2023 (12) TMI 725 - AAAR - GST

Local Authority or not - GST on procurement of security services received from any person other than body corporate under reverse charge mechanism - exemption granted in sl. no. 3 of Notification No. 12/2017 Central Tax (Rate) or sl. no. 3 of Notification No. 09/2017 IGST (Rate) - levy of GST on advertisement services or the service recipient of AJL is required pay GST under reverse charge mechanism considering Notification no. 13/2017-Central tax (Rate) dated 28-06-2017 - requirement to be registered as a deductor under GST as per the provision of Section 24 of the CGST Act. Whether the appellant is a local authority as claimed by the appellant? - HELD THAT - The appellant is a legal person formed as a Special Purpose Vehicle and incorporated under the Companies Act. The averment that since they are funded by the Central funds which is routed through AMC they are in control/management of the municipal or local fund is a proposition difficult to agree with. The appellant is neither a Municipal Committee nor a Zilla Parishad nor a District Board. Now as far as other authority which is legally entitled to/entrusted by the Central/State Government with the control/management of a municipal or local fund is concerned though they are granted Central funds as loan by AMC the appellant is not in control/management of a municipal/local fund - the appellant is not a local authority . Ongoing through sections 25 to 29A 342 355 and 357 ibid it is found that AMTS is a statutory authority discharging municipal functions as stipulated under the GPMC Act. It is on this ground that GAAR held AMTS to be a local authority. While relying on the advance ruling in the case of AMTS the appellant failed to point out as to under which section of the GPMC Act the Ahmedabad Janmarg Limited was incorporated as a Public Limited Company and was entrusted with the Municipal functions of providing transportation facilities. Thus there is clear cut distinction as far as AMTS is concerned which is a statutory authority in terms of the GPMC Act which incidentally is not the case with the appellant as far as the present dispute is concerned. The appellant is neither a department nor establishment of the Central/State Government nor a local authority as we have already held above nor persons or category of persons notified under notification No. 50/2018-CT - the appellant cannot deduct tax hence is not required to be registered as deductor under GST. As far as Governmental agencies are concerned it is found that this has been dealt with in para 21.2 of the impugned order in detail. The Appellant has not produced anything to interfere with the findings of the GAAR. Appeal rejected.

Summary

Issues Involved:
1. Whether Ahmedabad Janmarg Limited (AJL) qualifies as a 'Local Authority' under the Central Goods and Services Tax Act, 2017.
2. Liability of AJL to pay GST on procurement of security services under reverse charge mechanism (RCM).
3. Liability of AJL to pay GST on advertisement services.
4. Requirement for AJL to register as a deductor under GST.
5. If AJL does not qualify as a local authority, whether it can be construed as a government entity or governmental authority.

Summary:

Issue 1: Qualification as a Local Authority
The primary issue was whether AJL is a 'local authority' under the CGST Act, 2017. The appellant argued that since it receives funds from the Ahmedabad Municipal Corporation (AMC) and manages these funds, it should be considered a local authority. However, the court held that AJL is not a Municipal Committee, Zilla Parishad, District Board, or any other authority legally entitled to control or manage a municipal or local fund. AJL is a Special Purpose Vehicle incorporated under the Companies Act and does not meet the criteria of a local authority as per Section 2(69) of the CGST Act, 2017.

Issue 2: Liability to Pay GST on Security Services
AJL contended that as a local authority, it should be exempt from paying GST on security services under RCM. Since the court determined that AJL is not a local authority, it ruled that AJL is liable to pay GST on security services under the relevant notification.

Issue 3: Liability to Pay GST on Advertisement Services
AJL argued that it should not be liable to pay GST on advertisement services, and the recipient should pay under RCM. The court upheld the GAAR ruling that AJL is liable to pay GST on advertisement services supplied by it.

Issue 4: Requirement to Register as a Deductor under GST
AJL claimed it should be registered as a deductor under GST as per Section 24 of the CGST Act, 2017. The court found that AJL does not fall under the categories required to deduct tax, such as a department or establishment of the Central/State Government, a local authority, or persons notified under Notification No. 50/2018-CT. Therefore, AJL is not required to be registered as a deductor under GST.

Issue 5: Qualification as Government Entity or Governmental Authority
AJL argued that if not a local authority, it should be considered a government entity or governmental authority. The court examined the definitions and found that AJL, being a Public Limited Company incorporated under the Companies Act, was not set up by an Act of Parliament or State Legislature, nor established by any Government. Hence, AJL does not qualify as a governmental authority or government entity.

Conclusion:
The court rejected the appeal filed by AJL against the Advance Ruling No. GUJ/GAAR/R/27/2021 dated 19.07.2021, upholding that AJL is not a local authority, is liable to pay GST on security and advertisement services, is not required to register as a deductor, and does not qualify as a governmental authority or government entity.