TMI Blog2019 (6) TMI 1663X X X X Extracts X X X X X X X X Extracts X X X X ..... hority to a business entity attracts GST under reverse charge basis by the recipient of such services. Thus, entry No. (5) of the said notification states that the services supplied by the Central Government/State Government to a business entity will come under Reverse Charge Mechanism. There appears no merit in the appeal filed by the appellant thus the ruling of the AAR, Chhattisgarh is upheld. - STC/AAAR/01/2019 - - - Dated:- 4-6-2019 - SMT. REENA BABA SAHEB KANGALE, AND SHRI VINOD KUMAR SAXENA, MEMBER PROCEEDINGS [U/s 101 of the Chhattisgarh Goods Services Tax Act, 2017 (herein- after referred to as CGGST Act, 2017)] The appellant M/s. P.K. Mahapatra, Assistant General Manager (Finance) NMDC Limited, ADMN Building Hilltop Road, Near CSD, 1st Floor, Bacheli Complex, Dantewada (South Bastar) Chhattisgarh GSTIN 22AAACN7325A1Z5 has filed this appeal u/s 100 of the Chhattisgarh Goods Services Tax Act, 2017 requesting advance ruling in respect of the following question:- What is the Appellant's liability to pay tax on contributions made to District Mineral Foundation (DMF) and National Mineral Exploration Trust (NMET) as per Mines and Minerals (Deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neither qualify as 'government' nor as 'local authority' and hence there can be no liability on the appellant to pay GST under reverse charge. 3. Contention of the Appellant: 3.1 The appellant relied upon Section 7 of the CGST Act, 2017 which defines the term supply . The relevant portion of the same is as below:- 7(1) For the purposes of this Act, the expression supply includes,- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. ...................................................................... 3.2 Section 7 of the CGST Act, 2017 defines the term supply to include all forms of Supply of goods or services or both. Also, it expressly seeks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 They also cited the decision of Hon'ble CESTAT (Mumbai Bench) in the case of Cricket Club of India v. Commissioner of Service Tax [(2015 (40) STR 973] 11.......Consideration is, undoubtedly, an essential ingredient of all economic transactions and it is certainly consideration that forms the basis for Computation of service tax. However, existence of consideration cannot be 7 presumed in every money flow. The factual matrix of the existence of a monetary flow combined with convergence of two entities for such flow cannot be moulded by tax authorities into a taxable event without identifying the specific activity that links the provider to the recipient. 12. Unless the existence of provision of a service can be established, the question of taxing an attendant monetary transaction will not arise. .................................................................... They also cited the decision of Hon'ble CESTAT (Mumbai) in the case of Marmgoa Port Trust v. Commissioner of Customs, Central Excise and Service Tax, Goa 2016 TIOL 2843 CESTAT Mum :- 18. In our view, in order to render a transaction liable for service tax, the between the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government, State Government, Union Territory or local authority, as the trust does not fall under any of the categories mentioned above. Hence, there is no liability on the appellant to pay GST. They drew attention to Chhattisgarh District Mineral Fund Rules and NMET Rules wherein the collection is defined as 'contribution' and not as consideration. Similarly, they highlighted Rule 3 wherein the Fund is created as a trust and a non-profit body and hence they contended that since there is no supply, there is no activity in furtherance of business. 4.2 Also, as per National Mineral Exploration Trust Rules, 2015 it was the appellant's contention that National Mineral Exploration Trust (NMET) is a trust which was set up as a non-profit body for the purpose of detailed exploration of minerals that would facilitate high growth in the mining sector. As per Section 9C(2) of MMDR Act, the object of the Trust is to use the funds accrued to the Trust for the purpose of regional and detailed exploration in such manner as may be prescribed by the Central Government Also the funds accumulated with the NMET would be utilized to set up the exploration activities. The Appellant stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 of the Mines and Minerals (Development and Regulation) Act 1957 mandates NMDC to pay royalty @ 15%. Apart from this, section 9B and 9C of the said Act mandates that NMDC shall contribute 30% of royalty to District Mineral Foundation (Constituted on State level) and 2% of royalty to National Mineral Exploration Trust (NMET). The appellant seeks an appeal against the advance ruling with regard to tax liability under GST on such contributions to DMF and NMET. The State Government has allotted the said mines for the mining activity and for the activity they are bound to pay the royalty. Thus, the activities of M/s NMDC, squarely comes under the definition of business as defined u/s 2(17) of the CGST ACT. 2017. For this mining activity, they are also duty bound under Section 9B and 9C of Mines and Minerals (Development Regulation) Act. 1957 for contribution of 30% of royalty to District Mineral Foundation. DMF (Constituted on State level) and 2% of Royalty to National Mineral Exploration Trust (NMET). This contribution to both the trust is on account of their mining operations being carried out in the State. Thus mining gets covered under 'any other similar activity, whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r supply of service. The term 'consideration' has been defined u/s 2(31) of the CGST Act, 2017 as follows:- (31) consideration in relation to the supply of goods or services or both includes,- (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a 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; It is observed that the act undertaken by DMF and NMET would be considered as consideration for forbearance. FORBEARANCE The objective of DMF trust is to mitigate ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, equipments and supplies required for making such facilities effective. They also try to abide by all the guidelines provided by National Institute of Miners Health and thus it can be stated that the amount which has been collected by the DMF and NMET use the fund for building infrastructure and for providing facilities which are needed for taking care of the mining related illness and diseases. It is imperative to state here that DMF and NMET's primary focus is on the overall development of the area which is affected by mining or mining related operations which are undertaken by the holders of the mining lease. 5.4 CONTRIBUTIONS TO DMF AMOUNTS TO TAXABLE SUPPLY ' FOR A CONSIDERATION IN THE COURSE OF BUSINESS : The discussion in the proceeding paras fulfills that the contributions are certainly to be treated as taxable supply as defined under clause (a) of sub-section (1) of section 7 of the CGST Act, 2017 i.e. 7(1) For the purpose of this Act, the expression supply includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant contended that they could not be defined as a local authority as they are not constituted as per defined parameters of the constitution nor they undertake any such activities. In this context, Section 2(69) of the GST Act is to be examined to consider the above contention of the appellant. The definition of 'local authority' is provided as under:- Local Authority means - a) a Panchayat as defined in clause (d) of article 243 of the Constitution; b) a Municipality ' as defined in clause (e) of article 243P of the Constitution; c) a Municipal Committee, a Zilla Parishad, a District Board and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund; d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006 (41 of 2006); e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution; f) a Development Board constituted under article 371 of the Constitution; or g) a Regional Council constituted under article 371A of the Constitution; DMF (District Mineral Founda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ploration Trust) can be treated as an authority because of the reasons stated below:- In exercise of the powers conferred by sub-sections (2), (3) and (4) of section 9C and section 13 of the Mines and Minerals (Development and Regulation) Act, 1957 (67 of 1957), the Central Government has created NMET. Thus, it can be stated that it is a statutory body created under statute. The object of the Trust is to carry out regional and detailed exploration for minerals. Expenditure of the said Trust is made in funding special studies and projects designed to identify, explore, extract, beneficiate and refine deep-seated or concealed mineral deposits; undertaking studies for mineral development; facilitating exploration activities in such a manner that areas explored can be taken up for grant of mineral concessions in accordance with the provisions of the Act and the rules made thereunder; facilitating geophysical, ground and aerial survey and geochemical survey of obvious geological potential areas and rest of India; using the Trust Fund for such other purposes that the Governing Body may decide, or authorise the Executive Committee, to be necessary or expedient in the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the accounts of revenue and expenditure of the State. From the abovementioned definition the following can be termed as essentials for considering a fund to be a Local Fund:- 1. Revenue should be administered by bodies. 2. The said revenue should be under the control of Government by law or rule having the force of law. 3. In regard to the proceedings generally, or to specific matters. Administered by local bodies DMF and NMET are both independent bodies which are created by statute. According to the DMF Trust Rules, 2015, the trustees who are appointed by the Secretary, Mineral Resources Department shall administer the DMF Trust and State Level Monitoring Committee which is headed by Chief Minister is empowered to monitor the Trust Fund. The Contribution Fund shall be maintained by the Managing Committee of the Trust. Under Rule 6 of the National Mineral Exploration Trust Rules, 2015 Executive Committee of the Trust is given power to manage the National Mineral Exploration Trust Fund. Under the control of Government by law or rule having force of Law DMF All the members of the Trust or Committee or any other body in the DMF Trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respectively. 5.6 Section 2(98) of CGST Act, 2017 stipulates regarding liability to pay tax under reverse charge, meaning therein that the liability to pay tax shall be on the recipient of goods/services rather than the supplier of goods/services. Section 2(98), supra reads as under:- Reverse charge means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act; Further, Reverse Charge Mechanism is applicable for certain notified services as mentioned in Notification No, 13/2017 - Central Tax (Rate) dated 28,06.2017. As per SI. No. 5 to the said Notification, services supplied by the Central Government, State Government, Union territory or local authority to a business entity attracts GST under reverse charge basis by the recipient of such services. Thus, entry No. (5) of the said notification states that the services supplied by the Central Government/State Government to a business entity will come under Reverse Charge Mechanism. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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