TMI Blog2020 (8) TMI 681X X X X Extracts X X X X X X X X Extracts X X X X ..... supply. As per Sl.No. 2 of Schedule I; supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business is an activity to be treated as supply even if made without consideration - Since the applicant is a joint venture with equal equity participation of the Government of Kerala and the Government of India, the applicant falls within item (iv) of explanation to sub section (5) of Section 15 and hence the applicant and Government of Kerala are related persons and consequently the services rendered by the applicant to the Government of Kerala without consideration will also fall under the definition of supply. Thus, the services rendered by the applicant to the Government of Kerala as executing and operating agency of the Kochi Water Metro Project with or without consideration falls under the definition of supply under CGST Act, 2017. Whether the services rendered by the applicant to the Government of Kerala can be considered as pure services falling under Service Classification Code 998339 Project management services for construction projects? - HELD THAT:- It is evident from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India and Government of Kerala. KMRL has been entrusted by the State Govt. with a project of executing and operating an integrated water transport system in Kochi. The project includes providing modern and safe watercraft, jetties, access roads, lighting and other ancillary infrastructure developments. The water metro project has been initiated as part of urban planning and to improve amenities available to the public. It aims to improve the entire public transportation system in Kochi. The project is partly funded by Government of Kerala and partly out of a loan taken by Government of India from a German agency, M/s.Kreditanstalt fur Wiederaufbau (KEW). A tripartite project agreement has also been entered between KFW, Govt. of Kerala and KMRL. Accordingly, Government of Kerala had issued consequential orders vide G.O.(Ms)No.44/2016/Taxes dtd. 13-06-2016. 2. KMRL, the applicant has requested advance ruling on the following: 1. Since the Govt. of Kerala is the de jure owner of the assets of the water metro project and the works contracts are performed by contractors with whom agreements are entered into by KMRL on behalf of Govt. of Kerala. a) Whether KMRL has any liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remuneration for executing the project. 5. As per the loan agreement entered into between Government of India and KFW and the project agreement between KMRL, Government of Kerala and KEW, a separate agreement was entered into between KFW and KMRL. Accordingly the disbursement of funds would either be made directly to the contractors in case the contract value exceeds 5 Million Euro and to KMRL through Govt. of Kerala, if the contract value is less than 5 Million Euros. All the disbursements will be exclusive of taxes. This project cost consists of the cost of contract works entrusted to various contractors by KMRL and cost incurred by KMRL on personnel recruited specifically for this project and whose costs reimbursed from the funds allocated to the project and other indirect overhead expenses. 6. Accordingly the applicant is of the view that the Government of Kerala is the de jure owner of the assets constructed as part of the water metro project. The funds for the project are provided by Government of Kerala by way of their contribution and by way of loan from KFW which is primarily repayable by Government of Kerala. As per law GST has to be levied by the supplier of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract nor composite supply. The services are rendered to the State Government. It is in the nature of an activity for urban planning providing of public amenities which are functions listed in the Twelfth Schedule to the Constitution being in the nature of functions entrusted to a Municipality under section 243W of the Constitution. 9. The matter was examined in detail. The Government of the Federal Republic of Germany and the Government of India as per Loan Agreement dated 17-06-2016 had agreed to develop a climate friendly and sustainable integrated water transport system for greater Kochi through KMRL in the State of Kerala. The project is funded through loan amounting to Euro 85,000,000.00 with interest rate subsidies on the basis of the agreement entered into between Kreditanstalt fur Wiederaufbau (KFW) and the Government of India. The loan agreement mandates for a project agreement to be concluded between the KFW, State of Kerala and KMRL in the capacity as the Project Executing Agency. The borrower (Government of India) shall channel the loan according to the terms and conditions to the KMRL through the State of Kerala which shall only be used exclusively to finance goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ception agreed upon between KFW and the Project Executing Agency (Article 5.1 (a) of the PA). The Project Agreement had agreed that The Project-Executing Agency and the State of Kerala may not assign or transfer, pledge or mortgage any claims from this Project Agreement. (Article 6.7 of the PA). As per Article Il (2.3) of the Separate Agreement, the Project-Executing Agency shall be responsible for the preparation, implementation and operation of the Project in compliance with World Bank environmental and social standards. 12. Kochi Metro Rail Limited is a Special Purpose Vehicle (SPV) formed for the implementation of Kochi Metro Rail Project in the city of Kochi, its operation, maintenance and allied activities. The revenue streams of the company include fare collection from the passengers by way of sale of tickets and other indirect collections. KMRL is incorporated under the Companies Act, 1956 as a Government Company within the meaning of Section 2(45) of the Companies Act, 2013. The Company is a Joint venture between Government of India and State of Kerala, with equal equity participation. 13. The proposed Kochi Water Metro Project (KWMP) involves development of boat t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act, 2017, the activities specified in Schedule I, made or agreed to be made without a consideration is also supply. As per Sl.No. 2 of Schedule I; supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business is an activity to be treated as supply even if made without consideration. 16. As per the Explanation to sub-section (5) of Section 15 of the CGST Act, 2017 persons shall be deemed to be related persons if (i) such persons are officers or directors of one another's businesses; (ii) such persons are legally recognised partners in business; (iii) such persons are employer and employee; (iv) any person directly or indirectly owns, controls or holds twenty-five per cent. or more of the outstanding voting stock or shares of both of them; (v) one of them directly or indirectly controls the other; (vi) both of them are directly or indirectly controlled by a third person; (vii) together they directly or indirectly control a third person; or (viii) they are members of the same family; Since the applicant is a joint venture with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orks contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Govemmental authority or a Government Entity 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. 21. The functions entrusted to a municipality under the Twelfth Schedule to Article 243W of the Constitution includes 'public amenities including street lighting, parking lots, bus stops and public conveniences'. Moreover, the functions entrusted to a Panchayat under the Eleventh Schedule to Article 243G of the Constitution includes Roads, culverts, bridges, ferries, waterways and other means of communication. In view of the conclusion above that the services rendered by the applicant to the Government of Kerala as executing and operating agency of the integrated water transport project is classifiable as pure services falling under service classification code 998339; the services are exempted from payment of goods and services tax by virtue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns which are entrusted to Municipality under Article 243W of the Constitution or to a Panchayath under Article 243G of the Constitution. Hence, the applicant squarely falls under the definition of Governmental Authority under Para 2 (zf) of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. In view of the observations stated above, the following rulings are issued: 1. Since the Govt. of Kerala is the de jure owner of the assets of the water metro project and the works contracts are performed by contractors with whom agreements are entered into by KMRL on behalf of Govt. of Kerala: (a) Whether KMRL has any liability to pay GST on the funds received from Govt. of Kerala for paying the cost of the water metro project? No. The applicant being the agency for executing and operating the integrated water transport project in Kochi is rendering pure services to the Government of Kerala which is falling under the service classification code 998339. Hence, the services provided by the applicant to the Government of Kerala are exempted from payment of goods and services tax by virtue of the entry at Sl No. 3 of Notification No. 12/2017 Central Tax (Rate) dated 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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