Court rules applicant's payment from AICL is subject to GST, services not exempt under GST Act

The court ruled that the amount received by the applicant from AICL constitutes consideration for the supply of goods or services under the Central Goods and Services Tax Act, 2017, making it subject to GST. Additionally, the services provided by the applicant did not qualify for exemption under specific provisions of exemption notifications. Consequently, the applicant was held liable to pay GST on the transactions outlined in the Memorandum of Understanding dated 16.01.2017 with AICL.

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Issues Involved:
1. Whether Goods and Services Tax (GST) is leviable on the transaction/agreement as per the Central Goods and Services Tax Act, 2017.
2. If GST is applicable, whether the transaction can be exempted in whole or in parts under specific provisions of exemption notifications.

Issue-wise Detailed Analysis:

Issue 1: GST Applicability on the Transaction/Agreement

Consideration and Supply:
The primary issue is whether the amount paid by AICL to the applicant constitutes "consideration" for the supply of goods or services. The applicant argued that the payment from AICL is a grant and not consideration since the services are provided directly to beneficiaries and not to AICL. However, the judgment clarified that under Section 2(31) of the CGST Act, 2017, consideration can be paid by any person other than the recipient. The direct link between the payment and the services provided (installation of solar pumps, solar street lights, and construction of toilets) establishes that the amount is indeed consideration for the supply of services.

Nature of the Transaction:
The applicant's activities under the MoU with AICL are considered "supply" under Section 7(1) of the CGST Act, 2017. The payment by AICL to the applicant is directly linked to specific services, thus qualifying as consideration. The argument that the payment is a grant-in-aid was rejected since the payment is tied to specific services, and there is a clear nexus between the payment and the services provided.

Issue 2: Exemption Under Notification No. 12/2017

Charitable Activities:
The applicant claimed exemption under S.No. 1 of Notification No. 12/2017, which exempts services provided by entities registered under Section 12AA of the Income Tax Act, 1961, if the services are by way of charitable activities. The judgment examined whether the services provided (installation of solar water pumps, solar street lights, and construction of toilets) fall under the definition of "charitable activities" as per the notification.

Public Health and Preservation of Environment:
The applicant argued that their activities relate to public health and preservation of the environment. However, the judgment clarified that the installation of solar pumps and lights primarily aims to improve infrastructure and quality of life in rural areas, not directly for the preservation of the environment. Thus, these activities do not qualify as charitable activities under Clause (i)(B) or Clause (iv) of the notification.

Public Conveniences:
The applicant also claimed exemption under S.No. 76 of Notification No. 12/2017, which exempts services by way of public conveniences. The judgment clarified that only services falling under heading 9994 (sewage and waste collection, treatment, and disposal) are covered. Since the construction of toilets does not fall under this heading, it does not qualify for exemption.

Ruling:
1. The amount received by the applicant from AICL is considered "consideration" for the supply of goods or services under Section 2(31) of the CGST Act, 2017, and is thus subject to GST.
2. The supply of goods or services by the applicant is not exempt under S.No. 1 or S.No. 76 of Notification No. 12/2017. Therefore, the applicant is liable to pay GST on the transactions under the MoU dated 16.01.2017 with AICL.

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