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RECENT ADVANCE RULINGS IN GST (PART-9)

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RECENT ADVANCE RULINGS IN GST (PART-9)
Dr. Sanjiv Agarwal By: Dr. Sanjiv Agarwal
November 16, 2018
All Articles by: Dr. Sanjiv Agarwal       View Profile
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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 200 advance rulings on different issues already pronounced by various State Authorities. The appellate mechanism for filing appeals against AAR rulings is also in place and we have about twenty such appellate orders confirming or modifying the AAR orders. One 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) by different AARs. GST Council ought to decide on having a Centralized Authority as was there in erstwhile tax regime. The orders of Appellate Advance Ruling Authority (AAAR) have also started pouring in. The AAAR’s have been set up in all the states except six states so far.

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 on sale of spiritual products by a Charitable Trust

The applicant, Shrimad Rajchandra Adhyatmik Satsang Sadhana Kendra is a public charitable and religious trust engaged in advancement of the teachings of Paramkrupaludev Shrimad Rajchandra and spreading the knowledge of Jain Religion entrusted by Shri Mahavir Swami and other Tirthankars.

The main object of the applicant trust is to spread the knowledge of the Jain Dharam and advancement of teachings of Paramkrupaludev Shrimad Rajchandra. The ancillary and incidental objects of the applicant trust are to carry out activities for advancement of main object such as Satsang, Shibirs, etc. To spread knowledge of the Jain Dharam through publications of books, audio CDs, DVDs, etc. and other materials for students and public in general and to set up organizations for helping people. The ancillary object also includes, protecting birds and animals from being killed in slaughter houses and other activities.

The applicant was registered under VAT law and subsequently migrated to GST. It is also registered u/s 12AA of Income Tax Act, 1961.

It sought advance ruling on following issues:

(1)    Whether the applicant which is a charitable trust with the main object of advancement of religion, spirituality or yoga can be said to be in business so as to attract the provisions of Central Goods and Services Tax Act, 2017 and Maharashtra Goods and Services Tax Act, 2017?

(2)    Whether the applicant which is a charitable trust with main object of the advancement of religion, spirituality or yoga, is liable to registration under the provisions of Central Goods and Services Tax Act, 2017 and Maharashtra Goods and Services Tax Act, 2017?

(3)    Whether sales of spiritual products which is incidental/ancillary to main charitable object of the applicant can be said to be business of the applicant in terms of the definition in Section 2(17) of the Central Goods and Services Tax Act, 2017 and option provision of Maharashtra Goods and Services Tax Act, 2017?

(4)    Whether the sale of spiritual products can be said to be supply under Section 7 of the Central General Sales Tax Act, 2017 and equivalent provision of the Maharashtra Goods and Services Tax Act, 2017 so as to attract GST?

It was held that sales of spiritual products incidental and ancillary to its main charitable object amounted to ‘business’ and amounted to ‘supply’ attracting Goods and Services Tax. There is no exemption granted to charitable trusts in case of supply of goods which are taxable and are not specifically exempt or nil rated. In case of Service Tax exemption, a charitable trust is required to comply with below mentioned criteria:

(i)     The entity must be registered under Section 12AA of the Income Tax Act.

(ii)    The services provided by the entity must be a charitable activity.

Under the CST Act, not all services provided by a Trust registered under Section 12AA would be termed as a charitable activity. Only the following activities are termed as charitable activity and are exempt from CST- Services relating to public health like; care or counseling of terminally ill persons or persons with severe physical or mental disability; persons afflicted with HIV or AIDS; persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; public awareness of preventive health, family planning or prevention of HIV infection; advancement of religion, spirituality or yoga; advancement of educational programs or skill development relating to; abandoned, orphaned or homeless children; physically or mentally abused and traumatised persons; prisoners; or persons over the age of 65 years residing in a rural area; preservation of environment including watershed, forests and wildlife.

It was thus ruled as follows:

(a)     Applicant is in business and provisions of CGST Act, 2017 /Maharashtra GST Act, 2017 would be applicable.

(b)    Applicant is liable to be registered under GST law provided the aggregate turn over in a financial year exceeds the threshold limit provided under section 22 of the CGST Act, 2017.

(c)     Sale of spiritual products is business activity u/s 2(17) of CGST Act, 2017

(d)    Sale of spiritual products is a supply u/s 7 of CGST Act, 2017

[Shrimad Rajchandra Adhyatmik Satsang Sadhana Kendra, In Re,  (2018) 9 TMI 235 (AAR, Maharashtra); ].

Advance ruling on taxability of cold storage of agricultural produce

The assessee was the owner of the cold storage house, providing storage and warehousing facilities for variety of agriculture produce. It made an application before the Authority of Advance Ruling to seek ruling as to whether the goods which comes for storage will come under the definition of agricultural produce or not & whether the supply of Cold Storage services by the applicant firm to various products as mentioned herein below attracts Nil rate of duty or not as per Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017.

The assessee submitted list of various products and the process done on those agriculture commodities before they come into cold storage.

The Authority for Advance Ruling ruled that goods mentioned under Group A fall under the definition of Agricultural Produce in terms of the aforesaid notification and so supply of cold storage service in relation to these is exempt from the levy of GST. However if any processing is done on these products as is not usually done by a cultivator or producer at farm level, then these would fall outside the definition of agricultural produce as given in the aforesaid Notification and in that case supply of cold storage service in relation to these would remain chargeable to GST. The goods mentioned under Group B to G are not Agricultural produce in terms of the aforesaid notification and so the supply of cold storage service in relation to these would remain chargeable to GST. The goods covered under Groups A to G are listed in the text of case. [Sardar Mal Cold Storage & Ice Factory, In re, (2018) 7 TMI 967 (AAR, Rajasthan); ].

 

(Some more to follow …..)

 

By: Dr. Sanjiv Agarwal - November 16, 2018

 

 

 

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