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TMI Blog2023 (5) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... me provisions under UPSGST Act, 2017 and the vice versa. Brief facts of the case The instant appeal has been preferred against Advance Ruling No. UP ADRG-12/2022 dated 23.09.2022 passed in the case of applicant i.e. M/s Indian Hume Pipe Company Ltd. Gwalior Road, Karari Jhansi, Uttar Pradesh. The Brief facts of the case are as under: 1. The Applicant undertakes contracts for construction of head works sumps, pump rooms, laying jointing of pipe line and commissioning and maintenance of the entire work for water supply projects/sewerage projects/facilities. 2. The Customers of the Applicant include Government bodies/entities/authorities mainly, M/s Utttar Pradesh Jal Nigam for the aforementioned work. 3. M/s Uttar Pradesh Jal Nigam hold PAN AALU0256C under Income Tax Act, 1961 and GSTIN- 09AAALU0256C320 under the Goods and Service Tax Act, 2017. 4. Notification No. 15/2021 Central Tax (Rate) seeks to amend Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017 prescribing the rate of tax on construction services at SI.No. 3 of the table therein, viz- "(iii) composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Service Tax Act, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Notification No. 22/2021-Central Tax (Rate), dated 31.12.2021, then what is the applicable rate of Tax under the Goods and Service Tax Act, 2017 on such supplies made with effect from 01.01.2022; and (c) In case the supplies as per question 1 are not covered by the Notification above, then what is the applicable rate of tax on such supplies under the Goods and Service Tax Act, 2017 with effect from 01.01.2022. 8. The Authority for Advance Ruling in its impugned ruling held as under- (a) The supply of services by the Applicant to M/s Uttar Pradesh Jal Nigam is not covered by Notification No. 15/2021-Central Tax (Rate), dated 18th November, 2021 read with Notification No. 22/2021-Central Tax (Rate) dated 31st December, 2021. (b) Not answered as per reply of question above. (c) The applicable rate of tax shall be 18- CGST 9% and SGST 9%. 9.0 The appellant being aggrieved by the aforesaid ruling has preferred an appeal before the Appellate Authority for Advance Ruling as the Authority for advance ruling has failed to appreciate the fact that tax liability on Works Contract Services has to be determined as per Notification No. 11/2017-Central Tax (Rate) dated 28th June 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the scope of work submitted by the Appellant they are engaged in contracts for construction of head works sumps, pump rooms, laying jointing of pipe line and commissioning and maintenance of the entire work for water supply projects/sewerage projects/facilities. They are mainly supplying these services to Government Authorities/Government entities, mainly to M/s Uttar Pradesh Jal Nigam. The Appellant had sought Advance Ruling as to- (a) Whether supply of services by the Appellant to M/s Uttar Pradesh Jal Nigam is covered by Notification No. 15/2021-Central Tax (Rate) dated 18th November, 2021 read with Notification No. 22/2021-Central Tax (Rate), dated 31.12.2021. (b) If the supplies as per Question 1 are covered by Notification No. 15/2021-Central Tax (Rate) dated 18th November, 2021 read with Notification No. 22/2021-Central Tax (Rate), dated 31.12.2021, then what is the applicable rate of Tax under the Goods and Service Tax Act, 2017 on such supplies made with effect from 01.01.2022; and (c) In case the supplies as per question 1 are not covered by the Notification supra then what is the applicable rate of tax on such supplies under the Goods and Service Tax Act, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed vide Notification No. 03/2022-Central Tax (Rate) dated 31.07.2022, accordingly, the Authority for Advance Ruling Ruled that question raised by the Appellant has no significance in view of omission of entry no. 3(iii) with effect from 18.07.2022. However, this entry existed prior to 18.07.2022, therefore, the Authority ruled that supply of services by the Appellant provided to M/s Uttar Pradesh Jal Nigam is not covered by Notification No. 15/2021-Central Tax (Rate) dated 18.11.2021 read with Notification No. 22/2021-Central Tax (Rate) dated 31.12.2021. As the services provided by the Appellant not covered under aforementioned Notification the applicable Tax Rate on such supplies shall be 18% with effect from 01.01.2022. 12.0 We have gone through the submission made by the Appellant and arguments made by them in support of their claim. We also find that question raised by the Appellant before the Authority for advance ruling has been made in the light of amendment made in the Notification 11/2017-Central Tax (Rate) dated 28.06.2017 vide Notification No. 22/2021-Central Tax (Rate) dated 31.12.2021 when benefit of lower tax rate of 12% by way of supply of composite supply of works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for all purposes be deemed to be a local authority and Section 4 of the UPWSS Act relates to its constitution, according to which it shall consist of a Chairman, to be appointed by the State Government. It also provides that the Members other than the Chairman shall be a Managing Director, a Finance Director, both to be appointed by the Government and secretary to the State Government in the Finance Department (Ex-officio), Secretary to the State Government in the Local Self Government Department (Ex-officio), the Director of Local Bodies, Uttar Pradesh (Ex-officio), the Director of Medical and Health Services U.P. (Ex-officio) and three elected Heads of Local Bodies in the state to be nominated by the State Government. (iii) Section 40(1) of the UPWSS Act provides that the corporation shall have its own fund to be called the Nigam Fund which shall be deemed to be a local fund and to which shall be credited all moneys received otherwise than by way of loans by or on behalf of the corporation. 13.1 Now to examine whether M/s Uttar Pradesh Jal Nigam is a 'Local Authority' we find that the term local authority is defined in S. 2(69) of CGST Act. 2017. The definition of "loc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the inhabitants of the area. Next, they 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 but, an appreciable measure of autonomy there must be. Next they must be entrusted with such Governmental functions and duties as are usually entrusted to municipal bodies, such as those connected with providing amenities to the inhabitants of the locality, like health and education services, water and sewerage, town planning and development, roads, markets, transportation, social welfare services etc. etc. Broadly we may say that they may be entrusted with the performance of civic duties and functions which would otherwise be Governmental duties and functions. Finally, they 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. This may be in addition to moneys provided by Government or obtained by borrowing or otherwise. What is essential is that control or management of the fund must vest in the authority. 13.3 Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay by order specify. (3) As per Section 14 of the UPWSS Act, the UPJN is entrusted- (i) to prepare State plans for water supply, sewerage and drainage on the directions of the State Government (ii) to operate, run and maintain any waterworks and sewerage system, if and when directed by the State Government on such terms and conditions and for such periods as may be specified by the State Government. (iii) such other functions as may be entrusted to the Nigam by the State Government by Notification in the Gazette. (4) As per section 46(2) of the UPWSS Act, the UPJN may, from time to time, with the previous sanction of the State Government and subject to the provisions of this Act and to such conditions as the, State Government may by general or special order determine, borrow any sum required for the purposes of this Act, whether by the issue of bond or stock or otherwise or making arrangements with bankers or other bodies or institutions approved by the State Government for this purpose. (5) As per section 46(3) of the UPWSS Act, stock issued by the Nigam under the section shall be issued, transferred, dealt with and redeemed in such manner as the State Government may, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court, Allahabad (Lucknow Bench) in the Income Tax Appeal No. 128/2008 has held that UP Jal Nigam is not a 'local authority. While passing the order, the Hon'ble High Court has discussed various case laws including RC Jain case (supra). The relevant portion of the order is reproduced below- Order dated 22.09.2011 delivered by Hon'ble Justice Devi Prasad Singh- "43. 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 General Clause Act. The UPWSS Act, 1975 does empower the State Government or the Jal Nigam to claim exemption from taxes only because the word, 'local authority' has been used in subsection (3) of Section 3 of the 1975 Act. Virtually this broader principle has been upheld by the Hon'ble Supreme Court in the case of CIT Vs. U.P. Forest corporation, 230 ITR 945 (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transportation, social welfare services etc. Broadly, it may say that they may be entrusted with the performance of civic duties and functions which would otherwise be governmental duties and function. Finally, they 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. This may be in addition to money provided by Government or obtained by borrowing or otherwise. What is essential is that control or management of the fund must vest in the authority". 14.2 Although, the aforesaid order in Income Tax Appeal No. 128/2008 denying UP Jal Nigam the status of local authority is in respect of dispute of Income Tax, the same is applicable to instant case as the order of the Hon'ble High Court has been passed after analyzing the definition of 'local authority' contained in General Clauses Act. As it has already been discussed that the term ' local authority' has been similarly worded in CGST Act, 2017 as well as General Clause Act, 1975. Further, the relevant clarification contained in Service Tax Educational Guide published in the erstwhile tax regime is reproduced belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alth, sanitation conservancy and solid waste management is a function of municipality. In view of the above, the requirement that the authority must be established to carry out any function entrusted to a Municipality under article 243 W of the constitution has been fulfilled in the present case. Thus M/s UPJN is a 'Governmental Authority' in our view. 15.0 Now coming to legal provisions under Goods and Service Tax Act, 2017 as amended from time to time we find that Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 was amended vide Notification No.15/2021-Central Tax (Rate) dated November 18, 2021, wherein, in Entry 3(iii), the words "Union territory, a local authority, a Governmental Authority or a Government Entity" were substituted with "Union territory or a local authority". Thus, as on date, the amended Entry 3(iii) of the Notification No. 11/2017 reads as follows- Description of Service Rate (percent) (iii)Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied to the Central Government, State Government, Union territory or a local authority, by way of construction, erection, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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