TMI Blog2020 (3) TMI 1042X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice, being provided by the applicant - t is an admitted fact that in case of non-payment of amount towards LAD fund, under clause 8 of the agreement, the applicant has right of termination of lease agreement. The amounts towards the LAD fund are paid by the SPDs to the applicant, though the usage of the same is decided by the Committee formed by the Government of Karnataka for local area development. The service of lease/rent, being provided by the applicant, is a single service and the consideration is payable under two different heads and if any one of these payments is not made, the applicant has the right of termination of the said lease agreement. Hence the amount collected by the applicant, from the SPDs, towards LAD fund forms the value of supply under Section 15 of the CGST Act 2017 and the usage of the said amount would only amount to application of the said amount and still would form the value of taxable services. Therefore, the said amount, so collected, is taxable along with rental income, under forward charge mechanism. Classification of the service under which the collection of amounts towards LAD funds would fall, if said activity is treated as supply - HELD T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in receipt of any consideration for the said directions and is not in the course or furtherance of business. Therefore the activity of giving direction by the Committee does not amount to in terms of Section 7 (I)(a) of the CGST Act 2017. Therefore utilization of the LAD fund amount under the direction of Committee, for the intended purposes does not involve in supply of any service by the Committee. Further, the Committee is formed under the orders of Government of Karnataka, only for utilization of the LAD fund for local area development. The Committee is not involved in any activity but only decides the utilization of the said fund and hence there is no service involved. Therefore the entry number 5 of the notification is not applicable to the instant case. - KAR ADRG 10/2020 - - - Dated:- 18-3-2020 - DR. RAVI PRASAD M.P. AND SRI MASHHOOD UR REHMAN FAROOQUI, MEMBER Represented by: Sri. Ganesh S. Advocate ORDER UNDER SECTION 98(4) OF THE CGST ACT, 2017 UNDER 98(4) OF THE KGST ACT, 2017 1. M/s. Karnataka Solar Power Development Corporation Limited, (called as the Applicant hereinafter), South Block, Beeja Raja Seed Complex, II Floor, Bellary Road, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply as per the provisions of CGST/KGST/IGST Act 2017 and not levied to tax? 2. Without prejudice to the above, if it is treated as Supply, what will be the HSN/ SAC code under which it would be levied to Tax? 3. Without prejudice to the above, if it is treated as Supply, will it be exempt a per SI.No.3 or 3A of Notfn.12/2017-CT (R) as the activities to be carried out are covered under Article 243 G and / or Article 243 W of the constitution of India? 5.2 Applicant s interpretation of Law: There is no supply made by the applicant to the SPDs with reference to the LAD Fund; no benefit is derived by the Applicant in the said transaction; the amount is collected as per the guidelines of MNRE is used for only village development works; the said amount is not against any supply of goods/services made by the applicant to the SPDs. The transaction does not get covered by the definition of Supply, in terms of Section 7 of the CGST Act 2017; the activity is not in the course or furtherance of business. Therefore the activity can t be subjected to GST as it is not in the nature of supply. PERSONAL HEARING PROCEEDINGS HELD ON 21.11.2019. 6.1 Sri. Ganesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest earned on FDs are set aside and shown separately. f) Para 8.10 of the Implementation Support Agreement (ISA), entered by the applicant with the SPDs, stipulates that the Local Area Development Fund amount should be paid by the SPDs, for the purpose of development of village panchayats and other areas; a committee headed by District Collector, Tumkur will be constituted to utilize the fund for achieving its objectives. g) The Government of Karnataka issued a G.O. dated 17.10.2019, for formation of committee meant for the purpose of utilization of the Local Area Development Fund. Consequently meeting of the committee, so formed, was held on 25.10.2019 and finalized the area of work to be executed under the said scheme. Accordingly the applicant sought estimate for programmes for disbursal of funds. h) In view of the above activities and communications, it is clear that the Applicant is just acting as a custodian of the funds collected from the SPDs and to hand over the same to the committee for disbursement to various projects under the said LAD scheme. i) Supply of goods or services or both, as per the provisions of the CGST Act 2017, is a pre-requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant by the Government as there is no applicability of tax on reverse charge mechanism, in terms of Notification No.13/2017-Central Tax (Rate) dated 28.06.2017. n) The applicant, concluding the submissions, requests for favorable order that the amount received towards LAD fund is not against any supply made by the applicant and also the payments transferred at the directions of the Committee is not a supply of any service by the Government to the applicant. 7. FINDINGS DISCUSSION: 7.1 We have considered the submissions made by the Applicant in their application for advance ruling as well as the submissions made by Sri. Ganesh S, Advocate and duly authorised representative of the applicant during the personal hearing. We have also considered the issues involved, on which advance ruling is sought by the applicant, and relevant facts. 7.2 At the outset, we would like to state that the provisions of both the CGST Act and the KGST Act axe the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the KGST Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 (l)(a) of the CGST Act 2017 and is exigible to GST in terms of Section 9(1) of the said Act. 8.1 The applicant contends that the amount collected towards LAD fund is not related to any supply made by them to the SPDs and is intended for the local area development. The applicant endeavours to truncate and separate the said amount from the rental income, to circumvent the tax liability on the said income. We proceed to examine the relevance of the said amount to the supply rendered by the applicant. Thus we invite reference to Section 15(2)(a) of the CGST Act 2017 which, is related to determination of value of supply stipulates that the value of supply shall include any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier; 8.2 It is clearly evident from section 15(2)(a) of the CGST Act 2017 that any amount of any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than the GST related Acts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transaction but linked to the supply of rental/lease service, as discussed in the foregoing paras. Further the exemption under Sl.No.3 or 3A of the notification supra are applicable to only pure services provided to the Central Government, State Government or Union Territory or Local Authority or a Government Entity by way of any activity in relation to any function under article 243 G or 243 W of the Constitution of India. In the instant case the impugned amounts are part of the value of rental/ leasing service and are not provided to any Central Government, State Government or Union Territory or Local Authority or a Government Entity, but by the applicant to the SPDs. Therefore the exemption supra is not applicable to the instant case. 11. The fourth and last question is whether the payments made at the direction of the Committee, formed for Local Area Development, be considered as service rendered by Government to Applicant and subject to payment of GST, under Reverse Charge Mechanism (RCM), under Entry No.5 of Notification No. 13/2017-CentraI Tax (Rate) dated 28.06.2017, if the activity of collection of amounts towards LAD fund, by the applicant, is treated as supply or o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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