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TMI Blog2021 (10) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... ave fees & Lease rent payable every year as consideration for the grant of lease and way leave permission for the plot of land and water areas required by MMRDA for the MTHL project. The Annual Lease Rent of Rs. 22,58,30,199 is payable in respect of (i) Area under permanent occupation (i.e. 30 years lease period) and the Annual Lease Rentals of Rs. 33,23,36,835 is payable in respect of (ii) Area under temporary occupation during the construction period (i.e. Temporary occupation). b. Compensation equivalent to the amount of Rs. 24.48 crores in lieu of demolition of 4 existing sheds at STP yard situated on the said plot of land which is licensed to MMRDA for the purpose of the MTHL project and required to be demolished in order to render vacant possession of the said plot of land to MMRDA for the purposes stated in the MOU. The amount is arrived at on the basis of reconstruction cost at the present rate of construction based on Ready Reckoner of Government of Maharashtra (GOM) and payment thereof is one of the conditions of MOU. c. Compensation equivalent to the amount of Rs. 64 crores in lieu of decommissioning of Old Pir Pan Jetty / Berth situated on the said plot of land whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant is duly discharging GST liability in respect of various taxable supplies made by it. 2.3 Mumbai Metropolitan Region Development Authority (MMRDA) is a body established under Mumbai Metropolitan Region Development Authority Act, 1974 ('MMRDA Act') and has been established for the purpose of planning, coordinating and supervising the proper, orderly and rapid development of the Mumbai Metropolitan Region (MMR); to formulate and execute plans, projects and schemes for the development of the MMR and to provide for matters connected with the purposes aforesaid. 2.4. The Government of Maharashtra has entrusted the responsibility of the execution of MTHL project to MMRDA. The MTHL project, undertaken by Government of Maharashtra, refers to the construction of 'Mumbai Trans Harbour Link' (MTHL) 21.8 km, freeway grade Road Bridge for connecting the island city of Mumbai with mainland across the harbor and would also connect Sewri West and the Eastern Freeway through the Sewri Interchange over the Sewri Bunder Road after the construction of a bridge across the Central Railway Harbour line tracks and water areas of MbPT. MMRDA, approached to Applicant for acquisition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, the applicant wants to examine the applicability of the said entry to payments received by the applicant from MMRDA for activities contemplated under the said MoU. For the purpose of deciding the applicability of the entry No. (3) to the payments received/ receivable by the Applicant, supply made should be that of "pure services ", such supply should be made to the Central Government, State Government or Union territory or local authority or governmental authority or a Government Entity and the services should be 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 243 W of the Constitution. 2.10.2 As per the relevant provisions of the CGST Act, services in the nature of the lease, tenancy, easement, license to occupy land is a supply of 'pure services ' as it does not involve the supply of any goods. Therefore, subject services supplied by Applicant are in the nature of "pure services". 2.10.3 The definition of the term 'Governmental Authority' as given in Para 2(zf) of Notification No. 12/2017-CT(R) dated 20.06.2017 means an authority or a boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount equivalent to 15% of the Security Deposit, received by the applicant by way of Way Leave Agreement Charges is only in the nature of deposit for incurring expenditure to be incurred for and on behalf of MMRDA. The applicant will, therefore, be only acting as paying agent of the MMRDA in respect of such services procured by MMRDA from third parties or any expenditure incurred on account of MMRDA in connection with the execution of a Way Leave Agreement & Lease Agreement. The said amount is not payable by MMRDA to the Applicant as "quid pro quo "or "consideration " for provision of any service by the latter to the former, and thus there is no service provider/service receiver relationship between the applicant and MMRDA as regards the said payment. Consequently, the said amount would not attract any GST. Even otherwise, the said payments are made under the MOU and in connection with obtaining services of grant of way leave/lease in respect of land and water areas, which is directly required for the purposes of the MTHL project and consequently, it is exempt from payment of GST in terms of the Entry No. 3 of No. 12/2017-CTR dtd.28-06-2017. 2.15 The Refundable Security Deposit wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... execute the developmental and infrastructure work which was otherwise being done by the municipalities themselves. Thus, it is proved that the MMRDA has been established with the objective of doing works which were originally done by the municipalities. So, any work being done by the MMRDA can be termed as related to the functions entrusted to the municipalities under article 243W of the Indian Constitution. Hence, the transactions between MMRDA and MbPT clear this criteria too for becoming eligible for exemption under the Entry no 3 of Notification No.12/2017-CTR dtd.28-06-2017. 3.5 Thus, in the opinion of this office which has been formed on the basis of the documents mentioned above, the present transactions between MbPT and MMRDA clear all the criteria for becoming eligible for exemption under the said notification. 04. HEARING 4.1 Preliminary hearing in the matter was held on 22.01.2020. Smt. Gayatri Vidhate, Account Officer and Shri. Mandar Telang, CA appeared, and requested for admission of the application. Jurisdictional Officer Smt. Supriya Kokane, Deputy Commissioner, E-617, LTU-004, Mumbai also appeared. 4.2 Final hearing was held on 14.09.2021. The Authorized repres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the said plot of land to MMRDA for the purposes stated in the MOU. d. Compensation amount of Rs. 64 crores in lieu of decommissioning of Old Pir Pau Jetty / Berth situated on the said plot of land, licensed to MMRDA for the MTHL project and required to be decommissioned by MbPT in order to render vacant possession of the said plot of land to MMRDA for the purposes stated in the MOU. e. MMRDA will be required to pay 'Way Leave Agreement charges' to MbPT for the said purpose on the actual reimbursable basis. The charges will be calculated as 15% of security deposit payable by MMRDA to MbPT (equivalent to 12 months way leave fee/lease rent), in terms of clause 10 of the MOU. f. MMRDA will be required to lodge with MbPT interest-free refundable security deposit equivalent to 12 months Way Leave fee/Lease rent. g. MMRDA will also be required to pay to MbPT in advance, a refundable deposit of Rs. 20 Crores to be adjustable by the MbPT only against possible damages during the execution of work, if any, the cost of which is not paid separately by the MMRDA. 5.6 The applicant has queried as to whether entry no. (3) of Notification No. 12/2017-CTR which provides an exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as 'supply of goods' or 'supply of services'. Entry 2 (a) of Schedule II states that "any lease, tenancy, easement, licence to occupy land is a supply of services". 5.7.4 Thus, we find that in the instant case, the supply of leasing of immovable properties and water areas within its territory by the applicant to MMRDA is nothing but supply of services. From the submissions made by the applicant we observe that the impugned MOU does not envisage any supply of goods whatsoever, along with the supply of leasing services and therefore we conclude that the subject activity is a supply of pure services. 5.7.5 Relevant Entry No. (3) Of Notification No. 12/2017-CT(R) dated 28.06.2017 is as under:- SI.NO. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services 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 1_[or a Government Entity] by way of any activity in relation to any function entrusted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 15 and sub-section (1) of section 16 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, and on being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India, in the Ministry of Finance (Department of Revenue) No.11/2017- Central Tax (Rate), dated the 28th June, 2017, published in the Gazette of India, Extraordinary, Part 11, Section 3, Sub-section (i), vide number G.S.R. 690(E), dated the 28"'June. 2017, namely:- In the said notification, (i) in the Table, - (a) against serial number 3, - A. in item (iii), in column (3), for the words "Government, a local authority or a Governmental authority'", the words "Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity" shall be substituted: B. in item (vi), in column (3), for the words "a local authority or a Governmental authority" the words "ct local authority, a Governmental Authority or a Government Entity" shall be substituted: C. in items (iii) and (vi), in column (5), for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to provide for matters connected with the purposes aforesaid. Therefore, MMRDA is seen to be under the control of the Govt, of Maharashtra. 5.8.6 As per the MMRDA Act, the Authority comprises consists of the following members, namely (i) The Minister for Urban Development; (ii) The Minister for Housing; (iii) The Minister of State for Urban Development; (iv) The [Mayor of Mumbai]; (v) The Chairman, Standing Committee, Municipal Corporation of Brihan Mumbai (MCGM); (vi), (vii) and (viii) three Councillors of the MCGM elected by the Corporation, the election being held by ballot according to the System of proportional representation by means of the single transferable vote; (ix) and (x) two members of the Maharashtra Legislative Assembly, representing constituencies falling, wholly or partly, within the limits of the Mumbai Metropolitan Limits, to be nominated by the State Government; (xi) one member of the Maharashtra Legislative Council, to be nominated by the State Government; (xii) the Chief Secretary to the Government of Maharashtra; (xiii) the Municipal Commissioner of the MCGM (xiv) the Secretary to the Government of Maharashtra, Urban Development De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on provides for the following functions (relevant) as under: (1) Urban planning including town planning; (2) Regulation of land-use and construction of buildings (3) Planning for economic and social development (4) Roads and bridges 5.9.2 Further, Article 243G of the Indian Constitution states as under: "Article 243G. Subject to the provisions of this Constitution, the Legislature of a State may, by law, endow the Panchayats with such powers and authority and may be necessary to enable them to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Panchayats at the appropriate level, subject to such conditions as may be specified therein, with respect to - (a) The preparation of plans for economic development and social justice; (b) The implementation of schemes for economic development and social justice as may be entrusted to them including those in relation to the matters listed in the Eleventh Schedule." Article 243G of the Constitution refers to a list of functions enumerated in the Eleventh schedule. Entry 13 of the Eleventh schedule which is relevant states the following: "14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cost of rectification work, if any, not carried out by MMRDA (but which was supposed to be undertaken by MMRDA). 5.13.2 Again, this amount of Rs. 20 crores is received in relation to pure services rendered by the applicants to a Government Entity, will also be exempt from payment of GST under Entry No. (3) Of Notification No. 12/2017-CT(R) dated 28.06.2017, mentioned above. 5.13.3 Further, Applicant has taken a refundable security deposit from MMRDA as security against possible damages during the execution of works. It was stated during the hearing that, the security deposit is free from any interest payable to lessee that is 'Interest Free Security Deposit'. 5.13.4 The taxable event in GST is supply of goods of services or both. The term 'supply' is inclusive in nature can he understood in terms of following parameters namely:- 1. Supply of goods or services. Supply of anything other than goods or services or both, does not attract GST. 2. Supply should be made for a consideration. 3. Supply should be made in the course or furtherance of business 4. Supply should be made by a taxable person. 5. Supply should be a taxable supply. Besides above param ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributes namely:- i) For performance of an obligation. ii) Security against return of the hired goods, iii) Security against damage to properties rented. iv) Must be reasonable. 5.13.8 Applying the above test to the facts of the case we find that, the security deposit taken by the applicant is to secure or to act as a guarantee as per the terms of the MOU against possible damages to the properties. The fact is that the amount of deposit taken by the applicant is till the time the work has not been completed by MMRDA. We find, as per the submissions made by the applicant and the facts of the matter as stated by them, that the applicant will not apply such deposit received, as consideration for the said supply and therefore the provision to Section 2 (31) will not be applicable to this matter. Thus we find that in the subject case, the deposit received by the applicant cannot be treated as consideration for the supply made by the applicant and therefore they will not be liable to pay GST on such deposit amount received by them. 5.13.9 Even otherwise, we have already found herein above that all amounts received by the applicant are in relation to pure services rendered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said plot of land which is licensed to MMRDA for the purpose of the MTHL project and required to be demolished in order to render vacant possession of the said plot of land to MMRDA for the purposes stated in the MOU. The amount is arrived at on the basis of reconstruction cost at the present rate of construction based on Ready Reckoner of Government of Maharashtra (GOM) and payment thereof is one of the conditions of MOU. c. Compensation equivalent to the amount of Rs. 64 crores in lieu of decommissioning of Old Pir Pau Jetty / Berth situated on the said plot of land which is licensed to MMRDA for the purpose of the MTHL project and required to be decommissioned by MbPT in order to render vacant possession of the said plot of land to MMRDA for the purposes stated in the MOU and payment thereof is one of the conditions of MOU. d. An amount equivalent to 15% of the Security Deposit, received by MbPT from MMRDA under the name of "Way Lease Agreement Charges" to meet the cost of execution of execution of Way lease agreement & Lease Agreement to be entered into between MbPT and MMRDA, for and on behalf of MMRDA on exact reimbursement basis. In other words, these amounts, if found ..... 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