TMI Blog2023 (1) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... of Mangroves on Environment, Economic and social aspect. The benefits of plantation of Mangroves along coastal and looking to the impact of plantation of mangrove on environment, social and economic, it is held that the activities of plantation of mangrove carried out by the applicant are covered under point (iv) of Charitable under clause 2 (r) of Notification No. 12/2017-CT (R) dated 28-6-2017 as amended. Determination whether activity of the applicant covered under Supply defined under Section 7 of CGST Act, 2017 - HELD THAT:- The applicant service of afforestation which include plantation of Mangroves along with the coastline to protect the environment and up liftmen of socially and economically marginalized people as discussed in the above paras cannot be considered a business activity. The said activity have not been done for the commercial benefit but it is being carried out for social and economic benefit of the marginalized people and to protect the environment. The applicant activity of plantation of Mangrove are covered under Charitable Activity as defined under Clause 2( r) of the Notification No. 12/2017-CT (Rate) dated 28-6-2017. The applicant is registere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f main objectives of the trust and the activities being carried out as under: Name of the Trust VIKAS Centre for Development Regd. Address 'Ishavasyam', Opp. Lajpatnagar Society, Eeshita Towers Road, Navjeevan P.O., Navrangpura, Ahmedabad 380 014 Status Public Charitable Trust registered under Bombay Public Trusts Act, 1950. Charity Commissioner :Trust Registration no. E3183, Ahmedabad dated 04/01/1978. 12A Registration No.AAATV2880KE20214. 80G Approval No. AAATV2880KF20214. PAN No. AAATV2880K. Object of the Trust 1. To undertake, promote and support such activities leading to promotion of human development and welfare among general public (Refer: clause (h) of Objectives of Trust) 2. To render all types of services for the amelioration, relief, betterment and advancement of the community and for carrying out any programme for the benefit of the fellow beings and for any other object of public utility. (Refer: clause (r) of Objectives of Trust). 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y metals improving the quality of the seawater. Plantation leads to increase in green cover across the region improving the air quality. The mangrove plantation would absorb 06 MT of Co2 annually per hectare of land area. i.e. 1200 MT of Co2 annually for 30 years. The plantation would provide protection to life and domestic and industrial assets against natural calamities including cyclone, Tsunami, floods etc. Social benefits: VIKAS CFD promotes marginalized community led planation. This increases awareness about the climate change and its impact. This helps in reducing the vulnerability of the local community and enhances their socio-economic status. They get skilled in plantation process from seed collection to full establishment of plantation. The local leadership gets nurtured and acquires skills in managing projects. Furthermore, the entire plantation process by VIKAS CFD is driven largely by women from marginalized communities which aim to reduce the gender divide in this region. 2. The applicant has entered into an agreement to carry out a Pilot Project which is desig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preventive health, family planning or prevention of HIV infection; (ii) advancement of religion, spirituality or yoga; (iii) advancement of educational programmes or skill development relating to,- (A) abandoned, orphaned or homeless children; (B) physically or mentally abused and traumatized persons; (C) prisoners; or (D) persons over the age of 65 years residing in a rural area; (iv) preservation of environment including watershed, forests and wildlife; 3.2 The applicant submits that the activities of the applicant relating to Afforestation, which includes plantation of mangroves are activities relating to preservation of environment . 4. The applicant submits that a significant percent of global greenhouse gas (GHG) emissions is caused by forest destruction and poor agricultural practices. Boosting carbon sequestration in forestry sector is an effective approach to reduce and remove emissions from the atmosphere. Through afforestation and reforestation of degraded mangrove habitat the applicant aim to establish and maintain a sustainably managed mangrove ecosystem for carbon sequestration, natural disaster risk reduction, poverty reduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entioned above. 4.6 The applicant submits that the case is squarely covered under the Advance Ruling given by Authority for Advance Ruling under GST, Gujarat in the case of All India Disaster Mitigation Institute as reported at 2020 (36) GSTL.104 (A.A.R-GST-Guj) (Annexure-B) wherein it is held that activities related to 'disaster prevention', 'disaster mitigation' and 'disaster management' are activities relating to 'preservation of environment' as defined in clause 2(r) of Notification No.12/2017-C.T (Rate) and considered as charitable activities. In the present case, the activities being carried out by the applicant viz. plantation of mangroves arc directly related to 'disaster prevention' as it protects the environment from erosion by sea. It also protects the coastal areas from Tsunami and other kind of natural disasters. 4.7 The applicant submits herewith published articles by Planning Commission of India (NitiAyog) about the benefit and role of growing 'mangroves' in protecting environment and some other articles as per Annexure-C. 5. The applicant submits that a person who is a supplier is liable for registration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his trade, profession or vocation; (h) services provided by a race club by way of totalisator or a licence to book maker in such club; and (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities; 5.3 Thus while the term business has been elaborately defined, except for a few activities which have been specifically incorporated, the activity should be in the nature of trade, commerce, manufacture, profession, vocation, adventure or similar activity in order to qualify as business . 5.4 It is submitted that since the applicant is not engaged in business , the transactions of the applicant are not supply transactions as defined under the GST Acts. Hence the applicant does not have any turnover and therefore it is not required to take registration under the GST Acts. From a plain reading of the above Clause (a) of Section 7(1) it is clear that supply will be liable to GST only when it is made for a consideration in the course or furtherance of business. As submitted above, since in the present case, the Appellant is not carrying out any business, there can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 money is then released. In case, there are surplus funds available after M-1, then M-2 Fund is released after deduction of the surplus funds on hand. In case, there is deficit of Funds, then explanation for the deficit to be given and the M-2 Fund is released. Then the same method of submission of narrative report for M-2 and the Financial Report is also presented Sr.No. Activity Action 1 Proposal of the Pilot Project sent to Funder. The Proposal includes the Financial Budget also. The Funder goes through the Project and understands the financials and then approves of the Pilot Project on actual expense basis. 2 VIKAS CFD signs a Service Agreement with the Funder (Goodcarbon Impact, GmbH, Germany) VIKAS CFD will implement the Pilot Project of Afforestation of Mangroves in 200 Hectare area in the Jambusar Taluka villages of Malpur and Devla. The Fund disbursement will happen on achievement of three(03) Milestones: a. M-l (Milestone-1): July 2022 On signing of agreement by both parties. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under GST? Personal Hearing: 8. Personal hearing granted on 26-09-22 was attended by Shri Rajesh I. Shah, Managing Trustee and he reiterated the submission. Further it is requested to submit the copy of agreement held between the applicant and foreign entity also the details of consideration received and expenses on implementation of plantation of mangroves work. Revenue's Submission: 9. Revenue has neither submitted its comments nor appeared for hearing. FINDINGS: 10. We have considered the submissions made by the Applicant in their application for advance ruling as well as the submissions made by authorised signatory, during the personal hearing proceedings on 26-09-22 before this authority. We also considered the issue involved, on which advance ruling is sought by the applicant, relevant facts the applicant's interpretation of law. 11. At the outset we would like to make it clear that the provisions of CGST Act and GGST Act are in pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Pilot Projects development cycle; (ii) deploy an appropriate number of its trained and skilled personnel for undertaking implementation of the Pilot Project; (iii) undertake such acts, deeds and things as may be necessary for the successful implementation of the Pilot Project; (iv) provide a development cycle for the Pilot Project with key dates for relevant milestones and commercial requirements and prepare a final plan, which will form the basis and set out the standard operating procedure for the scaled up Project; (v) develop and maintain a good working knowledge of the various practical aspects of and documentation related to the Pilot Project; (vi) prepare and share progress/development reports periodically during the Term of this agreement; Schedule-3 KEY OUTPUTS FROM THE 200 HA PILOT PLANTATION PROJECT:- 1. This Pilot Project is designed to explore various plantation densities from 2,500 up to 10,000 plants per hectare. This will allow the Implementing Agency to identify the optimal plantation densities and plant size for the future scope of the Project. This will lead to better estimates of Carbon Credit realisation. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as suitable habitats for feeding, breeding, spawning and hatching of sedentary and migratory species. In particular, they are important nursery habitat, for fish and crustaceans of commercial value. The mangrove play an important role in a sediment repository, stabilizes shoreline, a buffer against storm surges. The mangroves are resistant to much of environmental perturbations and stresses. Mangroves are also important for their role as an biological filters and a sink for several pollutants. With the advent and current acceleration of climate changes, mangroves are being increasingly seen as carbon sinks and carbon stores. Mangroves protect coastlines from wave energy and offshore ecosystems from terrestrial sediments flowing downstream. Mangroves are salt-tolerant forest ecosystems of tropical and subtropical intertidal coastal regions near river mouths. Mangrove form highly productive ecosystems since the inorganic nutrients, brought in by the incoming freshwater from land run-off are trapped to form the source of energy for many organism. A mangrove ecosystem constitutes a reservoir, refuge, feeding ground and nursery for many useful and unique plants and animal conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... narcotics drugs or alcohol; or (B) public awareness of preventive health, family planning or prevention of HIV infection; (ii) advancement of religion, spirituality or yoga; (iii) advancement of educational programmes or skill development relating to,- (A) abandoned, orphaned or homeless children; (B) physically or mentally abused and traumatized persons; (C) prisoners; or (D) persons over the age of 65 years residing in a rural area; (iv) preservation of environment including watershed, forests and wildlife; 15.4 We have already discussed in Para 15.1 to 15.3 the benefits of plantation of Mangroves along coastal and looking to the impact of plantation of mangrove on environment, social and economic, we hold that the activities of plantation of mangrove carried out by the applicant are covered under point (iv) of Charitable under clause 2 (r) of Notification No. 12/2017-CT (R) dated 28-6-2017 as amended. Determination whether activity of the applicant covered under Supply defined under Section 7 of CGST Act, 2017 16.1 The term supply has been defined under Section 7(1) of the GST Acts, 2017. Relevant extract of the defini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as cannot be considered a business activity. The said activity have not been done for the commercial benefit but it is being carried out for social and economic benefit of the marginalized people and to protect the environment. 16. 4 The Invoicing and Payment Parameters for the year 2022-23 have been given in Schedule-2 of the Service Agreement. As per Schedule-2 the applicant would get total 198939/- Euro { Rs.169,09,815/- @ Conversion rate of 1 Euro = Rs.85} for the plantation of Mangroves. The applicant has submitted the flow of utilization of fund of Rs. 169,09,815/- in Excel Sheet VIKAS CFD : PILOT AFFORESTATION PROJECT : ACTIVITIES AND PAYMENTS : PLANNING 2022-2025 and same is reproduced as under : VIKAS CFD : PILOT AFFORESTATION PROJECT : ACTIVITIES AND PAYMENTS : PLANNING 2022-2025 200 Ha. Pilot Plantation Budget (Amount in INR) Activities/Remarks Mode/System of Payment Sr. Activity Rate Number Time 2022-2023 Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60,00,000 Payment to be done to Labourers against the activities towards formation of Nursery of total 12.50 lakh seedlings. The activities include Collection of A Seeds, transporting seed to location, punching of bags, filling of bags, laying of bags inside the nursery beds etc. The labourers need to be transported from villages to the site area. Payment transfer to the Labourers on weekly basis based on the Payment Sheet received from the Field. The Payment is done, through NEFT directly into the Beneficiary Accounts. B Mangroves NurseryGap filling 1 Pilot Plot 1 - 50Ha. 2500 Plants 5.04 750 50 1,89,000 2 Pilot Plot 2 - 50Ha. 5000 Plants 5.04 1500 50 - 3,78,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A Mangroves Plantation- 1st Year 1 Pilot Plot 1 - 50Ha. 2500 Plants 6.00 2500 50 7,50,000 7,50,000 2 Pilot Plot 2 - 50Ha. 5000 Plants 6.00 5000 50 15,00,000 15,00,000 3 Pilot Plot 3 - 50Ha. 7500 Plants 6.00 7500 50 22,50,000 22,50,000 4 Pilot Plot 4 - 50Ha. 10000 Plants 6.00 10000 50 30,00,000 30,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Pilot Plot 1 - 50Ha. 2500 Plants 6.62 250 50 - 82,750 2 Pilot Plot 2 - 50Ha. 5000 Plants 6.62 500 50 - 1,65,500 3 Pilot Plot 3 - 50Ha. 7500 Plants 6.62 750 50 2,48,250 4 Pilot Plot 4 - 50Ha. 10000 Plants 6.62 1000 50 - 3,31,000 C - 8,27,500 TOTAL- 3 75,00,000 106,90,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nthly basis, NEFT directly into the Beneficiary account D Community Building 5000 1 36 60,000 1,98,600 Cost of 01 local community member working towards community building activities. On Monthly basis, NEFT directly into the Beneficiary account TOTAL- 5 6,00,000 19,86,000 Program Expense 147,04,000 232,26,500 Total Expenses towards the Programme 6 Management Cost (Admin HR) 22,05,600 34,83,975 Management Cost of VIKAS CFD. This fund covers the Administrative / Account Personnel Salaries, all the admini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) (2) (3) (4) (5) 1 Chapter 99 Services by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) by way of charitable activities. Nil Nil 17.1 We hold that the applicant service of plantation of mangrove is covered under point (iv) of Charitable Activity define under clause 2 (r) of Notification No. 12/2017-CT (R) dated 28-6-2017 as amended and is eligible for exemption from payment GST in terms of entry No. 1 of Not. No. 12/2017-CT (Rate) dated 28-6-2017. 18. We have already discussed that the applicant service does not covered under supply as defined under Section 7 of CGST Act, 2017, therefore, applicant is not liable for registration under the provisions of Section 22(1) of the CGST Act, 2017. 19. We, hereby pass the Ruling: RULING (i) The activity of Afforestation carried out by the applicant as charitable organization is exempted from GST under Sr. No.1 of Notification No. 12/2017-CT (Rate) dated 28-6-2017 if organization is registered under (i) Section 12AA of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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