PSU with 87.3% government shareholding exempt from GST TDS under section 51(1)(d) and Notification 73/2018

The AAR Telangana ruled that the applicant, a PSU established under the Ministry of Fertilizer with 87.3% cumulative shareholdings held by Central PSUs and State Government of Telangana, falls under section 51(1)(d) of CGST Act 2017. Consequently, supplies made to such entities are exempt from TDS liability under GST by virtue of Notification No. 73/2018 dated 31-12-2018, as recipients falling under specified clauses of section 51(1) are not required to deduct TDS from consideration payable to suppliers.

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Issues Involved:

Classification of the applicant under notified persons u/s 51 of CGST Act 2017, liability to pay GST TDS, and applicability of exemption notification for transactions.

Issue 1: Classification of the Applicant under Notified Persons u/s 51 of CGST Act 2017

The applicant, M/s. Ramagundam Fertilizers and Chemicals Limited (RFCL), sought clarification on whether it can be classified under notified persons u/s 51 of CGST Act 2017. The applicant argued that it qualifies as an establishment of the Government due to its formation as a Joint Venture Company involving various Public Sector Undertakings (PSUs) and the Government of Telangana. The Authority for Advance Ruling (AAR) noted that the applicant is established by the Government under the Ministry of Fertilizer as a PSU, with 87.3% cumulative shareholdings belonging to Central PSUs and the State Government of Telangana. Hence, the applicant falls under section 51(1)(d) of the CGST Act.

Issue 2: Liability to Pay GST TDS

The applicant questioned whether it is liable to pay GST TDS by deducting it from the consideration payable to the suppliers. The AAR referred to Notification No. 73/2018, which exempts tax deduction at source for supplies made between persons specified under clauses (a), (b), (c), and (d) of sub-section (1) of section 51 of the CGST Act. Since the applicant falls under section 51(1)(d), any supplies made to persons falling under these clauses will not attract TDS at the hands of the recipients of such supplies.

Issue 3: Applicability of Exemption Notification

The applicant sought clarity on whether the exemption notification is applicable for transactions undertaken by it if other applicable conditions remain satisfied. The AAR reiterated that if the recipient falls under clauses (a), (b), (c), and (d) of sub-section (1) of section 51, then the applicant supplier will not attract TDS, in accordance with Notification No. 73/2018.

Ruling:

1. The applicant can be classified under notified persons u/s 51 of CGST Act 2017 read with Notification No. 33/2017 dated 15 September 2017.

2. If the recipient falls under clauses (a), (b), (c), and (d) of sub-section (1) of section 51, then the applicant supplier will not attract TDS.

3. The exemption notification is applicable for the transactions undertaken by the applicant if other applicable conditions remain satisfied, as clarified in question (2).

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