TMI Blog2021 (10) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... ment or not - refund of Refundable Security Deposit, to meet the cost of damages during the execution of work - whether entry no. (3) of Notification No. 12/2017-CTR which provides an exemption from GST in respect of pure services supplied to Governmental Authority, by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or to a Municipality under article 243 W of the Constitution, is applicable or not? Grant of a lease and way leave permission to MMRDA by the Applicant - HELD 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 it is observed 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. Supply in respect of Pure Services - HELD THAT:- The impugned MOU does not envisage any supply of goods individually or along with the supply of services in the instant case. In the instant case, pure services are supplied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osit 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 - 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. All amounts received by the applicant are in relation to pure services rendered by the applicants to a Government Entity, and will be exempt from payment of GST under Entry No. (3) Of Notification No. 12/2017-C.T(R) dated 28.06.2017. Even the refundable security deposit received by the applicant from MMRDA, as security against possible damages during the execution of works, is in relation to pure services rendered by the applicants to a Government Entity, and will be exempt from payment of GST under Entry No. (3) Of Notification No. 12/2017-CT(R) dated 28.06.2017. Even if, at the time of completion of the lease tenure, the entire deposit or a part of it is withheld and not paid back by the applicant, as a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 ₹ 64 crores in lieu of decommissioning of Old Pir Pan 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 excess will be refunded to MMRDA or if found less, will be called from MMRDA. e. Refundable Security Deposit to be returned to MMRDA only on termination of the agreement. f. Refundable Security Deposit of ₹ 20 Crores, to meet the cost of damages during the execution of work, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbai 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 certain land and water areas belonging to MbPT and required for the purpose of the said MTHL project, by way of the long term lease. To make the said areas available to MMRDA for the MTHL Project, the Applicant had to demolish its 4 existing sheds at STP yard situated on the said plot of land and decommission Old Pir Pau Jetty / Berth. MMRDA agreed to compensate the Applicant for the same. 2.5 Accordingly, applicant has entered into Memorandum of Understanding (MOU) with MMRDA, to grant MMRDA a lease and way leave permission of land and water areas belonging to it, for the MTHL project. As per the MOU, MMRDA agreed to make the following payments.- a. Annual Lease Rent of ₹ 22.58,30,199 in respect of Area under permanent occupation (i.e. 30 years tease period) and b. Annual Lease Rentals of ₹ 33,23,36,835 in respect of (ii) Area under temporary occupation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 board or any other body,- set up by an Act of Parliament or a State Legislature; or established by any Government, with 90% or more participation by way of equity or control, to carry out any function entrusted to a Municipality under article 243 W of the Constitution or to a Panchayat under article 243G of the Constitution; 2.10.4 MMRDA is established by the State of Government of Maharashtra as per MMRDA Act, 1974 and is controlled entirely by the state Government. Further, the functions entrusted to MMRDA are primarily covered under Sr. No. (1) of the Twelfth Schedule i.e. Urban Planning including town planning. Also, MMRDA is also involved in other functions of the Twelfth Schedule such as planning for economic and social development, Roads and bridges and Slum improvement and up-gradation. Hence, MMRDA can be said to be a &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 will be returned to MMRDA only on termination of the agreement/ or handing over vacant possession of the premises to MbPT after payment of all arrears that may become due and payable provided, there are no breaches of the covenants of the Way Leave / Lease agreement. As per section 2(31) of the CGST Act, any deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply. Hence, payment of security deposit shall not be regarded as consideration for services and not liable for GST. 2.16 Hence subject payments to be made by MMRDA to the applicant are exempt from payment of GST in terms of the Entry No. 3 of No. 12/2017-CTR did. 28-06-2017. 2.17 The Refundable Securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oming 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 representative of the applicant Shri. Mandar Telang, CA was present. The concerned jurisdictional officer Smt. Supriya Konkane Deputy Commissioner of State Tax was present. The Authorized representatives made oral and written submissions in this matter. The Nodal Officer to submit written submission with copy to applicant (hard copy), on or before 27.09.2021 and has accordingly submitted reply vide email dated 27.09.2021 which has been incorporated above. 4.3 We heard both sides. 05. DISCUSSIONS AND FINDINGS: 5.1 We have perused the documents on record, facts of the matter and submissions, both oral and written, made by the applicant as well as the jurisdictional officer. 5.2 Mumbai Port Trust, the applicant, in addition to other business are also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 ₹ 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 exemption from GST in respect of pure services supplied to Governmental Authority, by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or to a Municipality under article 243 W of the Constitution, is applicable to their subject case also. 5.7.1 We observe that the underlying supply in respect of all receivable amounts by the applicant, mentioned at para 5.5 (a) to (g) above are arising only on account of grant of a lease and way leave permission to MMRDA by the Applicant which is nothing but lease of land. To answer the query of the applicant regarding the admissibility of entry no. (3) of Notification No. 12/2017-CTR in the subject ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 5.7.6 For any supply to be covered under Sr. No. 3 mentioned in 5.7.5 above, the supply should be in respect of only Pure Services, secondly such Pure Services must be provided to the Central Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ministry of Finance (Department of Revenue) No.11/2017- Central Tax (Rate), dated the 28 th 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 the existing entry, the following entry shall be substituted, namely: - Provided that where the services are supplied to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union territory or local authority, as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment; (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 Department; (xv) the Secretary to the Government of Maharashtra, Housing Department; (xvi) the Managing Director, City and Industrial Development Corporation of Maharashtra; (xvii) the Metropolitan Commissioner, 5.8.7 Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Roads, culverts, bridges, ferries, waterways and other means of communication. 5.9.3 We find that the impugned pure services supplied by the applicant can be covered unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 parameters, GST Laws have provided certain exceptions to the requirement of supply being made for consideration and in the course of fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, 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 applicants to a Government Entity, and will be exempt from payment of GST under Entry No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose 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 ₹ 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 excess will be refunded to MMRDA or if found less, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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