2020 (12) TMI 837 - AAAR - GST

Appellate Authority Upholds Ruling on Service Tax Exemption

The Appellate Authority upheld the ruling of the AAR, Odisha, stating that the services provided by the Appellant do not qualify for exemption under Entry ... Benefit of exemption - Training programme - Services provided by them under the category of Information and Communication Technology)ICT @ School Project - Challenge to AAR decision - Applicability of Entry No. 72 of Notification No.12/2017-Central Tax(Rate), dated 28.06.2017, read with Entry No. 72 of Notification bearing SRO No. 306/2017-Finance Department, Government of Odisha - HELD THAT:- As per notification, it is noticed that the following three pre-requisite are to be satisfied in order for the supply to qualify for the notified exemption, under Entry No.72 of Notification No.12/2017-Central Tax(Rate): (a) The supply has to be a supply of Service provided to the Central Government, State Government or Union Territory Administration; (b) Such service must be under any training programme; (c) The total expenditure of such service is borne by the Central Government, State Government or Union Territory Administration. In terms of Section 2(53) of the CGST Act, 2017 and in terms of Section 2(53) of the SGST Act, 2017, “Government” means the Central Government or Government of Odisha respectively. There is no denying of the fact that the Appellant is providing service to Odisha Knowledge Corporation Limited (here-in-after referred to as “OKCL”) which is a body corporate. The Appellant has failed to produce any documentary evidence as to how the provision of service to OKCL qualifies to be a provision of service to the Central Government, State Government or Union Territory Administration - The argument put forth by the Appellant that they are the implementing agency on behalf of the Government is not correct, as they are not providing any services to Government. In terms of para-8 of the agreement between OKCL and the Appellant, it is noticed that the Appellant is required to supply and install the specified goods and provide specified services in the ICT Labs of the Govt. and Govt. Schools located in the specified zones. Therefore, it is evident that the Appellant made supplies to OKCL which is a body corporate and registered under the Companies Act, 1956 as a Company. Appellant have clearly admitted that the funds for implementation of project are being provided by OMSM to OKCL, for further release to the Appellant.. The Appellant has cited the agreement copy of OMSM and OKCL, where it is provided that if OKCL fails to discharge the obligation under the agreement, OMSM would discharge all the responsibilities. The agreement cited between OMSM and OKCL is not relevant to the present issue - The Appellant themselves have admitted that OKCL will release the money for the supplies made by the Appellant. The contention/pleading of the Appellant that they merely act as an implementing agency on behalf of OMSM, is factually not correct. The consideration received by the Appellant is in respect of provision of supplies, taxability of which has been discussed in the foregoing paragraphs. Moreover, under Schedule-II (1) (c) of the CGST Act, 2017/SGST Act, 2017, it is clearly defined that any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods - On plain reading of the job carried out by the appellant includes supply of goods, installation & commissioning of hardware, repair maintenance equipment and computer education service. Under 4.1 of the agreement, it is clearly mentioned that the payment is for goods and service. But the Appellant claims that they have rendered only computer training service, it is not correct at all. The consideration received by the Appellant in respect of provision of supply could not be treated as the consideration for only service rendered. Moreover, under Schedule II of Para 1(c) of the CGST Act, 2017/SGST Act, 2017, it is clearly defined that any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods. Having held that the Appellant have failed to meet the primary requirement of the conditions of the notification i.e., the supply has to be a supply of Service provided to the Central Government, State Government or Union Territory Administration; we refrain from discussing the other aspects of the notification and pass the following order. The decision of Advance Ruling passed by the Authority for Advance Ruling, Odisha, made under Section 98 of the Goods and Services Act, 2017, is upheld. Issues Involved:1. Applicability of Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) to the services provided by the Appellant.2. Determination of whether the services provided qualify as services to the Central Government, State Government, or Union Territory Administration.3. Classification of the services provided under the ICT Project as a composite supply.4. Determination of whether the services provided fall under a training program.5. Examination of whether the total expenditure is borne by the Central Government or State Government.Detailed Analysis:1. Applicability of Entry No. 72 of Notification No. 12/2017-Central Tax (Rate):The Appellant sought an Advance Ruling on the applicability of Entry No. 72 of Notification No. 12/2017-Central Tax (Rate), which exempts services provided to the government under any training program, provided the total expenditure is borne by the government. The AAR, Odisha, ruled that the Appellant is not entitled to the exemption, as the services provided do not meet the conditions stipulated under the notification.2. Services Provided to the Government:The AAR observed that the services were provided to Odisha Knowledge Corporation Limited (OKCL), a body corporate, and not directly to the Central or State Government. The Appellant argued that OKCL acts as an implementing agency on behalf of the Government of Odisha. However, the AAR held that OKCL, being a corporate entity, cannot be regarded as the government. The Appellate Authority upheld this view, stating that OKCL is distinct from the government and thus, the services provided to OKCL do not qualify as services provided to the government.3. Composite Supply:The AAR found that the supply undertaken by the Appellant is in the nature of a composite supply, which includes goods and services that are not naturally bundled. The Appellant contended that the principal supply is the provision of computer training, and other activities such as installation and maintenance are ancillary. However, the AAR and the Appellate Authority noted that the supply includes multiple services, such as installation, maintenance, and computer training, and therefore, cannot be classified solely as a training program.4. Training Program:The Appellant argued that the services provided under the ICT Project are part of a training program aimed at promoting computer literacy among students and teachers. The AAR, however, held that the services provided are not exclusively in the nature of a training program, as they include supply and installation of hardware, maintenance, and other activities. The Appellate Authority agreed, noting that the services provided are not solely for training purposes and thus do not meet the criteria for exemption under Entry No. 72.5. Expenditure Borne by the Government:The Appellant claimed that the total expenditure for the ICT Project is borne by the Central and State Governments. The AAR observed that although the source of funding is the government, the payment responsibility lies with OKCL. The Appellate Authority upheld this view, stating that the expenditure is not directly borne by the government, as OKCL is responsible for making payments to the Appellant.Conclusion:The Appellate Authority upheld the ruling of the AAR, Odisha, stating that the services provided by the Appellant do not qualify for exemption under Entry No. 72 of Notification No. 12/2017-Central Tax (Rate). The appeal filed by the Appellant was rejected, and the ruling of the AAR was confirmed. The services provided to OKCL do not meet the criteria for exemption, as they are not provided directly to the government, are not exclusively part of a training program, and the expenditure is not borne directly by the government.