PTCUL liable for GST on payments to UK CAMPA and DFO under reverse charge mechanism per sections 7 and 2(53)

AAR Uttarakhand ruled that UK CAMPA falls under state government definition per CGST Act section 2(53). Payments by PTCUL to UK CAMPA for compensatory afforestation and to DFO for lease rent constitute taxable supply of services under section 7. UK CAMPA services classified under heading 999799, DFO services under 997212, both liable to GST as not exempt under notification 12/2017. PTCUL liable to pay GST under reverse charge mechanism. Compensation payments don't qualify as charity exemption since consideration received for specific forest conservation activities.

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Issues Involved:
1. Whether UK CAMPA falls under the definition of "Government" as per Section 2(53) of the CGST Act, 2017.
2. Whether services rendered by UK CAMPA qualify as a 'supply of services' under Section 7 of the CGST Act, 2017.
3. Whether services supplied by UK CAMPA are covered under Serial No 1 (Chapter 99) of Notification No 12/2017-Central Tax (Rate).
4. If not covered under Serial No 1, under which heading of the GST tariff should the services be classified.
5. Identification of the person liable to deposit GST, i.e., whether under Reverse Charge Mechanism (RCM) or normal forward charge rules.
6. Whether compensation paid by PTCUL to DFO is subject to GST.
7. If subject to GST, under which heading of the GST tariff should the services be classified.

Detailed Analysis:

Issue 1: Definition of "Government"
UK CAMPA, established under the Compensatory Afforestation Fund Act, 2016, is managed by the Forest Department of the State Government of Uttarakhand. The judgment concludes that UK CAMPA falls under the category of State Government as defined in Section 2(103) of the CGST Act, 2017.

Issue 2: Supply of Services
The judgment refers to Section 7 of the CGST Act, 2017, which defines "supply" as including all forms of supply of goods or services for consideration in the course or furtherance of business. The payments made by PTCUL to UK CAMPA are considered a statutory obligation and are not exempt from being classified as consideration. Thus, services rendered by UK CAMPA qualify as a 'supply of services' under Section 7.

Issue 3: Exemption under Notification No 12/2017
The judgment clarifies that services rendered through the Forest Department of the State Government of Uttarakhand do not fall under Entry No 1 (Chapter 99) of Notification No 12/2017 - Central Tax (Rate) dated 28th June 2017. The activities performed by UK CAMPA are not considered charitable activities as defined in the notification.

Issue 4: GST Tariff Classification
The services provided by UK CAMPA are classified under Heading 999799 - "Other services nowhere else classified" in the "Group 99979- Other miscellaneous services." These services are not covered under Serial No 6 of Notification No 12/ 2017 and are liable to tax.

Issue 5: Liability to Deposit GST
The judgment refers to Notification No. 13/2017- Central Tax (Rate) dated 28th June, 2017, which mandates that services supplied by the State Government to a business entity are subject to GST under the Reverse Charge Mechanism (RCM). Hence, the applicant (PTCUL) is liable to pay GST under RCM on the total assigned value for which demand is raised by the Forest Department.

Issue 6: GST on Compensation to DFO
The compensation paid by PTCUL to the DFO for diversion of forest land for non-forest purposes is considered a consideration for leasing services. The judgment concludes that these payments qualify as a 'supply of services' under Section 7 of the CGST Act, 2017.

Issue 7: Classification of Lease Services
The services provided by the DFO fall under Heading 997212 - "Rental or leasing services involving own land or leased non-residential property." These services are not covered under Serial No 6 of Notification No 12/ 2017 and are liable to tax.

Ruling:
1. UK CAMPA falls under the category of State Government as per the CGST Act, 2017.
2. Services rendered through the Forest Department of the State Government of Uttarakhand qualify as a 'supply of services' under Section 7 of the CGST Act, 2017.
3. These services are not covered under Entry No 1 (Chapter 99) of Notification No 12/2017.
4. The services fall under Heading 999799 - "Other services nowhere else classified."
5. The applicant (PTCUL) is liable to pay GST under the Reverse Charge Mechanism as per Notification No. 13/2017.
6. The compensation paid to the DFO qualifies as a 'supply of services' under Section 7 of the CGST Act, 2017.
7. The services fall under Heading 997212 - "Rental or leasing services involving own land or leased non-residential property."

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