RECENT ADVANCE RULINGS IN GST (PART-3)

[Dr. Sanjiv Agarwal]

Advance rulings are important in any tax law as it provides a forum for clarification and possible interpretation of statutory provisions. Moreover, it conveys the legislative intention from the revenue’s view point. Provisions of advance ruling are contained in section 95 to 106 of CGST Act, 2017 and State / UT GST enactment. Rules 103 to 107 of also provide for forms, manner, certification etc.

The Authority for Advance Rulings (AAR) have been set up in all the states and we have now over 50 advance rulings on different issues already pronounced by various State Authorities. However, appellate mechanism for filing appeals against AAR rulings is not yet in place and one is faced with this challenge. Another major issue presently being faced is about multiple authorities (equal to number of States), each pronouncing a ruling of its own even if the matter is covered by some other State AAR’s rulings. There would be situations where we may have different rulings on same question(s). GST Council ought to decide on having a Centralized Authority as was there in erstwhile tax regime.

The summary of few more recent advance rulings pronounced by State Advance Ruling Authorities are discussed hereunder but these needs to be read in the background of the question involved:

Advance Ruling for supply of goods and services for a solar power plant

Where applicant sought advance ruling on whether in case of separate contracts for supply of goods and services for a solar power plant, there would be separate taxability of goods as solar power generating system at 5 per cent and services at 18 per cent. However, impugned agreement contended to be for supply of goods was actually a works contract involving engineering, design, procurement and commissioning of solar power plant. Further, contract contended to be for supply of services was also one for executing a works contract involving a provision of goods as well as services. Thus, depending upon nature of supply, intra state or inter-state, rate of tax would be governed by Entry No. 3(ii) of the Notification No. 8/2017 - Integrated Tax (Rate under the Integrated Goods and Services Tax Act, 2017(IGST Act) or the Notification No. 11/2017 - Central Tax/State Tax (Rate) under the CGST Act and MGST Acts. The rate of tax would be 18 per cent under the IGST Act and 9 per cent each under the CGST Act and the MGST Act. [Fermi Solar Farms (P.) Ltd., In Re. (2018) 5 TMI 963 (AAR-Maharashtra); ].

Advance Ruling on job work or manufacture (electricity generation is supply of goods)

Where applicant-power company i.e. JEL generates power from coal supplied by JSL, a steel company, and JEL supplies power to JSL, activity undertaken by JEL amounts to manufacture of electricity from coal as supplied by JSL and is squarely covered in definition of 'manufacture' under GST Act and is a transaction of supply of goods. Such activity is therefore, not covered under scope of definition of 'job work' under GST Act. [JSW Energy Ltd., In Re  (2018) 5 TMI 763 (AAR-Maharashtra); ].

Advance Ruling on taxability of coaching services / exemption

Where the applicant runs private coaching institute and is engaged in providing the service of teaching to the students of Class XIth and XIIth science. This activity prepares the students for entrance examinations related to MBBS, Engineering and other sciences related examinations.

The Authority for Advance Ruling ruled that the applicant's institution is in no way covered in the definition of ‘educational institution’ as given in the Notification No. 12/2017 - Central Tax (Rate). The private institute does not have any specific curriculum and does not conduct any examination or award any qualification recognized by any law which would be covered in the exemption notification. The activity of applicant is not covered by the specific definition provided for interpretation of exemption notification. Further, it was found that the education service provided in the instant case is taxable at the rate of 9 percent under CGST Act, 2017 and 9 percent under SGST Act, 2017, i.e. @ 18% in aggregate. [Simple Rajendra Shukla, In Re 2018 (5) TMI 648 - AUTHORITY FOR ADVANCE RULING - MAHARASHTRA ].

Advance Ruling on nature of supply

Where advance ruling was sought on nature of supply i.e., mixed or composite supply for supply of UPS along with battery. Applicant’s contention was that it amounts to composite supply, it was ruled that the supply of UPS and battery is to be considered as mixed supply because they are two different and independent items which are supplied under a single contract at a combined single price, i.e., not being naturally bundled. [Switching Auto Electro Power Ltd., In Re. (2018) 4 TMI 810 (AAR-West Bengal); ].

Advance Ruling of applicability of GST on reinstatement charges

Where applicant was engaged in business of generation, transmission and distribution of electricity which calls for laying and maintenance of power lines and other incidental work which require digging up of trenches. The Municipal Authorities grant the needful permissions, however, subject to charges for restoring the street or pavement which has been dug up. Thus, charges are recovered by the Municipal Authorities to restore that portion of the street or pavement which has been dug up. The restoration work can neither be equated to construction work nor to maintenance work as suo-moto undertaken by Municipal Authorities.

The Authority for Advance Ruling (AAR) ruled that recovering of charges for restoring patches which have been dug up by business entities/applicant cannot be equated to performing a sovereign function as envisaged under article 243W of the Constitution. Therefore, reinstatement charges would attract GST at the rate of 18 per cent. [Reliance Infrastructure Ltd., In Re. (2018) 5 TMI 647 (AAR-Maharashtra); ]

Advance ruling on registration

Where the Applicant was not registered under any of the repealed Acts and desired to have a ruling on whether it is required to be registered under the CGST  Act, 2017 / WBGST Act, 2017.

In the instant case, where an applicant was engaged exclusively in supplying goods and services that are wholly exempt from tax, it was ruled that he will not be not liable to be registered in accordance with provisions under section 23(1) of GST Act, subject to condition that applicant is not otherwise liable to pay tax under Reverse Charge mechanism under section 9(3) of GST Act or section 5(3) of IGST Act. [Joint Plant Committee, In Re  (2018) 4 TMI 809 (AAR-West Bengal);].

Advance Ruling on taxability of Canteen services by employer

Where the assessee preferred an application for Advance Ruling for taxability of recovery of food expenses from employees for the canteen services provided by it. It submitted that they were providing canteen services exclusively for their employees. All the canteen expenses were recovered from its employees without any profit margin. It further contended that such service was not being carried out as a business activity.

The Authority for Advance Ruling (AAR) ruled that the recovery of food expenses from the employees for the canteen services provided by company would come under the definition of 'outward supply'. Therefore, it would be taxable as a supply of service under GST. [M/s. Caltech Polymers Pvt. Ltd., In Re. 2018 (4) TMI 582 - AUTHORITY FOR ADVANCE RULING - KERALA ; ].

= = = = = = = =