TMI Blog2021 (4) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... ing out any function entrusted to a municipality under Article 243W of the Constitution or to a Panchayat under Article 243G of the Constitution. Since the applicant has fulfilled the conditions of being formed by an Act of Parliament and being established to carry out the function entrusted to a municipality under Article 243W of the Constitution and to a Panchayat under Article 243G of the Constitution, it is concluded that the applicant will fall under the definition of Governmental Authority if it also fulfils the condition namely ninety percent or more participation of Government by way of equity or control. Whether NID is liable to pay GST on procurement of (a)security services received from any person other than body corporate as per Notification No.13/2017-central Tax Rate (b)access to e-books/e-database from service provider located outside India as import of service as per Notification No.10/2017-IGST(Rate) under reverse charge mechanism, in view of the exemption granted in Sr.No.3 of Notification No.12/2017-Central Tax(Rate) or Sr.No.3 of Notification No.09/2017-IGST(Rate)? - HELD THAT:- Sr.No.3 of aforementioned Notifications No.12/2017-Central Tax(Rate) date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therewith or incidental thereto. The NID Act regulates NID by laying down its powers, functions and responsibilities. The applicant has submitted a copy of the NID Act along with their submission as well as the copy of their registration with GST authorities. 2. The applicant has submitted that according to Section 9 of the NID Act, the President of India would be the visitor of the institution, who may appoint one or more persons to review the work and progress of the institute or to hold the inquiries into affairs of the institute and to report them in such manner as he directs and that on the basis of the report, the visitor shall take such actions and issue such directions as he may consider necessary, which shall be binding on the Applicant. The applicant has explained some of the sections of the NID Act as under: (1) Section 10 of the NID Act provides that a Governing Council ( Council ) shall be an authority of the institution. Moreover, as per Section 11 of the NID Act, Council would comprise of a chairperson who would be nominated by the President of India. Apart from chairperson, the Council also shall have such number of members, who are nominated by Central Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity or a Governmental Authority by way of any activity in relation to a function entrusted to a Municipality under Article 243W of the Constitution of India ( COI ) is exempted; that since, NID is set-up by an Act of Parliament and the Central Government has complete control over the institution, the Applicant believes that they would merit categorization as a Governmental Authority as defined in the GST Act; that they believe that their activity of providing education in the field of design is one of the functions of Article 243W of COI and services received by them in relation to/pertaining to education service should be eligible for exemption from payment of GST; that in light of above discussion, if the applicant decides to avail security services from individual or partnership firm, the liability to pay tax rests with the applicant as per Notification #13/2017- CT (Rate), as amended from time to time. The applicant has further stated that apart from the above, they make payment to service providers located outside India for access of e-books or e-database, which are used for the educational purpose. For such services, the liability to pay tax rests with the Applicant as per No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that from perusal of the above, they understand that in order to qualify for above referred exemption, it is essential to fulfill following conditions: The Applicant should merit category of Governmental Authority The services (procured) are by way of activity in relation to function entrusted to Municipality under Article 243W of the Constitution of India ( COI ) Part A Whether NID would qualify as governmental authority as defined under the Integrated Goods and Services Tax Act, 2017? On the basis of the information/details, as provided in the statement of facts, the Applicant would like to submit that they are set up by an Act of Parliament as well as established by the Central Government through Department for Promotion of Industry and Internal Trade (DPIIT) of Ministry of Commerce Industry, Government of India. Further, the Director, Chairman or Governing Council are appointed by Government and in a way, Government has 100% participation by way of control in NID. They have submitted a copy of annual report for FY 2018-19 for reference. The applicant has stated that for analyzing the question being the subject matter, it would be relevant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent or State Legislature. The provisions contained in sub-clause (i) and sub- clause (ii) of Clause 2(s) are independent dis-conjunctive provisions and the expression 90% or more participation by way of equity or control to carry out any function entrusted to a municipality under Article 243W of the Constitution is related to sub-clause (ii) of Clause 2(s) alone. The clause (i) is followed by ; and the word or . Therefore, each of the sub-clauses is independent provision. The condition of 90% or more participation by way of equity or control to carry out any function entrusted to a municipality under Article 243W of the Constitution is relatable to only sub-clause (ii) of Clause 2(s). It means that an authority established by Government should have 90% or more participation by way of equity or control to carry out any function entrusted to a municipality under Article 243W of the Constitution to be eligible for exemption. The Authority set up by an Act of Parliament or State Legislature is not and cannot be made subject to the condition of 90% or more participation by way of equity or control to carry out any function entrusted to a municipality under Article 243W of the Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 2005 and personnel of NID is also given the election duty which normally is given to Government organization / entities and entities controlled or owned by Government. The applicant has also stated that considering above discussion, they would like to submit that NID is controlled by Central Government and most of decisions of NID is subject to approval from Central Government which evidently proves that the applicant fulfils the condition of being controlled by the Government and therefore, they are Governmental Authority as per GST provisions. The applicant has also referred to the Ruling of Advance Ruling authority in the case of National Dairy Development Board ( NDDB ) vide reference #GUJ/GAAR/Ruling/2019/02 dated February 22, 2019 wherein the facts in that ruling and facts in hand are similar as NDDB was an institution set up by an Act of Parliament viz. National Dairy Development Board Act, 1987, the Government has substantial control over the operations of NDDB, the Board of Directors would be nominated by the Central Government, the auditors of NDDB would be appointed in consultation with Central Government and the audited accounts would be laid before Parliament by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) the Committees with such powers and authority as may be necessary to enable them to carry out the responsibilities conferred upon them including those in relation to the matters listed in the Twelfth Schedule. Further, the Applicant has reproduced the matters that are listed in the Twelfth Schedule, as under: 1. Urban planning including town planning. 2. Planning of land- use and construction of buildings. 3. Planning for economic and social development. 4. Roads and bridges. 5. Water supply for domestic, industrial and commercial purposes. 6. Public health, sanitation conservancy and solid waste management. 7. Fire services. 8. Urban forestry, protection of the environment and promotion of ecological aspects. 9. Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded. 10. Slum improvement and upgradation. 11. Urban poverty alleviation. 12. Provision of urban amenities and facilities such as parks, gardens, playgrounds. 13. Promotion of cultural, educational and aesthetic aspects. 14. Burials and burial grounds; cremations, cremation grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry and discretionary duties of the Corporation and Section 66 of GPMCA, (copy of which is submitted), prescribes discretionary functions, one of which is promotion of cultural, educational and esthetical aspects. The relevant extract of the law is reproduced hereunder. 66. The Corporation may, in its discretion, provide from time to time, either wholly or partly, for all or any of the following matters, namely :- (8A) promotion of cultural, educational and esthetical aspects; The Applicant has stated that the Twelfth schedule to COI also lists out that promotion of cultural, educational and aesthetic aspects is one of the functions entrusted to a Municipality; that it is crystal clear from the above discussion that rendering of higher and technical education is one of the functions of a Municipality; that it is important to note that there is no restriction envisaged/ stated in above provisions including Article 243W with respect to higher education; that the law intends to cover all type of education including higher technical education to be covered within the function of Municipality; that the activities of NID are for the promotion of educational aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ality under Article 243W of the Constitution of India ( COI ) 14. The applicant has submitted that in this connection, the term in relation to used in above exemption is very much wide enough to cover every kind of services that results in performance of the functions as mentioned in Article 243W of the COI either directly or indirectly; that even the services provided for enabling the organization to perform defined functions would also be covered as a reason of usage of words in relation to ; that to substantiate this, they would like to refer to the judgement of Doypack Systems (P.) Ltd. vs. UOI as reported in 1988 (36) E.LT. 201 (S.C.) wherein it was held that the expression in relation to (so also pertaining to ), is a very broad expression which pre-supposes another subject matter; that these are words of comprehensiveness which might both have a direct significance as well as an indirect significance depending on the context; that it is also held that the expression in relation to has been interpreted to the words of wisest amplitude; that they also wish to rely on judgement of State Waqf Board Vs. Abdul Azeer sahib as reported in AIR 1968 Mad 79, wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re entrusted with the functions mentioned under article 243G and 243W of Constitution of India and the Authorities have pronounced that the services of the Applicant would be considered as pure services and eligible for exemption on fulfilment of the below mentioned conditions: - It excludes works contract service - It excludes other composite supplies involving supply of any goods - It is supply of services without involving any supply of goods 16. The applicant has further submitted that, similarly, the West Bengal Authorities for Advance Ruling has also pronounced a similar ruling in the case of Mr. Mahendra Roy vide order No.24/WBAAR/2019-20 dated September 23, 2019 wherein the applicant was engaged in providing conservancy/solid waste management services to Conservancy department of Howrah Municipal Corporation ( HMC ); that while making the payment to the Applicant, HMC deducted GST TDS; that the applicant had contended that they are supplying pure services to Municipal Corporation and eligible for exemption under Sl. No.3 of Notification No. 12/2017- CT (rate) and the GST TDS provisions would not be applicable to this transaction. The contention of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fety of students, teachers and staff; that it may be appreciated that security is vital for safe-keep of institution and it can be ensured only by way of keeping enough security measures and procedures in place; that security service has direct nexus with the education service, being one of the functions of Municipality and therefore, same would be eligible for exemption and the applicant would not be liable to make payment of tax under reverse charge mechanism. 18.1 Access to e-books/e-database from service provider located outside India as import of service as per Notification No.10/2017 IGST (Rate) The applicant has stated that e-books and e-database is used by students and faculties/professors during the course of dissemination of education and without this, it would be difficult for the applicant to provide education services effectively and would not enable them to achieve their objectives well; that the availability of e-books provides them with an option of gaining knowledge from people with different kind of perspective to a similar question/problem; that database provides a lot of data/information to students that helps them in undertaking various kind of resear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above mentioned line item, a question may arise as to whether the condition of fifty-one percent or more participation by way of equity or control, to carry out any function is applicable to the body set up by an Act of Parliament; that as discussed earlier, usage of word or between (i) (ii) coupled with the fact that clause (i) is followed by ; unlike the clause (ii) is followed by , means that the condition of fifty-one percent or more participation by way of equity or control, to carry out any function would be applicable to body which is established by the Government. This means that the board/body set up by an act of Parliament or State legislature is independent and is not bound by above condition; that, recently, a Circular is issued vide reference No.76/50/2018 GST dated 31 December, 2018 wherein the clarity is provided on similar aspect or legal interpretation according to which, the long line written in clause (a) in Notification No. 50/2018-Central Tax dated 13.09.2018 is applicable to both the items (i) and (ii) of clause (a) of the said notification; that in other words, the provisions of section 51 of the CGST Act are applicable only to such authority or a b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Designs, Ahmedabad qualifies as Governmental Authority as defined under the Integrated Goods and Services Tax Act, 2017 or otherwise. But, before doing that, we would like to refer to that portion of the submission of the applicant wherein, while referring to the judgement of Hon ble High Court in the case of Shapoorji Paloonji Company ld. v/s. CCE, Patna (2016-TIOL-556-HC-Patna-ST) they have stated that vide this decision, the Court held that the condition attached to the definition of the Governmental Authority given in the erstwhile Service Tax Legislation viz. Participation of government by way of 90% or more of equity and control to carry out the functions of municipality under Article 243W of the Constitution, is relevant only for the Board established by the Government. However, we have to state here that the said judgement is under challenge by the Department before the Hon ble Supreme Court and has therefore not attained finality. Further, for the purpose of examining whether the applicant is covered under the definition of Governmental Authority or otherwise, we will be required to refer to the definition of Governmental Authority as appearing in the IGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue in hand vis-a-vis the 3 conditions elaborated above, is as under: (1) The applicant National Institute of Design has been formed by the National Institute of Design Act of the Government of India which means that it has been formed by an Act of Parliament. Therefore the first condition is fulfilled. (2) The applicant in their submission have stated that that since NID is set-up by an Act of Parliament and the Central Government has complete control over the institution, they believe that they would merit categorization as a Governmental Authority as defined in the GST Act. However, they have not provided any proof/submission with regard to the Government having 90% or more by way of participation of equity or control. Therefore, unless and until it is proved that the Government is having 90% or more by way of participation of equity or control in NID, this condition will not be considered to have been fulfilled. In other words, the applicant can qualify to be a Governmental Authority , if and only if, there is 90% or more by way of participation of equity or control by Government in NID. (3) In order to examine as to whether NID has been established to carry ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... electrification, including distribution of electricity. 15. Non-conventional energy sources. 16. Poverty alleviation programme. 17. Education, including primary and secondary schools. 18. Technical training and vocational education. 19. Adult and non-formal education. 20. Libraries. 21. Cultural activities. 22. Markets and fairs. 23. Health and sanitation, including hospitals, primary health centres and dispensaries. 24. Family welfare. 25. Women and child development. 26. Social welfare, including welfare of the handicapped and mentally retarded. 27. Welfare of the weaker sections, and in particular, of the Scheduled Castes and the Scheduled Tribes. 28. Public distribution system. 29. Maintenance of community assets. We have gone through the aforementioned lists. As submitted by the applicant, theirs is an Institute involved in the field of Education i.e. in education, research and training in all discipline relating to Design and matters therewith, and on going through the above list, we find there are two functions related to Education i.e.(i) one appearing at Sr.No.13 in the list of functions entru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. NIL NIL Sr.No.3 of Notification No.09/2017-IGST(Rate) dated 28.06.2017 reads as under: Sr.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Service Rate (percent) Condition (1) (2) (3) (4) (5) 3. Chapter 99 Pure services (excluding 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 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... located outside India who are providing/will be providing them access to e-books/e-database. In absence of the same, and without going through the conditions/provisions of the contract/agreement made by the applicant with their service providers, it will not be possible for us to determine the nature of services or whether the services received/to be received by them are Pure services or otherwise. We, therefore, conclude that in view of non-submission of copies of agreement or contract with regard to the services received/to be received by the applicant, it would not be possible for us to give a decision in the matter. 25. The third question to be discussed is whether NID is required to be registered as a tax deductor under GST as per the provision of Section 24 of the CGST Act. For this purpose, we will be required to refer to Section 24 of the CGST Act, 2017. Section 24 of the said Act reads as under: 24. Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act, (i) persons making any inter-State taxable supply; (ii) casual taxable persons making taxable supply; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fifty thousand rupees: 25.2 Since, NID is not covered under any of the categories mentioned under (a), (b) or (c) above, it is required to examine as to whether the applicant is covered under category(d) or otherwise. In this regard, we find that the Government has issued a Notification No.50/2018-Central Tax dated 13.09.2018 vide which the Central Government has appointed 1st day of October, 2018, as the date on which the provisions of Section 51 of the CGST Act, 2017 shall come into force with respect to persons specified under clause (a), (b), (c) of sub-section(1) of the said Act and the persons specified below under clause(d) of sub-section(1) of section 51 of the said Act, namely:- (a) An authority or a board or any other body, - (i) Set up by an Act of Parliament or a State Legislature; or (ii) Established by any Government, with fifty-one percent, or more participation by way of equity or control, to carry out any function; (b) Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860(21 of 1860). (c) Public sector undertakings. 25.3 Since, the applicant is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t also fulfils the condition namely ninety percent or more participation of Government by way of equity or control. Question-2: Whether NID is liable to pay GST on procurement of following services under reverse charge mechanism, in view of the exemption granted in Sl. no.3 of Notification No.12/2017 Central Tax(Rate) or Sl.No.3 of Notification No.09/2017 IGST (Rate) ? Security services received from any person other than body corporate as per Notification No.13/2017 Central Tax (Rate) Access to e-books/e-database from service provider located outside India as import of service as per Notification No.10/2017 IGST (Rate) Answer : In view of non-submission of copies of agreement or contract with regard to the services received/to be received by the applicant, it would not be possible for us to give a decision in the matter for the reasons discussed hereinabove. Question-3: Whether NID is required to be registered as a tax deductor under GST as per the provision of Section 24 of the CGST Act? Answer : Since it has been established from the discussions hereinabove, that NID has been formed by an Act of Parliament, the applicant will have t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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