Applicability of GST under RCM on CFO renewal fees paid to KSPCB

[TEAM GST]

A Sugar factory has paid toKarnataka State Pollution Control Board (KSPCB) towards Consent for Operation (CFO)renewal fees. KSPCB has not provided any GST tax invoice, only online payment receipt from the KSPCB portal is available.

Kindly advise whether GST is applicable under RCM or this would be exempt under the ambit of Sl no 4 Notification 12/2017

[Sneha Bhansali]

The exemption at Sl. No. 4 of Notification 12/2017-CT(Rate) covers only "registration" services and does not extend to Consent for Operation which is a permission/authorisation.

Accordingly, GST is liable to be paid by the sugar factory under RCM at 18% as covered under Sl. No. 5 of Notification 13/2017-CT(Rate) (services by a State Government/local authority to a business entity) read with SL.No. 9 of Notification 12/2017 - CT (Rate).

Further, the factory must issue a self-invoice (Section 31(3)(f) read with Rule 46) and a payment voucher (Rule 52) to claim ITC.

[Sanjeev Agarwal]

Final opinion

KSPCB CFO renewal fee should be treated as GST-exempt under Sl. No. 4 of Notification No. 12/2017-CT(R), and RCM should not be discharged.

KSPCB is a statutory Pollution Control Board constituted under the Water (Prevention and Control of Pollution) Act, 1974, and is therefore not synonymous with the State Government for purposes of Sl. No. 5 of Notification No. 13/2017-CT(R).

Sl. No. 4 of Notification 12/2017 exempts services by a governmental authority by way of activities relating to functions entrusted to a Municipality under Article 243W. The relevant constitutional function includes "protection of the environment and promotion of ecological aspects." KSPCB's statutory functions of pollution prevention/control and grant of statutory consent are directly connected with this environmental function. (CBIC GST)

Accordingly, the better view is:

CFO renewal fee paid to KSPCB is exempt under Sl. No. 4 of Notification No. 12/2017-CT(R); RCM under Sl. No. 5 of Notification No. 13/2017-CT(R) is not applicable.

Documentation

The fact that KSPCB issues only an online payment receipt and not a GST tax invoice does not create an RCM liability. The company should retain:

• KSPCB online payment receipt;

• CFO renewal application/order;

• fee calculation/challan;

• applicable KSPCB fee notification/rate schedule; and

• a brief GST exemption note citing Sl. No. 4 and the Article 243W environmental function.

No self-invoice, payment voucher or RCM payment should be required where the underlying service is exempt.

Important qualification

The exemption should be documented as Sl. No. 4 exemption based on KSPCB's governmental-authority status and the environmental function nexus, rather than on the proposition that CFO is merely a "registration".

Conclusion: GST payable under RCM - NO. GST exemption under Sl. No. 4 - YES, subject to the above statutory nexus and verification for the relevant tax period.

AI Summary

GST reverse charge on Consent for Operation renewal fees depends on activity classification and applicable exemption framework.
GST treatment of Consent for Operation renewal fees paid by a sugar factory to the Karnataka State Pollution Control Board is considered. The issue is whether the fee, for which only an online payment receipt is available and no GST tax invoice has been issued, attracts GST under reverse charge or qualifies for exemption under serial number 4 of Notification No. 12/2017. Classification of the renewal-related activity and the applicable reverse-charge and exemption framework require consideration.