Water supply corporation not local authority under GST Act Section 2(69), lacks municipal fund control, classified as governmental authority instead

The Authority for Advance Rulings, Uttarakhand ruled that the water supply corporation does not qualify as a local authority under Section 2(69) of the GST Act, 2017, as it lacks control over municipal or local funds entrusted by government. The corporation is classified as a governmental authority instead. Consequently, reverse charge mechanism under Notification 13/2017 does not apply. The construction services for water supply are exempt from GST under Notification 12/2017, making ITC claims inapplicable.

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Issues Involved:
1. Applicability of Reverse Charge Mechanism (RCM) and tax payment responsibility.
2. Entitlement to Input Tax Credit (ITC) on GST deposited.

Issue-Wise Detailed Analysis:

1. Applicability of Reverse Charge Mechanism (RCM) and Tax Payment Responsibility:

The applicant, Uttarakhand Peyjal Sansadhan Vikas Evam Nirman Nigam (UK Peyjal Nigam), sought an advance ruling on whether the tax should be paid by THDC on a reverse charge basis or on a forward charge basis. The applicant claimed that they are a Local Authority and hence, the supply of services should not fall under RCM. However, upon examination, it was found that UK Peyjal Nigam does not qualify as a "Local Authority" under Section 2(69) of the CGST Act, 2017. The definition of "Local Authority" includes entities like Panchayats, Municipalities, and other authorities legally entitled to control or manage a local fund, which UK Peyjal Nigam does not satisfy. The applicant lacks autonomy and does not manage a municipal or local fund as required by the definition.

The judgment referenced the Supreme Court decision in Union of India Vs. R.C. Jain (1981) 2 SCC 308, which outlined the attributes required for an entity to be considered a local authority. UK Peyjal Nigam did not meet these criteria, particularly in terms of autonomy and control over local funds. Consequently, the applicant does not qualify as a "Local Authority," and the services provided do not fall under the provisions of RCM as per Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017.

Ruling:
M/s Uttarakhand Peyjal Sansadhan Vikas Evam Nirman Nigam does not qualify to be a "Local Authority," and hence, there is no applicability of the RCM as per the provisions of the Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017.

2. Entitlement to Input Tax Credit (ITC) on GST Deposited:

The applicant also sought a ruling on whether THDC or UK Peyjal Nigam is entitled to avail ITC on the GST deposited. The judgment clarified that since UK Peyjal Nigam is not a "Local Authority" but a "Governmental Authority," the services provided are exempt from payment of GST under Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017, as amended. The construction of an overhead water tank at Rishikesh in the THDC colony pertains to the supply of water, which is an activity in relation to a function entrusted to a Municipality and Panchayat under articles 243W and 243G of the Constitution of India. Therefore, the service is exempt from GST, and the question of claiming ITC does not arise.

Ruling:
The service provided is exempt from payment of GST, and hence, the question of claiming ITC does not arise.

Conclusion:

The judgment concluded that UK Peyjal Nigam is not a "Local Authority" but a "Governmental Authority." Therefore, the provisions of RCM do not apply, and the services provided are exempt from GST, negating the possibility of claiming ITC.

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