Government-Linked Entities Must Deduct Tax at Source under GST Act | Ruling on Notification No. 1344-FT

The Authority ruled that if the Applicant is established by government notification and is controlled by the Central and State Governments, it is obligated to deduct tax at source under Section 51(1) of the GST Act and Notification No. 1344-FT dated 13/09/2018.

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Issues:
1. Applicability of Notification No. 1344-FT dated 13/09/2018 under the WBGST Act, 2017 and CGST Act, 2017.
2. Interpretation of Section 51(1) of the GST Act regarding tax deduction at source.
3. Determination of whether the Applicant is controlled by the Central and State Governments as per the Companies Act, 2013.

Analysis:

Issue 1: Applicability of Notification No. 1344-FT dated 13/09/2018
The Applicant sought an advance ruling on the applicability of Notification No. 1344-FT dated 13/09/2018 under the WBGST Act, 2017 and CGST Act, 2017. The Notification mandates tax deduction at source for certain categories of recipients. The Authority admitted the application as the question was not decided by any authority under the GST Act.

Issue 2: Interpretation of Section 51(1) of the GST Act
Section 51(1) of the GST Act empowers the deduction of tax at a specified rate from payments made to suppliers exceeding a certain threshold. The Notification specifies categories of entities to which this provision applies, including government bodies and public sector undertakings. The Notification exempts certain authorities and supplies between public sector undertakings.

Issue 3: Determination of Control by Central and State Governments
The Applicant argued that it is not a public sector undertaking as defined under the Companies Act, 2013, and therefore, the Notification should not apply. However, the Authority found that the Central and State Governments, through government companies, indirectly control the Applicant. As per the Companies Act, 2013, control includes the right to appoint directors or influence management decisions. Consequently, the Applicant is liable to deduct tax at source as it is considered a company controlled by the Central and State Governments.

In conclusion, the Authority ruled that if the Applicant is established by government notification and is controlled by the Central and State Governments, it is obligated to deduct tax at source under Section 51(1) of the GST Act and Notification No. 1344-FT dated 13/09/2018. This ruling remains valid unless declared void under the provisions of the GST Act.

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