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TMI Blog2020 (10) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... lled as 'Textbook Corporation' or the Applicant) is a society registered under the provisions of the Societies Registration Act 1860 set out by the Government with the object to acquire and take over the business and other activities of Government of Tamil Nadu relating to Publication of text books and to promote the advancement of General and Technical Education. They are registered under GST Act with Registration No. 33AAATT0438P1ZA. They have sought ruling for the following questions: 1) Whether the supply of educational aids to students such as school bags, footwear, geometry box, wooden colour pencils, crayons, woollen sweater to government and government aided schools based on the State Government educational policy for which the consideration is paid to Tami Nadu Text Book and Educational Services Corporation by the State Government by means of a budgetary allocation constitutes a supply. 2) If the answer to the above is in the affirmative then is Tamil Nadu Text Book and Educational Services Corporation is entitled to avail of corresponding input tax Credit on the procurement made. 3) Whether the supply of Rain Coats, Ankle Boots and Socks to students without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ol bags, footwear, and geometry box, wooden colour pencil, crayons, woollen sweater (collectively termed as Educational Kits) which is supplied to Government and Government aided schools based on the requirements which are provided by the Education Department, Government of Tamil Nadu. Based on the tender floated for procurement of the Educational kits from various suppliers they submit a claim to the Education Department of the State Government for allocating monies for the cost of Procurement of the Educational kits. In the claim so submitted apart from the cost of procurement of the Educational kits the Applicant also claims incidental expenses towards Procurement such as advertisement cost for floating tenders, field inspection Expenses and other related costs and administration charge which is at 1% of the Cost of procurement of the supplies. These claims made by them are scrutinized by the officials of the Education Department of the Government of Tamil Nadu, who after such scrutiny recommend the payment to be made to the applicant from the budgetary allocation made to the Education Department of the State Government in the State Budget and any amendments thereof which are pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services Tax Act 2017. The Applicant has stated that the definition of "related party" is provided as an explanation in Section 15 of the CGST Act. They have further stated that as a case can be made out that as the Applicant and the State Government are related parties, supplies made without consideration can attract the entry made in item No. 2 of Schedule - I of Central Goods and Services Tax Act 2017 and its corresponding provision under the Tamil Nadu Goods and Services Tax Act 2017. They are of the view that the transactions covered under the entry made in item No. 2 of Schedule I of the CGST Act was made as an anti-avoidance measure. The entry was only made to ensure that the tax authorities are not denied GST Revenue in what may be a potentially less than arm's length transaction between related parties. In the instant case the supply of the goods to the Government is only for achieving the means of improving literacy levels by encouraging children in the hilly areas to go to schools which is a social welfare measure and there is no commercial motive in the aforesaid supply to apply/attract invoking of the entry made in Item 2 of Schedule I of the CGST Act in the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reads as under : Composite supply of goods and services in which the value of supply of goods constitutes not more than 25% of the value of the said composite supply provided to the Central Government, State Government or Union territory or local authority or a Governmental 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. Provision of education including primary and secondary schools is covered under Article 243G and the above activity of printing is in relation to education and hence should be considered as exempt. 2.5 The Applicant has stated that they being the nodal agency involved in the procurement also levies penalties and liquidated damages on the suppliers for failure to adhere to the tender Conditions which is on account of delay in supply as per the tender condition or non-Adherence to the quality parameters as set out for the items which are supplied.; mere levy of Penalty/Liquidated Damages cannot constitute a supply.; to attract the provisions of Section 7 of the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , socks they don't get any consideration. They also do not take any ITC and hence should be covered under Entry 1 of Schedule I and not under Entry 2 of Schedule I. In respect of SI.No. 5, 6, they agreed that being a recipient they cannot obtain a ruling under Advance ruling. They stated that will submit GO for function of the applicant, Registration Certificate of Society, GOs for procurement of all items, indents, claims, reimbursement, audited income and expenditure accounts, GSTRB returns in two weeks. They do not get reimbursement for administrative charges but only paid for the cost of items. 4.1 The state Government Jurisdictional authority also appeared for the hearing and reiterated written submissions furnished in letter Rc. No.416/2019/A4 dated 04.06.2019. In the written submissions, the said authority has remarked that * in respect of Q1 & 2 of the applicant, the applicant provides certain educational aides to government and government aided schools under the State Government Education Policy, for which the applicant receive money from State Government which is nothing but a supply of goods wherein State Government is recipient * In respect of Q 3 & 4 of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them on the Tamil Nadu Government and other relevant documents as sample mapping to the amount of grant given by them for certain free kits such as: a. Geometry Box for the FY: 2016-17 b. Wooden Colour Pencil & Crayons for the FY: 2016-17 c. Woollen Sweater for the FY: 2016-17 d. School Bags for the FY: 2016-17 5. A copy of GO issued at the time of the formation of the Society 6. Copy of certificate of registration obtained from the Registrar of Society. 7. The copy of GO dated: 15.11.2016 directing Tamil Nadu Textbook and Educational services Corporation to procure and supply Raincoat, Ankle Boots and socks to students studying in hilly areas from its own fund. 8. Copies of GSTR 3B for 2017-2018. 5.2 Further, the applicant has stated that Liquidated damage on which the ruling has been sought is levied by them on the suppliers and therefore requested to take on record the Additional Grounds in respect of the aforesaid matter along with the submission which was made at the time of filing the appeal. Liquidated Damages are levied due to the Supplier supplying deficient goods or delaying the supply of goods; there is no obligation on their part to tolerate the defici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve from printers engaged by them for printing of text books. 6) Whether the Tamil Nadu Text Book and Educational Services Corporation is required to pay GST on Penalty and Liquidated damages levied by them on suppliers due to violation of the contract terms for supply and if so the rate at which such GST is payable. 7. The applicant is a society registered under Societies Registration Act 1860, set up by the Government of Tamil Nadu. As per the G.O.Ms. No. 1174 of Education Department dated 5.8.69, the State government has decided to establish an autonomous Text Book Corporation for Tamil Nadu with Chief Minister as the Chairman, Minister for Education & Industries as Vice-chairman and a Managing director (Government of Tamil Nadu), ex-officio director and have it registered under the Societies registration Act. It is seen from the balance sheet of 2017-18 given by the applicant that the income is mainly 'reimbursement' of cost of books, free kits. 8.1 The first and second question is regarding the supply of educational aids such as school bags, footwear, geometry box, wooden colour pencils, crayons, woollen sweater to government and government aided schools based on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instant case, the applicant was formed as a society by the State government for procuring and supplying textbooks and other items. The applicant is supplying the kits for a consideration which includes cost of the goods plus various administrative charges which is claimed by the applicant. Therefore, the supply of educational aids such as school bags, footwear, geometry box, wooden colour pencils, crayons, woollen sweater by the applicant to the State government for a consideration is a 'supply of goods' in the course of its business as per Section 7 of the Act. 8.3 The applicant has claimed exemption in respect of the above supply vide Sl.No. 150 in Notification No. 2/2017-C.T.(Rate) dated 28th June 2017 as amended by Notification No.35/2017-C.T.(Rate) dated 13th October 2017. The relevant entry is examined as under: "150 - Supply of goods by a Government entity to Central Government, State Government. Union territory. local authority or any person specified by Central Government, State Government, Union territory or local authority, against consideration received from Central Government, State Government, Union territory or local authority in the form of grants"; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 and hence is an exempted supply. As such a supply is exempt 9. The second question raised is on their eligibility to Input Tax Credit on the procurement of Educational Kits supplied to the Government. As it is seen that the supply of 'Educational Kit' is fully exempted, the applicant is not eligible to the Credit of Input Tax paid on the procurement of such goods. 10.1 Question No. 3 & 4 raised by the applicant is Whether the supply of Rain Coats, Ankle Boots and Socks to students without consideration to Government/Government Aided schools located in Hilly areas is a supply? If so, whether they are entitled to discharge the tax liability on such outward supplies at Cost + 10% and avail of corresponding Input Tax Credit on the procurement made? The same are taken up for consideration as under. 10.2 The applicant has stated that they supply raincoats, boots and socks based on the requirement as provided by the Education Department, to the Government Schools located in hilly areas for which no consideration is paid to the applicant by the Department of School/Elementary Education. The applicant claims that these supplies for which no consideration is received sepa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of reference, (a) "advance ruling" means 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; As per the above, the ruling can be sought in relation to the supply of goods or services or both undertaken or proposed to be undertaken by the applicant. The Q.No. 5 relates to receipt of service and not supply of service by the applicant, therefore the said question is not taken up for consideration for the reason that it is not covered under the purview of this Authority. 12. The last question to be answered is Whether the Tamil Nadu Text Book and Educational Services Corporation is required to pay GST on Penalty and Liquidated damages levied by them on suppliers due to violation of the contract terms for supply and if so the rate at which such GST is payable. The applicant has stated that as per the Purchase Order issued by the applicant for purchase of the goods to be supplied to the Government, they levy penalties and liquida ..... X X X X Extracts X X X X X X X X Extracts X X X X
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