ADVANCE RULING ON EXEMPTION FROM ‘GST’

[Mr. M. GOVINDARAJAN]

Exempt Supply

Section 2(47) of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) defines the expression ‘exempt supply’ as supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply.

Power to grant exemption

Section 11 of the Act gives powers to the Government to grant exemption from tax.  Section 11(1) provides that where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification.

Section 11(2) provides that where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by special order in each case, under circumstances of an exceptional nature to be stated in such order, exempt from payment of tax any goods or services or both on which tax is leviable.

Section 11(3) provides that the Government may, if it considers necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an explanation in such notification or order, as the case may be, by notification at any time within one year of issue of the notification under sub-section (1) or order under sub-section (2), and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be.

section 6 of the Integrated Goods and Services Tax Act, gives powers to the Government to give exemption from GST on the same line with section 11 of the CGST Act.

Not to collect tax

The explanation to section 11 of the Act provides that where an exemption in respect of any goods or services or both from the whole or part of the tax leviable thereon has been granted absolutely, the registered person supplying such goods or services or both shall not collect the tax, in excess of the effective rate, on such supply of goods or services or both. 

Advance Rulings

Advance Rulings is a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.    For the purposes of this Act, the Authority for advance ruling constituted under the provisions of a State Goods and Services Tax Act or Union Territory Goods and Services Tax Act shall be deemed to be the Authority for advance ruling in respect of that State or Union territory.

An applicant desirous of obtaining an advance ruling under this Chapter may make an application in such form and manner and accompanied by such fee as may be prescribed, stating the question on which the advance ruling is sought.

The question, on which the advance ruling is sought under this Act, shall be in respect of,––

• classification of any goods or services or both;
• applicability of a notification issued under the provisions of this Act;
• determination of time and value of supply of goods or services or both;
• admissibility of input tax credit of tax paid or deemed to have been paid;
• determination of the liability to pay tax on any goods or services or both;
• whether applicant is required to be registered;
• whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.

For the purposes of this Act, the Appellate Authority for Advance Ruling constituted under the provisions of a State Goods and Services Tax Act or a Union Territory Goods and Services Tax Act shall be deemed to be the Appellate Authority in respect of that State or Union territory.

Some rulings given by various Authorities for Advance Ruling are discussed as below-     

Health Care Services

In re ‘Starcare Hospital Kozhikodi Private Limited’ – 2019 (5) TMI 901 - AUTHORITY FOR ADVANCE RULINGS, KERALA and in re ‘Kindorama Health Care Private Limited’ – 2019 (5) TMI 960 - AUTHORITY FOR ADVANCE RULINGS, KERALA the Authority for Advance Ruling held that the medicines, consumables, room rent, nursing charges, doctor’ fees etc., supplied to in-patients which are given to the patients and the patients are under continuous monitoring and nursing staff to control administration and dosage of medicines, are given in a single bundle and charged in a single invoice.  The entire supply squarely covered under composite supply with health care services as principal supply.  The exemption is available from GST under Sr. No. 74 of Notification No. 12/2017-CT (Rate), dated 28.06.2017.

Accommodation services

In re ‘Students’ Welfare Association’ – 2019 (3) TMI 1473 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA, the applicant sought for advance ruling on accommodation services provided by their trust will be exempted from GST.  The trust offered the hostel during the vacation period for residential purpose and hired for laborers of a commercial organization.   Sl. No. 14 of Notification No. 12/2017 provides that the services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation below ₹ 1000/- per day or equivalent attracts NIL rate of GST.  The Authority held that from the scrutiny of above exemption the Authority found that the description of service is used based, meaning that if the accommodation is used for residential or lodging purpose then it is immaterial who the user is.  The services provided by such hostel, for residential and lodging purpose would be covered by scope of notification entry where the declared tariff of a unit of an accommodation is below ₹ 1000/- per day.  Therefore the scope of entry is restricted to use of the accommodation unit for residential and lodging purpose.

Pure Services

In re ‘Uralungal Labor Contract Co-Op Society Limited’ – 2019 (4) TMI 112 - AUTHORITY FOR ADVANCE RULINGS, KERALA the Department of Cultural Affairs of Kerala authorized the petitioner to arrange skill exhibition centers, sustained livelihood by creating new opportunities, strong market contacts by excluding middle man to connect them with various Government programs aimed to address their social and economic backwardness and collect data about them.  The petitioner requested to know the GST liability before the Authority.  The Authority found that the services rendered by the petitioner to the Department of Cultural Affairs of Kerala come under the classification of purse services.  The Authority held that the services provided by the petitioner fall under the category of pure services as per Sl. No. 3 of the Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017.  As per the notification pure services (excluding the works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union Territory or local authority of a Government Authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution.  The Authority held that the activities performed by the petitioner are exempted from GST.

In re ‘Kerala State Construction Corporation Limited’ – 2019 (5) TMI 961 - AUTHORITY FOR ADVANCE RULINGS, KERALA the Authority held that the Centrage charges/consultancy charges received by the applicant in relation to pure services provided to the State Government by way of activity in relation to function entrusted to a Panchayat/Municipality under 243G/243W of the Constitution is exempted from GST as per Sl. No.3 of the Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017.

Extending short term loan

In re ‘Shreenath Polyplast Private Limited’ – 2019 (3) TMI 1008 - APPELLATE AUTHORITY FOR ADVANCE RULING, GUJARAT the Gujarat Authority for Advance Ruling held that the services provided by Shreenath Polyplast Private Limited by way of extending short term loans in so far s the consideration is represented by way of interest is covered under Sl. No. 27 of the Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017 and hence exempt from payment of GST.  The appellant filed appeal before the Appellate Authority.  The Appellate Authority upheld the findings of the Authority for Advance Rulings.

Slump Sales

In re ‘Innovative Textiles Limited’ – 2019 (4) TMI 1499 - AUTHORITY FOR ADVANCE RULINGS, UTTARAKHAND the applicant is selling, inclusive of all assets and liabilities, its entire live/operating business of textiles manufacture as going concern.  The purchaser has agreed to carry on the same business.  Further as on date there is no series of immediately consecutive transfers of the said business.  In terms of internationally accepted guidelines of His Majesty’s Revenues Customs, the said sale amounts to sale of going concern.  The Authority held that the slump sales are exempted from GST under Notification No. 12/2017-Central Tax (Rate).

Diagnostic services

 In re ‘Medivision Scan and Diagnostic Research Centre (P) Limited’- 2019 (5) TMI 900 - AUTHORITY FOR ADVANCE RULINGS, KERALA the Authority found that a clinical or medical diagnostic laboratory is a centre where various tests are conducted from human body for providing information on diagnosis, prognosis, prevention or treatment of disease.  The Authority held that this activity is squarely covered under the Health Cover Service covered under SAC 9993 and exempt from GST under Sl. No. 74 of Notification No. 12/2016-Central Tax (Rate).