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2019 (1) TMI 486 - AAR - GSTTDS liability under GST - Specified person u/s 51(1) - supplies from a public sector undertaking to another public sector undertaking - Public Sector Undertaking or not?. - Held that:- The Applicant has nowhere disputed that it has been established by the Government. The Application is silent on this issue. Section 51(1) of the GST Act, read with the Notification as amended from time to time, mandates that certain categories of recipients shall deduct tax at source at a percentage while making payments to the suppliers above a threshold. Such recipients include inter alia an authority or a board or any other body set up by an Act of Parliament or a State Legislature or established by any Government with 51% or more participation by way of equity or control to carry out any function - As the GST Act does not define “Control”, it should be construed as defined under the Companies Act, 2013. Section 2(27) of the Companies Act, 2013 defines “Control”. It includes the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner. Neither the Central Government nor the State Government has any direct equity participation. But the “Government Companies”, as defined under section 2(45) of the Companies Act, 2013, together hold 62.29% of the paid up share capital and majority of the directors in the Board. WBIDC alone holds 49.46% of the shares, and enjoys four votes (including the casting vote of the Chairman) in a nine member Board. The Central and the State Governments, therefore, acting through the government companies, are in a position to indirectly control the management or policy decisions of the Applicant. The Central and the State Governments, therefore, “control” the Applicant within the meaning of Section 2(27) of the Companies Act, 2013. Clause a (ii) of the Notification is, therefore, applicable for the Applicant if he is established by government notification. Ruling:- The Applicant, if established by government notification, is liable to deduct tax at source under section 51(1) read with Notification No. 1344-FT dated 13/09/2018, being a company controlled by the Central and the State Governments.
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