Corporation liable to pay GST on plot holder charges despite government control under Section 7 CGST Act 2017

The AAAR Gujarat ruled that the appellant, a corporation established under the GIDC Act 1962, is liable to pay GST on charges collected from plot holders. The authority determined that the appellant's activities constitute supply under Section 7 of CGST Act 2017, falling within the definition of business under Section 2(17). While the appellant qualifies as a government entity being 90% controlled by the State Government, it was denied exemption under Notification 12/2017 as its functions do not fall under the Twelfth Schedule of Article 243W of the Constitution relating to municipal functions.

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Issues Involved:
1. Whether the activities carried out by the appellant amount to "supply" under Section 7 of the CGST Act, 2017.
2. Whether the appellant's activities are exempt from GST under Sr.No. 04 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.
3. Whether the appellant qualifies as a "Governmental Authority" or "Government Entity."

Detailed Analysis:

1. Whether the activities carried out by the appellant amount to "supply" under Section 7 of the CGST Act, 2017:
The appellant argued that their activities do not constitute "supply" under Section 7 of the CGST Act, 2017, as they do not fall under the definition of "business" under Section 2(17) of the CGST Act, 2017. They cited various sections of the Gujarat Industrial Development Act (GID Act) and relevant case laws to support their claim. However, the GAAR ruled that the appellant's activities fall under clause (i) of Section 2(17), which includes any activity or transaction undertaken by the Central Government, a State Government, or any local authority in which they are engaged as public authorities. Consequently, the GAAR concluded that the appellant's activities amount to "supply" under Section 7 of the CGST Act, 2017.

2. Whether the appellant's activities are exempt from GST under Sr.No. 04 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017:
The appellant claimed exemption under Sr.No. 04 of Notification No. 12/2017-Central Tax (Rate), arguing that their activities are in relation to functions entrusted to a municipality under Article 243W of the Constitution. However, the GAAR observed that the appellant is not a "Governmental Authority" as defined in the notification and that their activities do not relate to functions entrusted to municipalities under Article 243W. The GAAR's ruling was upheld, with the modification that the appellant is classified as a "Government Entity" rather than a "State Government."

3. Whether the appellant qualifies as a "Governmental Authority" or "Government Entity":
The appellant argued that they qualify as a "Governmental Authority" under Notification No. 02/2014-ST dated 30.01.2014. The GAAR, however, ruled that the appellant falls under the category of "State Government." Upon review, the appellate authority concluded that the appellant is a "Government Entity" as defined under clause (zfa) of Para 2 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017 (as amended). The appellant fulfills the conditions of being set up by a State Legislature and having 90% or more participation by way of equity or control by the government.

Findings:
The appellate authority upheld the GAAR's ruling that the activities carried out by the appellant amount to "supply" under Section 7 of the CGST Act, 2017, and are liable to GST. The appellant's claim for exemption under Sr.No. 04 of Notification No. 12/2017-Central Tax (Rate) was rejected, as they do not qualify as a "Governmental Authority" carrying out functions entrusted to a municipality under Article 243W of the Constitution. However, the appellate authority modified the GAAR's finding to classify the appellant as a "Government Entity" instead of a "State Government."

Conclusion:
The appeal filed by the appellant was rejected, and the Advance Ruling No. GUJ/GAAR/R/88/2020 dated 17.09.2020 was upheld with the modification that the appellant is classified as a "Government Entity."

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