2019 (12) TMI 49 - AAR - GST

Cooperative Society Exempt from GST TDS

The cooperative society registered under the Tamil Nadu Cooperative Societies Act, 1983, was found not to be subject to TDS provisions under the GST Act. ... Tax Deduction at Source (TDS) under GST - applicability of notification prescribing deductors under Section 51 - societies covered under the Societies Registration Act, 1860 - 51% government participation or control by way of equity - control through voting rights and management compositionTax Deduction at Source (TDS) under GST - applicability of notification prescribing deductors under Section 51 - 51% government participation or control by way of equity - societies covered under the Societies Registration Act, 1860 - control through voting rights and management composition - Whether Notification No.33/2017 (as amended) and Notification 50/2018 (superseding it) making certain persons liable to deduct TDS under Section 51 of the CGST Act apply to the applicant, an apex co-operative society registered under the Tamil Nadu Co-operative Societies Act 1983. - HELD THAT: - The Authority examined the applicant's constitutional and governance features, shareholding pattern and relevant notifications. The notifications identify as deductors: (a) authorities/boards/bodies set up by statute or established by government with 51% or more participation by equity or control, (b) societies under the Societies Registration Act, 1860 established by government or local authority, and (c) public sector undertakings. The applicant is an apex co-operative society registered under the Tamil Nadu Co-operative Societies Act 1983, not under the Societies Registration Act, 1860. Although the federation was constituted by a Government G.O. and government participation was envisaged, the historical and present equity never reached or exceeded 51% and, importantly, management and control vest with elected A-class members who hold voting rights while functional directors appointed by government do not have voting rights. On this basis the Authority concluded that the applicant neither falls within the class of societies under the Societies Registration Act nor is a body with 51% or more government participation or control covered by the notification; consequently the notified TDS provisions are not applicable to the applicant. [Paras 7, 8]Notification No.33/2017 (as amended) and Notification No.50/2018 are not applicable to the applicant; the applicant is not covered as a person required to deduct TDS under those notifications.Final Conclusion: The Authority ruled that the Central and State notifications prescribing persons liable to deduct TDS under Section 51 do not apply to M/s. Tamil Nadu Coop Silk Producers Federation Ltd., an apex co-operative society registered under the Tamil Nadu Co-operative Societies Act 1983, and therefore it is not liable under those notifications to deduct TDS. Issues Involved:1. Applicability of TDS provisions under GST Act to a Co-operative Society registered under the Tamil Nadu Cooperative Societies Act, 1983.2. Interpretation of Notification No. 33/2017 (C.T) dated 15/09/2017 as amended by Notification No. 50/2018 dated 13.09.2018.Detailed Analysis:Issue 1: Applicability of TDS provisions under GST Act to a Co-operative Society registered under the Tamil Nadu Cooperative Societies Act, 1983The applicant, a Co-operative Society registered under the Tamil Nadu Cooperative Societies Act, 1983, sought clarification on whether the TDS provisions under the GST Act are applicable to them. They argued that since they are not registered under the Societies Registration Act, 1860, and are not a statutory corporation or a state government undertaking, they should be exempt from TDS provisions.The applicant detailed their operations, which include supporting sericulture activities by supplying silk to various cooperative societies and other entities. They highlighted that their transactions attract 5% GST and that they are exempt under Section 80P of the Income Tax Act.Upon examination, it was found that the applicant is an Apex society registered under the Tamil Nadu Cooperative Societies Act, 1983, with the Director of Sericulture as the Functional Registrar. The society's capital structure includes contributions from members, government share, and loans from the National Corporation of Development of Co-operatives. The government’s share has never exceeded 51%, and currently stands at 30%.Issue 2: Interpretation of Notification No. 33/2017 (C.T) dated 15/09/2017 as amended by Notification No. 50/2018 dated 13.09.2018The applicant sought to understand the applicability of Notification No. 33/2017 (C.T) dated 15/09/2017, which was amended by Notification No. 50/2018 dated 13.09.2018. This notification specifies the persons required to deduct TDS under the GST Act, including:1. Authorities or bodies set up by an Act of Parliament or State Legislature with 51% or more participation by way of equity or control.2. Societies established by the Central or State Government under the Societies Registration Act, 1860.3. Public sector undertakings.The applicant argued that they do not fall under these categories as they are not established under the Societies Registration Act, 1860, and the government’s equity participation is below 51%. Furthermore, the control of the society rests with the elected members of the cooperative societies, not the government.Upon review, it was concluded that the applicant, being a cooperative society under the Tamil Nadu Cooperative Societies Act, 1983, with less than 51% government equity and management control vested in elected members, does not meet the criteria specified in the notifications for TDS applicability.Ruling:Central Tax Notification No. 33/2017-C.T. dated 15.09.2017 as amended and State Tax Notification No. II(2)/CTR/783(C-3)/2017 vide G.O. (Ms) No. 107 dated 15.09.2017 as amended are not applicable to the applicant.