2020 (9) TMI 545 - AAR - GST

Taxable Status of Auditing, Accounting & Taxation Services for SSNNL under CGST Act

In Re : M/s Dhirubhai Shah & Co. LLP

The service of auditing, accounting, and taxation provided by M/s. Dhirubhai Shah & Co. LLP to Sardar Sarovar Narmada Nigam Limited (SSNNL) was deemed ... Benefit of exemption from GST - professional service in respect of maintenance of Accounts and allied items of work - applicant is of the view that service of maintenance of account provided to SSNNL, a Govt, of Gujarat undertaking is covered under Sr. No.3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - HELD THAT:- The Narmada Project implemented through a Company whose entire share capital is owned by Govt. of Gujarat viz. SSNNL is being implemented as part of the development and commercial activities of Govt. of Gujarat and to make available various benefits of development, irrigation, power generation and other attendant benefits to the people of Gujarat and other neighboring states - SSNNL, a company is engaged in the work of providing drinking water, generation of electricity and irrigation facility which is a function entrusted to a Panchayat under Article 243G and Municipalities under Article 243W of the Constitution. The words “in relation to” is defined in the Oxford Dictionary as to mean “in the context of” or “in connection with”. When two activities are directly linked to each other, then they are said to be in connection with or in the context of. The applicant has provided no evidence to establish that the activity of providing service of auditing, accounting, taxation to the SSNNL are provided in relation to the any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to the function entrusted to a Municipality under Article 243W of the Constitution - The applicant, himself, in his submission, has stated that they understand that pure service as prescribe in the said Notification is available in relation to an activity/ function entrusted to a Panchayat or a Municipality under Article 243 G and 243W of the Constitution respectively. They are not providing any technical services/any related services for constructing of Dam, Canal or any other irrigation network of the company; that Service of maintenance of Accounts provided by them is not related to main function of the Company like water providing activity and to prepare the structure of Dam, Canal and other irrigation network of the Company; they do not provide any services which are in relation to the functions prescribed in clause 243G and 243W of the Constitution of India; that Maintenance of Accounts service has no anywhere concern with functions prescribed under clause 243G and 243W of the Constitution of India. Thus, the service of auditing, accounting, taxation to the SSNNL is not covered under the Entry No. 3 of the Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017. Issues Involved:1. Whether the professional service for maintenance of accounts and allied items of work provided to Sardar Sarovar Narmada Nigam Limited (SSNNL) is a taxable service under Section 9(1) of the CGST Act, 2017.2. Whether the service is exempted vide Sr. No. 3 of Notification No. 12/2017-CT (Rate) dated 28.06.2017.Issue-Wise Detailed Analysis:1. Taxability of Professional Services:The applicant, M/s. Dhirubhai Shah & Co. LLP (DBS), is engaged in providing services in auditing, accounting, taxation, etc., and has been appointed for professional services in respect of maintenance of accounts and allied items of work in Segment III of SSNNL. The applicant issued a tax invoice charging CGST and SGST for the services provided.2. Applicability of Exemption under Notification No. 12/2017-CT (Rate):The applicant contended that the service provided to SSNNL is not covered by the entry at Sr. No. 3 of Notification No. 12/2017-CT (Rate) dated 28.06.2017, which exempts pure services provided to the Central Government, State Government, Union territory, or local authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution.Discussion and Findings:1. Definition and Conditions of 'Pure Services':The authority examined the term 'Pure Services,' which is not defined in the GST Act but generally means any activity/supply that does not involve goods. The maintenance of accounts provided by the applicant does not involve any supply of goods, thus satisfying the first condition of being pure services.2. Recipient of Services:The second condition requires the recipient to be the Central Government, State Government, Union Territory, Local Authority, Governmental Authority, or Government Entity. SSNNL, being a company with 100% shareholding by the State Government, qualifies as a Governmental Authority.3. Relation to Functions Entrusted to Panchayat or Municipality:The third condition examines if the service is in relation to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution. The functions listed under these articles include activities like water supply, irrigation, and public health. While SSNNL is involved in functions like providing drinking water and irrigation, the applicant's services of auditing, accounting, and taxation are not directly related to these functions.Applicant's Submission:The applicant admitted that their services are not related to the main functions of SSNNL, such as water supply or construction of dams and canals, and do not fall under the functions prescribed in Articles 243G and 243W of the Constitution.Ruling:The authority ruled that the service of auditing, accounting, and taxation provided to SSNNL is not covered under Entry No. 3 of Notification No. 12/2017-CT (Rate) dated 28-6-2017. Therefore, these services are liable to GST.Conclusion:The professional service for maintenance of accounts and allied items of work provided by the applicant to SSNNL is a taxable service under Section 9(1) of the CGST Act, 2017, and is not exempted under Sr. No. 3 of Notification No. 12/2017-CT (Rate) dated 28.06.2017.