2021 (1) TMI 427 - AAR - GST

University ineligible for GST exemption under Notification No. 12/2017-Central Tax (Rate)

In Re: M/s. Nirma University,

The university, not meeting the criteria of a 'governmental authority,' was deemed ineligible for claiming exemption on legal services under Sr. No. 45 of ... Benefit of the exemption for legal services - applicant is established with the objectives of developing the knowledge of science and technology, dental, medial, paramedical, physiotherapy, pharmacy, commerce, management, education and humanities for the advancement of mankind - Sl. No.45 of the Notification No.12/2017-Central Tax (Rate) dated 28th June, 2017 - procurement of legal services - Exemption under S. No. 4 of Notification No.12/2017-Central Tax (Rate)? - Whether Nirma is required to be registered as a Deductor under GST as per the provision of Section 24 of the CGST Act? Whether Nirma would be eligible for claiming benefit of the exemption for legal services as provided in Sr. No.45 of the Notification No.12/2017-Central Tax (Rate) dated 28th June, 2017, as amended from time to time in respect of procurement of legal services? - HELD THAT:- The applicant is a private university set up with the objectives of teaching, research and training at the university, by an Act passed by the Gujarat State Legislature, in which Government is having zero percent participation by way of equity or control. Being the similar issue raised by the applicant concerning the legal interpretation as clarified in Circular No. 76/50/2018-GST dated 31st December, 2018, we can state that the applicant does not fall under the “governmental authority”, as defined under Section2(16) of the IGST Act, 2017. We, therefore, conclude that the condition of ‘with ninety per cent. or more participation by way of equity or control, to carry out any function entrusted to a municipality under Article 243W of the Constitution’ would apply to both authorities whether set up by an Act of Parliament or a State Legislature; or established by any Government - thus, the applicant would not be eligible for claiming benefit of the exemption as provided in Sr. No.45 of the Notification No.12/2017-Central Tax (Rate) dated 28th June, 2017, as amended from time to time, in respect of procurement of legal services (as a recipient). Whether services provided by Nirma are exempted under S. No. 4 of Notification No.12/2017-Central Tax (Rate)? - HELD THAT:- This entry exempts services by Central Government, State Government, Union Territory, local authority or governmental authority by way of any activity in relation to any function entrusted to a municipality under Article 243W of the Constitution. As already held in foregoing para, the applicant is not a Central Government, State Government, Union Territory, Local Authority or Governmental Authority. Further, we find that higher education is nowhere specified as an activity in relation to any function entrusted to a municipality under Article 243W of the Constitution - the higher education services provided by the applicant would not qualify for exemption provided under S. No. 4 of the exemption Notification No.12/2017-Central Tax (Rate) dated 28.06.2017. Whether Nirma is required to be registered as a Deductor under GST as per the provision of Section 24 of the CGST Act? - HELD THAT:- The applicant entity was formed as a private university set up by the Nirma University Act passed by the Gujarat State Legislature, in which Government is having zero percent participation by way of equity or control - Further, admittedly, the applicant does not fall under (i) a department or establishment of Central Govt. or State Govt., or (ii) a local authority; or(iii) Govt. Agencies, or other specified persons viz. (iv) Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860); or (v) public sector undertakings (PSUs). The CBEC vide aforesaid Circular clarified that the provisions of Section 51 of the CGST Act, are applicable to only such authority or board or any other body whether set up by an Act of Parliament or a State Legislature or established by any Government in which fifty one percent or more participation by way of equity or control, is with the Government. It is fact on record that the Nirma University is set up by the Nirma University Act passed by the Gujarat State Legislature, in which Government is having zero percent participation by way of equity or control. Hence, the applicant does not fall under this category of specified person for the purpose of Section 51 of the CGST Act, 2017 - the applicant is not liable to register themselves as a Deductor under GST. Issues Involved:1. Eligibility for claiming exemption for legal services under Sr. No. 45 of Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017.2. Exemption of services provided by the university under Sr. No. 4 of Notification No. 12/2017-Central Tax (Rate).3. Requirement for the university to be registered as a Deductor under GST as per Section 24 of the CGST Act.Issue-wise Detailed Analysis:Issue 1: Eligibility for Exemption for Legal ServicesThe applicant, a university established by a special Act of the Gujarat State Legislative Assembly, sought clarity on whether it could claim an exemption for legal services under Sr. No. 45 of Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017. The applicant argued that it should be considered a 'governmental authority' as it was set up by a State Legislature Act. However, the authority concluded that the applicant does not qualify as a 'governmental authority' under Section 2(16) of the IGST Act, 2017, as it does not have 90% or more participation by way of equity or control by the government. Consequently, the applicant is not eligible for the exemption and must discharge tax liability on legal services under the reverse charge mechanism.Issue 2: Exemption of Services Provided by the UniversityThe applicant sought an exemption for its higher education services under Sr. No. 4 of Notification No. 12/2017-Central Tax (Rate). The authority noted that this exemption applies to services by Central Government, State Government, Union Territory, local authority, or governmental authority by way of any activity related to functions entrusted to a municipality under Article 243W of the Constitution. Since the applicant is not classified as any of these entities and higher education is not a function under Article 243W, the services provided by the university do not qualify for this exemption. However, the authority clarified that services provided by the university as part of a curriculum for obtaining a qualification recognized by law are exempt under Sr. No. 66 of the same notification.Issue 3: Requirement to be Registered as a Deductor under GSTThe applicant sought clarity on whether it needed to register as a Deductor under GST. According to Section 51 of the CGST Act and Notification No. 50/2018-Central Tax, certain entities are required to deduct TDS under GST. The authority clarified that only entities with 51% or more participation by way of equity or control by the government are required to register as Deductors. Since the applicant university has zero percent government participation, it does not fall under this category and is not required to register as a Deductor under GST.Ruling:1. The university is not eligible for claiming the benefit of the exemption for legal services under Sr. No. 45 of Notification No. 12/2017-Central Tax (Rate).2. The services provided by the university are not exempt under Sr. No. 4 of Notification No. 12/2017-Central Tax (Rate).3. The university is not required to be registered as a Deductor under GST as per the provision of Section 24 of the CGST Act.