TMI Blog2023 (5) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... a common seal and capable of suing and being sued in its name. It has power to acquire, hold and dispose of the property. Whether M/s Uttar Pradesh Jal Nigam is a 'Local Authority'? - HELD THAT:- The term local authority is defined in S. 2(69) of CGST Act. 2017. The definition of local authority in the CGST Act includes within its ambit 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 . Thus, for the purpose of the GST Laws, any authority legally entitled to or entrusted by the Government with the control or management of a municipal or local fund qualifies as a Local Authority - M/s UPJN is not satisfying some of the conditions for qualifying as local authority. The Apex court in the UNION OF INDIA ORS. VERSUS RC. JAIN ORS. [ 1981 (2) TMI 200 - SUPREME COURT] has held that the authority should be elected by the inhabitants of the area. As per Section 4 of the UPWSS Act, the UPJN shall consist of Chairman and members appointed by the State Government. As such, the UPJN is not elected by the inhabitants of the area but the same is established by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Central Government, State Government, Union territory and a local authority only. As the UPJN does not qualify as a 'local authority' and it qualifies as a governmental authority, tax rate of 18% is applicable on the works contract services provided to UPJN by way of Entry 3(xii) of Notification No. 11/2017-Central Tax(Rate) dated 28.06.2017. - 05/AAAR/2023 - - - Dated:- 10-3-2023 - DR. UMA SHANKER AND SMT. MINISTHY S, MEMBER (Proceedings under Section 101 of the Central Goods and Service Tax Act, 2017 and Uttar Pradesh Goods and Service Tax Act, 2017) The present appeal has been filed under Section 100 of the Central Goods and Service Tax Act, 2017 and Uttar Pradesh Goods and Service Tax Act, 2017 ( here-in-after referred to as the CGST Act and UPSGST Act ) by M/s The Indian Hume Pipes Company Ltd., Gwalior Road, Karai Jhansi, Uttar Pradesh(here-in-after referred to as the Appellant ) against the Advance Ruling Order No. UP ADRG-12/2022 dated 23.11.2022 issued by the Authority for Advance Ruling, Uttar Pradesh. At the outset, we would like to make it clear that the provisions of both the CGST Act and the UPSGST Act, are the same except for certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al authority shall still continue to be taxed at 12% GST ( 6% CGST+ 6% SGST). 6. Section 2(69) of the Goods and Service Tax Act, 2017 defines Local Authority as- (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 Zila 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; (e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution; (f) a Development Board constituted under article 371 and article 371J of the Constitution; or (g) a Regional Council constituted under article 371J of the Constitution. 7. Based on the aforesaid facts the appellant had presented following question to seek advance ruling. (a) Whether the supply of services by the Appellant to M/s Uttar Pradesh Jal Nigam is covered by Notification No. 15/2021-Central Tax (Rate) dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has submitted that M/s Utttar Pradesh Jal Nigam is not covered under the Government Authority as defined under the Act. As per definition to qualify as a 'Government Authority' an entity must be funded primarily by equity and not otherwise. In the instant case M/s Uttar Pradesh Jal Nigam has no equity funds. Further the term with 90 per cent, or more participation by way of equity or control as used in the definition has to be read as one condition because a person can control an organization by having prescribed equity holdings either directly or may control the same through equity holdings in some other entities. 10.4 The Constitutional Board of Jal Nigam has 8 Government Officials and 5 elected Heads of Local Bodies in the State. This would imply that Government is having control of about 61.54% only which is less than required 90%. This view has been confirmed By Karnataka Advance Ruling Authority in the case of M/s URC Construction Pvt. Ltd. vide their Advance Ruling NO. KAR ADRG 73/2019 dated 23.09.2019. 10.5 The opportunity of personal hearing was granted to the appellant on 13.02.2022. Shri Manish Goyal, Authorised Representative, appeared on behalf o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Tax (Rate) dated 18.11.2021 read with Notification 22/2021-Central Tax (Rate) dated 31.12.2021 seeks to amend SI.No. 3(iii) as - union territory or a local authority thereby deleting the words 'a Government Authority or a Government Entity' implying thereby that aforementioned services by way of works contract if provided to an union territory or a local authority shall still continue to be taxed at 12% GST ( 6% CGST + 6% SGST). 11.3 In the aforesaid back drop the Appellant sought for advance ruling before the Authority for Advance Ruling. In Appellant opinion services supplied by them to M/s Uttar Pradesh Jal Nigam, are liable to be taxed under concessional rate of duty i.e. GST @ 12% even after 01.01.2022, as M/s Uttar Pradsesh Jal Nigam is a local authority. Contrary to Appellants opinion the Authority for Advance Ruling ruled that M/s Uttar Pradesh Jal Nigam is not covered under 'Local Authority' however, it may be covered under 'Governmental Authority'. Authority further ruled that by way of Notification 22/2021-Central Tax (Rate) dated 31.12.2021 the benefit of concessional tax rate of 12% as provided under Entry No. 3(iii) of Notification 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as defined in clause (e) of article 243P of the Constitution; (c) a Municipal Committee, a Zila 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; (e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution; (f) a Development Board constituted under article 371 and article 371J of the Constitution; or (g) a Regional Council constituted under article 371A of the Constitution. 13. We have gone through the constitution of Uttar Pradesh Jal Nigam (hereinafter referred to as the UPJN). We find that it was created by Government of Uttar Pradesh by enacting the U.P. Water Supply and Sewerage Act, 1975 (hereinafter referred to as the UPWSS Act). It is a body corporate having perpetual succession and a common seal and capable of suing and being sued in its name. It has power to acquire, hold and dispose of the property. The relevant provisions of UPWSS Act are as under- (i) The preamble of the UPW ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been similarly worded in CGST Act, 2017 as well as General Clauses Act, 1897. The Apex Court in the landmark decision of Union of India Vs. R.C. Jain (1981) 2 SCC 308 while deciding whether the Delhi Development Authority is a 'local authority' or not, explained the scope of the term local authority under the General Clauses Act as follows-Let us, therefore, concentrate and confine our attention and enquiry to the definition of 'Local Authority' in Sec. 3(31) of the General Clauses Act. A proper and careful scrutiny of the language of Sec. 3(31) suggests that an authority in order to be a local Authority, must be of like nature and character as a Municipal Committee, District Board or Body of Port Commissioners, possessing, therefore, many, if not all, of the distinctive attributes and characteristics of a Municipal Committee, District Board, or Body of Port Commissioners, but, possessing one essential feature, namely, that it is legally entitled to or entrusted by the Government with, the control and management of a municipal or local fund. What then are the distinctive attributes and characteristics, all or many of which a Municipal Committee, District Boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Statute with such Governmental functions and duties as are usually entrusted to municipal bodies. (5) The authority must have the power to raise funds for the furtherance of their activities and the fulfillment of their projects by levying taxes, rates, charges, or fees. (6) Essentially, control or management of the funds must vest in such authority. 13.4 We find that M/s UPJN is not satisfying some of the above conditions for qualifying as local authority as discussed below- 13.5 The Apex court in the RC Jain case (supra) has held that the authority should be elected by the inhabitants of the area. As per Section 4 of the UPWSS Act, the UPJN shall consist of Chairman and members appointed by the State Government. As such, the UPJN is not elected by the inhabitants of the area but the same is established by the state. 13.6 The Apex court in the RC Jain case (supra) has held that the authority must enjoy a certain degree of autonomy, with freedom to decide for themselves questions of policy affecting the area administered by them. The autonomy may not be complete and the degree of the dependence may vary considerably and an appreciable measure of autonomy there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Nigam together with the audit report thereon, received by it under section 50(4) to be laid annually before each House of the State Legislature, and (b) cause the accounts of the Nigam to be published in such manner as it thinks fit. (7) As per Section 89 of the UPWSS Act, the UPJN shall be guided by such directions on questions of policy as may be given to it by the State Government. (8) As per Section 90 of the UPWSS Act, the UPJN shall submit to the State Government an annual report giving an account of its activities during the previous financial year and the State Government shall cause every such report to be laid before the State Legislature. Above provisions clearly indicate to the fact that UPJN does not enjoy autonomy of work and has little freedom to decide for themselves questions of policy affecting the area administered by them. 13.7 The Apex court in the RC Jain case (supra) has held that the main requirement to qualify as a local authority' is that the authority must be legally entitled to or entrusted by the Government with, the control and management of a Municipal or local fund. In case of UPJN, there is no local fund entrusted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority has been defined in the Section 3 (31) of the General Clause Act 1897. The Central Act, which has been interpreted by the Hon'ble Supreme court by catena of judgments (Supra) Order dated 22.09.2011 delivered by Hon'ble Justice Satish Chandra. Further, Hon'ble Apex Court held that the U.P. Forest Corporation is not an authority, though, under section 3(3) the U.P. Forest Corporation Act, 1974 it is provided that for all purposes, it shall be the local Authority'. Hence on the similar analogy, provisions of Section 3 (3) of U.P. Act no. 1975 are of no use to the assessee. Thus, to hold statutory body as an authority , it shall be necessary that the authority must have 'local fund' which shall be spent for providing civic amenities and also shall have right to generate fund by imposing taxes within the statutory jurisdiction, managed by elected body. Merely because a corporation has local fund, does not mean that it shall be the 'local authority' as contemplated under Section 3(31) of the General Clauses Act. At the cost of repetition, it may be mentioned that in the instant case, the assesse has three wings namely; (i) Jal Ni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification No 11/2017 - Central Tax (Rate) dated 28.06.2017 defines 'Governmental Authority' as follows- Governmental Authority means 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 90 per cent, or more participation by way of equity or control, to carry out any function entrusted to a Municipality under article 243W of the Constitution or to a Panchayat under article 243 G of the Constitution. Thus, in order to qualify as a governmental authority, such authority must be set up by an act of Parliament/State Legislature, should have 90% or more stake of government, and should carry out any functions entrusted to a municipality under article 243W of the Constitution of India. 14.4 As already discussed, the UPJN is a body corporate formed by the State legislature under UPWSS Act enacted by the UP State Legislature. As such, the first requirement of a governmental authority stands fulfilled in the present case. Further, as per Section 3 of the UPWSS Act, UPJN is a body corporate established by the Government of U.P., as such, the second requirement of gover ..... X X X X Extracts X X X X X X X X Extracts X X X X
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