from various parts of Kerala to our Kanjikode plant in Palakkad," a top IMA office-bearer said. The plant, IMAGE-CBWTF (Common Biomedical Waste Treatment Facility), was commissioned in 2003 for the scientific management of biomedical waste generated from healthcare establishments in Kerala.

When contacted, Health Minister Veena George’s office expressed surprise. “No one had informed us,” a top officer said. He promised to inform the minister. After an hour, Onmanorama made repeated calls, but they went unheeded. We then contacted the minister directly. We were told to WhatsApp her our posers. We did so as told but the minister is yet to respond. 

The cancellation of the GST registration will automatically lead to three things. One, IMAGE's GSTIN (GST Identification Number) will cease to exist. Two, IMAGE's access to Electronic Way Bill (e-way bill) will be blocked, rendering the transportation of waste from hospitals to the Kanjikode plant illegal; under the GST Act, anyone transporting goods above a certain value should possess an e-way bill. And three, IMAGE will also not be able to generate electronic invoices (e-invoice), or in simple terms, it will not be able to bill its clients. 

Charity vs business
The decision seems to be the fallout of an ongoing feud between the Directorate General of GST Intelligence (DGGI) under the Union Ministry of Finance and Indian Medical Association, Kerala State Branch (IMA, KSB). 

The DGGI had argued that the profit-making IMAGE was the IMA itself but was shown as a separate entity, “a shell company”, only to preserve the IMA's status as a charitable organisation that will remain outside the GST net. 

Between July 2017 and September 2023, IMA had collected Rs 251.79 crore from the operations of IMAGE. The DGGI said that the amount, however, was not found in the IMA's balance sheet, thereby masking the commercial side of its existence.

The DGGI wants the IMA to conduct the operations of IMAGE under its GST registration so that the profits of IMAGE will be rightfully shown as that of IMA's. The IMA is trying to find a way around because as a 'charitable organisation' it cannot be seen as running profitable businesses and risk falling under the GST net. 

Mysterious 'association of persons'
It was the DGGI that asked the Kerala GST Department to probe the issue. Now, the state agency, too, has found merit in the DGGI's observation.

When summoned, IMAGE had argued that it was just an Association of Persons, meaning it was not a separate legal entity. Being an AOP, its stand was that there was no need for a 'certificate of incorporation'. However, even for an AOP, the GST Rules say that there should be 'proof of constitution' or evidence of its formation. 

The document IMAGE uploaded as proof was a certificate issued by the Registrar of Societies in 2010. On analysis, the state GST Department found that this certificate was issued to the IMA Kerala State Branch and not to IMAGE. The GST Department, therefore, concluded: "Even though the claim is that Indian Medical Association Goes Eco-friendly (IMAGE) is an Association of Persons, there is no supporting documents or evidence of proof of Constitution as per Rule 24(2) of the CGST/SGST Rules 2017."

MoU revelation
The IMA had further argued that even the Kerala government had entered into an agreement with it regarding the operations of IMAGE. It was also said that this agreement has been in existence for over 20 years. A Memorandum of Understanding with the Kerala government was also submitted by the IMA.

But the GST Department found that in the MoU IMAGE is mentioned as a "project" and is signed by Government of Kerala and IMA Kerala State Branch only. What's more, in the same MoU it is stated that "IMAGE is a wing/project of IMA Kerala State Branch". 

"Hence it can be safely concluded that there is no separate legal entity in the name of Indian Medical Association Goes Eco-friendly (IMAGE) rather it is only a wing/project of IMA Kerala State Branch," the cancellation order states. It is in this context that the GST Department states that the GST registration for IMAGE was secured "by means of willful misstatement and suppression of facts."

Location conundrum
The GST Rules also state that the taxpayer has to furnish proof of 'Principal Place of business and Additional Place of Business'. The proofs offered by IMAGE were a building tax receipt and an electricity bill, both in the name of IMA Kerala State Branch. 

Nonetheless, IMAGE submitted a 'consent letter' from the IMA to use its premises. But the IMA's letter of consent to an entity that was operating from its premises for the last 20 years seems to have been provided a tad late, on December 20, 2024, the date the GST Department issued the cancellation order.

Like the DGGI, the state GST Department, too, said: "The IMA Kerala State Branch ought to have used its own GST registration for managing the activities of their wing /project named IMAGE." 

If the IMA takes the advice it it will risk losing its status as a charitable organisation.

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