2019 (6) TMI 1236 - AAR - GST

Ministry of Defence liable for GST on services, ITC restrictions clarified

In Re: M/s. General Manager Ordnance Factory Bhandara

In Re: M/s. General Manager Ordnance Factory Bhandara - 2019 (26) G.S.T.L. 423 (A. A. R. - GST) Issues Involved:1. GST liability on various supply of services.2. Availability of Input Tax Credit (ITC) on specific expenditures.3. Exemption for 'defence formation' in generating E-way bills.4. GST exemption on transport of military or defence equipment.5. Reversal of ITC on finished goods destroyed during testing.6. Proportionate ITC reversal due to liquidated damages.7. Applicability of specific GST notifications.8. ITC on services of passenger vehicles hired (withdrawn).Detailed Analysis:1. GST Liability on Various Supply of Services:- Liquidated Damages: The applicant is not considered 'Government' under Section 2(53) of the CGST Act. Hence, liquidated damages deducted from suppliers' payments are taxable.- Forfeited Security Deposit: The forfeited security deposit due to non-fulfillment of contract conditions is taxable as it is considered additional consideration.- Unclaimed Security Deposit: Security deposits left unclaimed and recognized as income after three years are not taxable as they do not constitute consideration for supply.- Food and Beverages in Canteen: The supply of food and beverages in the industrial canteen is taxable under GST.- Community Hall Rental: Renting the community hall to employees is taxable as it is considered a supply of service.- School Bus Facility: The school bus facility provided to employees' children is taxable.- Conducting Exams: Conducting exams for vacancies is taxable as the applicant is not an educational institution.- Rent from Residential Quarters: Renting residential quarters is exempt from GST.2. Availability of Input Tax Credit (ITC):- Maintenance of Garden Inside Factory Premises: ITC is not available as it is not considered in furtherance of business.- Maintenance of Estate Area: ITC is not available for maintenance activities outside the factory premises as they are considered welfare activities.- Hospital Medicines and Maintenance: ITC is not available as the hospital services are exempt under Notification No. 12/2017.- Guest House Maintenance: ITC is not available as guest houses are for personal use and not in furtherance of business.- LPG Cylinders in Canteen: ITC is available as the canteen services are taxable.3. Exemption for 'Defence Formation' in Generating E-way Bills:- The applicant is considered a 'defence formation' under the Ministry of Defence and is exempt from generating E-way bills under Rule 138(14)(k) of the CGST Rules.4. GST Exemption on Transport of Military or Defence Equipment:- The applicant's transport of propellants and explosives used in ammunition is exempt from GST under Notification No. 12/2017.5. Reversal of ITC on Finished Goods Destroyed During Testing:- ITC need not be reversed for finished goods destroyed during testing as they are used in the course of furtherance of business.6. Proportionate ITC Reversal Due to Liquidated Damages:- ITC must be proportionately reversed if lesser payment is made to the supplier due to liquidated damages.7. Applicability of Specific GST Notifications:- Notification No. 2/2018: The applicant is not eligible for exemption as they are not considered 'Government.'- Notification No. 3/2018: Renting of immovable property for non-residential purposes is taxable.- Notification No. 36/2017: The applicant must discharge GST on the sale of used vehicles, seized goods, etc.8. ITC on Services of Passenger Vehicles Hired:- This question was withdrawn by the applicant and not addressed.Conclusion:The judgment comprehensively addresses the GST implications on various services and ITC eligibility for the applicant, an entity under the Ministry of Defence. The applicant is liable for GST on most services provided and must adhere to specific provisions regarding ITC and exemptions.