2020 (9) TMI 1233 - AAR - GST

State PSU not required to deduct TDS under CGST/SGST Act

The ruling determined that a State Government PSU providing services to government bodies is not required to deduct TDS from payments under Section 51 of ... Deduction of TDS from the amount due to applicant - deduction permitted to State/-Central govt organizations, Nagar Nigams, any other govt corporations, State/Central PSUs & Educational Institutions registered under Societies Registration Act or not - section 51 of the CGST/SGST Act read with Notification Nos. 50/2018 dated 13.09.2018 & 73/2018 dated 31.12.2018 - HELD THAT:- The Government has authorized following persons, to deduct tax at the rate of two per cent (1% CGST + 1% SGST) from the value of supply excluding the central tax, State tax, Union territory tax, integrated tax and cess, made to the supplier of taxable goods or services or both w.e.f. 01.10.2018, provided that the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees:- (a) a department or establishment of the Central Government or State Government; or (b) local authority; or (c) Governmental agencies; or (d) 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 fifty-one per cent, or more participation by way of equity or control, to carry out any function; (e) Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860); (f) public sector undertakings. Further, there will be no TDS deduction if location and place of supply of supplier is different from the place of registration of recipient. Further vide amendment dated 31.12.2018, the provisions of Section 51 of the Act will not be applicable in respect of such supply of goods or services or both which takes place between persons as mentioned above. Whether the applicant falls under any of the aforesaid categories notified by the Government? - HELD THAT:- On perusal of Memorandum of Association of the applicant, it is found that the applicant is a Company of Government of Uttarakhand within the meaning of Section 617 of the Companies Act 1956 which define “ Government company” as any company in which not less than fifty- one per cent of the paid up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more state Governments and includes a company which is a subsidiary of a Government company. The Applicant is a State Government PSU in as much as 100 % Shareholding is with Uttarakhand Government and falls under one of the categories notified by the Government under Section 51 of the Act read with Notification Nos. 50/2018-Central Tax dated 13.09.2018 and 73/2018-Central Tax dated 31.12.2008. Issues Involved:- Application for advance ruling under CGST/SGST Act, 2017 regarding TDS deduction by government organizations and PSUs.- Interpretation of Section 51 of the Act and relevant notifications.- Verification of applicant's status as a State Government PSU.- Applicability of TDS provisions based on government notifications.Analysis:The application sought an advance ruling on whether government organizations, PSUs, and educational institutions can deduct TDS from payments due to the applicant in accordance with Section 51 of the Act and related notifications. The Authority for Advance Ruling considered the legal provisions under Section 97(2) of the Act, which allows rulings on matters like tax liability determination and notification applicability. The application was admitted for hearing, and the concerned officer requested a decision on the merits.Upon review, it was found that the applicant, a PSU of the Uttarakhand Government, provides personnel services to various government entities. The key question was whether TDS deduction is applicable to transactions with specified entities as per Section 51 and relevant notifications. The ruling focused on the specific facts presented in the application and the legal framework governing TDS deductions.The ruling delved into the provisions of Section 51 of the Act, which authorize certain entities to deduct tax from payments exceeding a specified threshold. Notifications 50/2018 and 73/2018 identified the categories of entities empowered to make such deductions, including government bodies, PSUs, and societies established by the government. Notably, the ruling clarified that TDS would not apply if the supplier's location differs from the recipient's registration location.Further scrutiny confirmed that the applicant qualified as a State Government PSU, meeting the criteria outlined in the notifications for TDS deduction. The ruling concluded that TDS should not be deducted when the applicant supplies goods or services to the designated categories of entities specified by the government. This decision was based on the applicant's status as a PSU with full ownership by the Uttarakhand Government, aligning with the entities authorized for TDS deduction as per the notifications.In summary, the ruling clarified the applicability of TDS provisions to transactions involving government organizations and PSUs, emphasizing compliance with Section 51 and relevant notifications. By confirming the applicant's status and aligning it with the specified categories, the ruling provided a clear directive on TDS deduction requirements for the applicant's transactions with designated entities.