2021 (11) TMI 225 - AAR - GST

GST Applicability to Services Provided by Applicant to Social Welfare Department

The services provided by the applicant to the Social Welfare Department were found not to be exempt from GST as they did not meet the criteria related to ... Tax exemption under Notification No. 12/2017-C.T. (Rate) - renting of immovable property as supply of service - TDS under Section 51 of the CGST Act - applicability of an advance ruling on a notificationTax exemption under Notification No. 12/2017-C.T. (Rate) - renting of immovable property as supply of service - Whether the services rendered by the applicant to the State Government department for residential accommodation are exempt under Entry No. (3) of Notification No. 12/2017-C.T. (R) dated 28.06.2017. - HELD THAT: - The Authority examined the three conditions of Entry No. (3): (a) the supply must be a pure service; (b) it must be provided to a government entity; and (c) it must be by way of an activity in relation to functions entrusted to Panchayats/Municipalities under Articles 243G/243W. Applying Schedule II, leasing of immovable property is a service and the applicant's leasing to a State Government department satisfies the 'provided to government' requirement. However, the applicant failed to produce sufficient material to demonstrate that the supply was made by way of an activity in relation to functions entrusted under Article 243G or 243W. In the absence of any evidence or submissions linking the leased accommodation to a function devolved under the Eleventh/Twelfth Schedule, the Authority could not hold that the third condition was satisfied. Consequently, the Authority concluded that the supply does not qualify for exemption under Entry No. (3). [Paras 5]Answered in the negative - the impugned renting of immovable property is not exempt under Entry No. (3) of Notification No. 12/2017-C.T. (R).TDS under Section 51 of the CGST Act - Whether TDS provisions under Section 51 are applicable where the supply is exempt. - HELD THAT: - The Authority noted that its earlier conclusion establishes that the applicant's supply is taxable and not exempt. Section 51 relates to deduction of tax at source on payments for taxable supplies made by specified government authorities. Because the impugned supply is held not to be exempt, the TDS provisions apply to the subject transactions. The Authority therefore answered the applicability of TDS in the light of its finding on taxability of the supply. [Paras 5]TDS provisions will be applicable in the subject case.TDS under Section 51 of the CGST Act - treatment of unregistered suppliers under TDS mechanism - Whether the TDS notification issued under Section 51 would be applicable for deduction of TDS where the supplier is not registered under GST and supplies to a State Government department. - HELD THAT: - Having held the supply to be taxable, the Authority considered whether the TDS notification under Section 51 applies to the payments in question. The Authority observed that Section 51 mandates deduction of tax at source by specified government departments on payments for taxable supplies and, on the facts before it, concluded that the TDS notification is applicable and TDS is liable to be deducted even though the applicant is not registered. The Authority relied on its taxability finding rather than the applicant's submissions about registration thresholds or SOP guidance. [Paras 5]Answered in the affirmative - the TDS notification under Section 51 is applicable and TDS is liable to be deducted.Entitlement to refund of TDS - Whether the applicant would be entitled to refund of TDS if deducted. - HELD THAT: - The Authority recorded that the question of entitlement to refund pertains to the law and procedure for refunds and does not fall within the ambit of matters on which an advance ruling may be given under Section 97. Consequently, the Authority refrained from adjudicating the refund question and did not decide it on merits. [Paras 5]Not answered by the Authority in view of limitations on advance ruling jurisdiction; question left open.Final Conclusion: The Authority held that the applicant's leasing of immovable property to the State Government department is not exempt under Entry No. (3) of Notification No. 12/2017-C.T. (R); accordingly, TDS under Section 51 is applicable and the TDS notification applies even though the applicant is unregistered. The question of entitlement to refund of any TDS was not decided as it falls outside the scope of the advance ruling. Issues Involved:1. Exemption of services provided to the Social Welfare Department from GST.2. Applicability of TDS provisions on exempt services.3. Applicability of TDS notification for an unregistered supplier under GST.4. Entitlement to refund of TDS deducted.Detailed Analysis:Issue 1: Exemption of Services Provided to the Social Welfare Department from GSTThe applicant sought clarification on whether the services provided to the Samaj Kalyan Department, State Government of Maharashtra for residential accommodation of underprivileged girls are exempt from GST. The applicant argued that the services fall under 'pure services' as defined in Notification No. 12/2017-C.T. (R) dated 28.06.2017, which exempts services provided to the government by way of any activity related to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution.The authority examined the conditions for exemption under the notification:1. The service should be a 'pure service.'2. The service should be provided to the Central Government, State Government, local authority, or a Governmental authority.3. The service should be related to functions entrusted to a Panchayat or Municipality under the respective Articles of the Constitution.The authority concluded that while the applicant's service qualifies as a 'pure service' and is provided to a State Government department, there was insufficient evidence to establish that the service is related to functions entrusted under Articles 243G or 243W. Consequently, the services provided by the applicant are not exempt from GST.Issue 2: Applicability of TDS Provisions on Exempt ServicesThe applicant questioned whether TDS provisions apply when the supply of services is exempt. Since the authority determined that the services provided by the applicant are not exempt from GST, it held that the TDS provisions under Section 51 of the GST Act are applicable in this case.Issue 3: Applicability of TDS Notification for an Unregistered Supplier under GSTThe applicant, being unregistered under GST, sought clarity on whether TDS notifications issued under Section 51 would apply. The authority affirmed that TDS provisions are applicable even if the supplier is unregistered, provided the services are taxable.Issue 4: Entitlement to Refund of TDS DeductedThe applicant asked if they would be entitled to a refund of TDS deducted. The authority refrained from answering this question, stating that entitlement to a refund is not covered under Section 97 of the CGST Act, 2017.Conclusion:1. The services provided by the applicant to the Samaj Kalyan Department are not exempt from GST.2. TDS provisions apply to the services provided by the applicant.3. TDS notification under Section 51 is applicable for deduction of TDS even if the applicant is not registered under GST.4. The question regarding the refund of TDS deducted was not addressed.