2021 (10) TMI 51 - AAAR - GST

Appellate Authority denies Nirma University tax exemptions for legal & municipal services.

In Re: M/s. Nirma University

The Appellate Authority upheld the denial of exemption to Nirma University for legal services under Sr. No. 45 of Notification No. 12/2017-Central Tax ... Exemption for legal services - Nirma University - Governmental Authority or not - exemption under Sr.No. 45 of the Notification No. 12/2017- Central Tax(Rate) dated 28th June, 2017 or under Sr.No.4 of Notification No. 12/2017- Central Tax (Rate) - requirement to be registered as a Deductor under GST as per the provision of Section 24 of the CGST Act or not - HELD THAT:- The condition mentioned in item (ii) of clause (zf) of para 2 of the Notification No. 12/2017-Central Tax (Rate) are applicable to both the items (i) and (ii) of the said clause - the condition that an authority / board / other body, to be qualified as ‘Governmental Authority’ should have been set up or established ‘with 90 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 or to a Panchayat under article 243G of the Constitution’, is applicable to both the items (i) and (ii) of definition of “Governmental Authority” at clause (zf) of para 2 of Notification No. 12/2017-Central Tax. The appellant has been set up under the Nirma University Act, i.e. an Act of the Gujarat Legislature, therefore it falls under item (i) of the definition of “Governmental Authority”. However, the appellant has not claimed to be satisfying the condition of 90 per cent or more participation by way of equity or control. The Nirma University Act contains provisions relating to ‘Funds of University’ in section 24 and provisions relating to composition of Board of Governors in section 10, which also do not indicate that the appellant is satisfying the condition 90 per cent or more participation by way of equity or control - thus, the appellant Nirma University cannot be termed as “Governmental Authority” within the definition of the said expression under clause (zf) of para 2 of Notification No. 12/2017-Central Tax. Nirma University is not eligible for claiming benefit of Sr. No. 45 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended and Notification No. 12/2017-State Tax (Rate) dated 30.06.2017, as amended - Services provided by Nirma University are not exempted under Sr. No. 4 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended and Notification No. 12/2017-State Tax (Rate) dated 30.06.2017, as amended. Issues Involved:1. Eligibility for claiming benefit of the exemption for legal service under Sr. No. 45 of Notification No. 12/2017-Central Tax (Rate).2. Exemption of services provided by Nirma University under Sr. No. 4 of Notification No. 12/2017-Central Tax (Rate).3. Requirement for Nirma University to be registered as a Deductor under GST as per Section 24 of the CGST Act (not challenged in appeal).Detailed Analysis:Issue 1: Eligibility for Exemption under Sr. No. 45 of Notification No. 12/2017-Central Tax (Rate)The appellant, Nirma University, sought to claim the benefit of the exemption for legal services under Sr. No. 45 of Notification No. 12/2017-Central Tax (Rate). The GAAR denied this exemption, determining that Nirma University does not qualify as a 'governmental authority.'Key Points:- The appellant argued that it qualifies as a 'governmental authority' under Section 2(16) of the IGST Act, 2017, asserting that it was set up by an Act of a State Legislature.- The appellant contended that the condition of 90% or more participation by way of equity or control applies only to item (ii) of the definition and not item (i), which is separated by a semi-colon.- The GAAR and the Appellate Authority found that the conditions of 90% or more participation by way of equity or control apply to both items (i) and (ii) of the definition of 'governmental authority.'Findings:- The Appellate Authority confirmed that the condition of 90% or more participation by way of equity or control is applicable to both items (i) and (ii) of the definition of 'governmental authority.'- Nirma University does not meet the 90% or more participation condition and thus does not qualify as a 'governmental authority.'- Consequently, Nirma University is not eligible for the exemption under Sr. No. 45 of Notification No. 12/2017-Central Tax (Rate).Issue 2: Exemption of Services under Sr. No. 4 of Notification No. 12/2017-Central Tax (Rate)The appellant also sought exemption for services provided under Sr. No. 4 of Notification No. 12/2017-Central Tax (Rate), which applies to services by a 'governmental authority' in relation to functions entrusted to a municipality under Article 243W of the Constitution.Key Points:- The GAAR denied this exemption, determining that Nirma University does not qualify as a 'governmental authority.'- The appellant argued that its educational activities fall under the functions entrusted to municipalities under Article 243W.Findings:- The Appellate Authority upheld the GAAR's determination that Nirma University does not qualify as a 'governmental authority' because it does not meet the 90% or more participation condition.- As Nirma University is not a 'governmental authority,' it is not eligible for the exemption under Sr. No. 4 of Notification No. 12/2017-Central Tax (Rate).Conclusion:The Appellate Authority confirmed the GAAR's Advance Ruling No. GUJ/GAAR/R/38/2020 dated 03.07.2020, holding that:1. Nirma University is not eligible for claiming the benefit of Sr. No. 45 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended.2. Services provided by Nirma University are not exempted under Sr. No. 4 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended.