UKPSVEN not local authority under CGST Section 2(69) but qualifies as governmental authority; construction services exempted

AAR Uttarakhand ruled that UKPSVEN (Uttarakhand Peyjal Sansadhan Vikas Evam Nirman Nigam) does not qualify as a local authority under CGST Act, 2017 Section 2(69) since it lacks control/management of municipal or local fund entrusted by government. The entity operates its own fund, not government-entrusted municipal fund. However, UKPSVEN qualifies as governmental authority being body corporate established by Uttarakhand government under state legislation. Construction services for water supply are exempted from tax under Notification 12/2017 as activity relates to municipal functions under Constitution Articles 243W and 243G.

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Issues Involved:
1. Whether the Applicant needs to pay GST under Forward charge or under RCMRs.
2. Whether UKPSVEN can have Dual Status i.e. for some purposes it may be deemed to be Local Authority while for others it may notRs.

Summary:

Issue 1: Whether the Applicant needs to pay GST under Forward charge or under RCMRs.

The applicant, THDC India Limited (THDCIL), sought an advance ruling on the determination of the liability to pay tax on services under Section 97(2)(e) of the CGST/SGST Act, 2017. The services in question were provided by Uttarakhand Peyjal Sansadhan Vikas Evam Nirman Nigam (UKPSVEN) for the design, engineering, and construction of a 500 KL RCC Over Head Tank at THDCIL Campus, Rishikesh. UKPSVEN claimed that they did not qualify as a "Local Authority" for this specific work and thus charged GST under Forward charge. The applicant contended that UKPSVEN, being a Local Authority, should have the tax paid under RCM as per Notification No. 13/2017 (CTR) dated 28/07/2017.

Upon examination, it was determined that UKPSVEN does not qualify as a "Local Authority" under Section 2(69) of the CGST Act, 2017, but is a "Governmental Authority" as defined in Notification No. 31/2017-Central Tax (Rate), dated October 13, 2017. Consequently, the services provided under the MOU are exempt from payment of tax under Notification No. 12/2017-Central Tax (Rate), dated 28.6.2017, as amended. Therefore, there is no applicability of RCM or Forward Charge for the applicant.

Issue 2: Whether UKPSVEN can have Dual Status i.e. for some purposes it may be deemed to be Local Authority while for others it may notRs.

The ruling clarified that UKPSVEN does not qualify as a "Local Authority" within the meaning and ambit of the provisions of the CGST/SGST Act, 2017. The authority examined the constitution and functions of UKPSVEN and concluded that it does not meet the criteria for a Local Authority as defined under Section 2(69) of the CGST Act, 2017. Therefore, UKPSVEN cannot have a dual status and is not deemed to be a Local Authority for any purposes under the CGST/SGST Act, 2017.

Ruling:

1. GST Payment under Forward charge or RCM: The answer is negative. There is no applicability of the RCM as per Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017, as the supplier of services is not a "Local Authority". The services provided under the referred MOU are exempt in view of Notification No. 12/2017-Central Tax (Rate), dated 28.6.2017, as amended. Therefore, the applicant does not need to pay GST under Forward Charge.

2. Dual Status of UKPSVEN: The answer is negative. M/s Uttarakhand Peyjal Sansadhan Vikas Evam Nirman Nigam does not qualify to be a "Local Authority".

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