AI Drafter 
TaxTMI 
TaxTMI 
2018 (5) TMI 647
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.... made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act /MGST Act would be mentioned as being under the "GST Act" 02 FACTS AND CONTENTION - AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus- 1 - STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTION(S) ON "ANNEXURE I- STATEMENT OF THE RELEVANT FACTS HAVING A BEARING ON THE QUESTIONS (S) ON WHICH THE ADVANCE RULING REQUIRED 2. M/s. Reliance infrastructure limited ('the Applicant") is inter alia engaged in the business of generation, transmission and distribution of electricity and is registered under Goods and Service Tax Act ('GST') bearing Registration No. 27AACCR7446Q1ZM. 3. The Applicant has obtained a license under Section 14 of the Central Electricity Act, 2003 ('Electricity Act') to distribute electricity as a distribution licensee. Accordingly, the Applicant is operating and maintaining a robust distribution system for supplying electricit....
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....n 67 also empowers the appropriate Government to lay down rules prescribing the manner of restoration of property affected by such works and maintenance there of and also the procedure for deposit of compensation payable by the licensee and furnishing of security in respect thereto. 8. The Government of Maharashtra has formulated the Maharashtra Electricity Work of Licensee Rules,2012 ("Electricity Work Rules") for inter alia setting out the procedure to be followed by the licensee for the purpose of carrying out the works given under Section 67 of the Electricity Act. It also lays down lay down the procedure for fencing, guarding and other safety measures relating to the works and the immediate reinstatement of the affected areas and manner of restoration and the payment of the cost of reinstatement to the authority etc. The key provisions laid down in this connection are summarized hereunder: *Rule 11 of the Electricity Work Rules provides that licensee shall be liable to deposit an amount for restoration and maintenance of the affected areas. * Rule 12 of the Electricity Work Rules provides that the distribution licensee shall carry out the restoration....
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.... as security deposit which can be utilized to recover penalties for various lapses, additional reinstatement charges in case the utility agency exceeds the excavation than length allowed in permit etc. Such deposit which has to be deposited with MCGM with each and every permit can be waived; if the utility agency deposits certain fixed amount of standing security deposit with MCGM for the purpose stated hereinabove. the Astt. Commissioner of respective ward shall decide the amount of such standing security deposit which in his opinion will be sufficient to meet the recoveries from the utility agency. It the utility agency deposits such standing security deposit which the respective ward then no separate security deposit shall be insisted along with demand note" ii) Access Charges: In addition to the payment of the reinstatement charges, the licensee is also liable to pay access charges to the Municipal Authorities for giving right of way to the distribution licensee to carry out the excavation work for laying of underground electric supply lines. The relevant extract of the MCGM Trenching Policy have been provided below: "6A. Access Charges (Right ofway charges): ....
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....t penalties or against the reinstatement charges), the Municipal Authorities issues letters directing the Applicant to make additional security deposit. Copy of the letter issued by Municipal Authorities is enclosed as Exhibit D. 11. It is to be noted that that the Applicant has made similar payments of reinstatement charges and access charges to other authorities namely Mumbai Metropolitan Region Development Authority (MMRDA) and Mira Bhayandar Municipal Corporation. STATEMENT CONTAINING THE APPLICANT'S INTERPRETATION OF LAW AND/OR FACTS, AS THE CASE MAY BE, IN RESPECT OF THE QUESTION(S) ON WHICH THE ADVANCE RULING IS REQUIRED 2. SUBMISSIONS OF APPLICANT GST is not payable on Reinstatement charges paid to Municipal Authorities 2.1 In terms of Entry 4 to Notification No. 12/2017 -Central Tax (Rate) dated 28.06.2017 ('NN 12/2017'), services by Central Government, State Government, Union territory, local authority or governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution are exempt from le of GST. The relevant extract of NN 12/2017 Sl. No. Chapter, Secti....
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.... clause (e) of article 243P of the Constitution; (c) a Municipal Committee, a Zilla Parishad a District board and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund; (d) a Cantonment Board as defined in section 3 of the Cantonments Act 2006: (e) a Regional council or a District Council constituted under the Sixth Schedule to the Constitution; f) a Development Board constituted under article 371 Of the Constitution; or (g) a Regional Council constituted under article 371A of the Constitution; 2.7 In terms of Article 243P read with 243S of the Constitution of lndia, a Nagar Panchayat, Municipal Council or a Municipal Corporation would constitute 'Municipality'. Thus, Condition II in Entry 4 to NN 12/2017 stands fulfilled as the MCGM, MMRDA and Mira Bhayandar Municipal Corporation would be treated as local authority Condition III 2.8 The Condition Ill requires that the services should be by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution, 2.9 It is a ....
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.... conjunction with the reinstatement charges. Therefore, whenever the Applicant is required to carry out the excavation of roads for laying, repairing and maintaining of electric cables, it is necessary for the Applicant to make the payment of access charges for the purpose of right of way over roads to carry Out work and reinstatement charges for restoration of roads affected by excavation work. 2.15 It is important to examine whether the instant case involves a 'composite supply' as defined under Section 2(30) of the CGST Act as under: "composite supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof which are naturally bundled and supplied in conjunction With each other in the ordinary course Of business, one of which is a principal supply; 2.16 Further, in terms of Section 8 of the CGST Act, the tax liability of a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply. 2.17 In the present case, the Municipal Authorities provide services of restoration of roads and also ri....
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....hearing was whether the services provided by the Municipal Corporation ('local authority') can be said to constitute an activity in relation to any function entrusted to a municipality under article 243 W of the Constitution of India. 3. In this connection, the Applicant wishes to submit that Article 243 W of the Constitution inter alia empowers the Municipalities in order to enable them to carry out the responsibilities conferred upon them including in relation to the subject matters listed in Twelfth Schedule to the Constitution. Out of the several matters listed in Twelfth Schedule to the Constitution, some of the entries under which the activity of road reinstatement may fall are reproduced hereunder: "I. Urban Planning including town planning and 4 Roads and Bridges 17. Public amenities including street lighting, parking lots, bus stops and public conveniences."" 4. The activity of restoration of roads which includes activities such as construction, alteration, repair and maintenance of roads, can be related to any of the above relevant entry and more particularly the entry in respect of "roads and bridges". 5. It is a settled position in la....
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....ter supply for domestic, industrial and commercial purposes ". Thus, from a perusal of the said entry, it is clear that the functions listed under the Twelfth Schedule are not restricted to be provided to public at large but it can also be provided for commercial purposes or industrial purposes to business entities. Hence, the services of the restoration of roads carried out for the Applicant would also get covered under the Twelfth Schedule to the Constitution of India. 9. Further, the Applicant also wishes to draw attention to the fact that the entries under NN 12/2017 can be classified under the following categories: (i) Where the service is exempted from GST without any reference to the service provider or service recipient (refer Entries 2, 9B, 25, 12, etc.) (ii) Where the service is exempted from GST when provided by the specified persons without any reference to the service recipient(Refer 1, 4, 5, etc.) (iii) Where the service is exempted from GST when received by the specified persons without any reference to the service provider (Refer 16, 40, etc.) (iv) Where the service is exempted from GST when received by the specified p....
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.... makes the field of Article 298 wider than Article 301 Significantly, in different use of words in the two Articles is for a purpose, if the field of two Articles are to be the same. the same words would have been used. It is true, as submitted, that since 'trade' is used both in Article 298 and 301, the same meaning should be given. To this extent, we accept it so but when the two Articles use different words, in a different set of words conversely, the different words used could only be to convey different meaning. If different meaning is given the field of the he different. so. When Instead of the words 'trade and commerce in Article 301. the words 'trade or business" is used it necessarily has different and wider connotation than merely 'trade and commerce'. 'Business' may be of varying activities. may or not be for profit. hut it necessarily includes within is ambit 'trade and commerce' so sometime it may be synonymous but its field stretches beyond 'trade and commerce, 14. In support of the above contention, reference may also be made to the following judgements wherein, in the absence of any specific definition of the term 'railways' under the Finance Act, 1994 or any sim....
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....erally be Strictly but beneficial exemptions having their purpose as encouragement or promotion of certain activities should be liberally interpreted. This composite rule is not stated in any particular Judgment in so many words. In fact, majority of Judgements emphasize that exemptions are to the strictly interpreted while some of them insist that exemptions in fiscal Statutes are to be liberally interpreted giving an apparent impression that they are contradictory to each other. But this is only apparent. A close scrutiny will reveal that there is no real contradiction amongst the judgments at all. The synthesis of the views is quite clearly that the general rule is strict interpretation while special rule in the case of beneficial and promotional exemption is liberal interpretation. The two go very well with each other because they relate to two different sets of circumstances." 18. The Applicant also relies on the case of Commissioner of Central Excise, Surat-l Versus Favourite Industries 2012 (278) E.L.T. 145 (S.C.) = 2012 (4) TMI 65 - SUPREME COURT OF INDIA , wherein the Apex Court held as under: "31. Moreover, a liberal construction requires to be given to a ben....
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....ch is a principal supply, shall be treated as a supply of such principal supply. 22. In the present case, the Municipal Authorities provide services of restoration of roads and also right of way to carry out excavation work. The services of giving right of way and restoration of roads are naturally bundled and are supplied in conjunction with each other in the ordinary course of business of granting permission to the licensee for carrying out the excavation works. Thus, it can be said that it would constitute a composite supply in terms of Section 2(30) of the CGST Act wherein the service of restoration of roads would be the principal supply 23. As discussed above, in terms of Section 8 of the CGST Act, the composite supply shall be treated as supply of principal supply and GST would be applicable based on such principal supply. In the instant case, principal supply is the supply of service for restoration of roads which is exempt from the levy of GST in terms of NN 12/2017. Therefore, GST would not be applicable on the access charges collected by the Municipal Authorities. In view of the above submissions, no GST would be leviable on reinstatement charges and access charg....
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....therance of their business and hence attracts GST. In terms of entry no. S of the Notification No. 13/2017- Central Tax (rate) dated 28.06.2017, the leviable GST is payable by the recipient i.e. M/S. RIL on reverse charge basis." 04. HEARING The case was taken up for preliminary hearing on dt.31.01.2018 when Sh. Gopal Mundhra (Advocate) attended alongwith Shi Thomas. K. D (DGM). On dt.28.02.2018, Shi Gopal Mundhra -(Advocate), Ms. Ginita Bodani (Advocate) and Sh Thomas. K. D (DGM) and reiterated the contention as made in the written submission. A request was made to make a further submission. The same has been tendered. Ms. Sapna Makhija, Superintendent attended on behalf of the officer from the Central Tax Office. She also requested time to make a written submission which has been tendered. 05. OBSERVATIONS We have gone through the facts of the case. The questions raised in the application are as under - 1. Whether reinstatement charges paid to Municipal Authorities would be liable to GST? 2. Whether access charges paid to Municipal Authorities would be liable to GST? The first thing that we notice from a perusal of the questions posed as ....
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....services or both and all the provisions of this Act shall apply to such recipient as if he the person liable for paying the tax in relation to the supply of such goods or services or both The notification issued under the above sub-section has an entry thus- Notification No. 13/2017-Central/State Tax (Rate) In exercise of the powers conferred by sub-section (3) of section 9 of the Central/Maharashtra Goods and Services Tax Act, 2017, the Central/State Government on the recommendations of the council hereby notifies that on categories of supply of services mentioned in column (2) Table below; supplied by a person as specified in column (3) of the said Table, the whole of central / state tax leviable under section 9 Of the said Central Goods and Services Tax Act, shall be paid On reverse charge basis by the recipient Of the such services as specified in Column (4) of the said Table: Table Si No. Category of Supply of Services Supplier of service Recipient of Service (1) (2) (3) (4) 5 Services supplied by the Central Government, State Government, Union Territory of local authority to a business entity excluding....
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....lature of a State may, by law, endow- (a) the Municipalities with such powers and authority as may be necessary to enable them to function as institutions User-government and such law may contain provisions for the devolution of powers and responsibilities upon Municipalities, subject to such conditions as may be specified therein, with respect to- (i) the preparation of plans for economic development and social justice; (ii) the performance of functions and the implementation of schemes as may be entrusted to them including those in relation to the matters listed in the Twelfth Schedule; (b) the Committees with such powers and authority as may be necessary to enable them to carry out the responsibilities conferred upon them including those in relation to the matters listed in the Twelfth Schedule." The word "Municipality" is defined in the Constitution in the definitions in Article 243P(e)A As "Municipality" means an institution of self government constituted under article 243Q;" Article 243Q says thus- "243Q (1) there shall be constituted in every State,- (a) a Nagar Panchayat (by whatever name called) for a ....
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....the needful permissions. However, these permissions come with charges for restoring the street or pavement which has been dug up. Thus, the activity in the present case is the charges recovered by the Municipal Authorities to restore that portion of the street or pavement which has been dug up. It does not amount to construction of the entire road, as such. The copies of the application for undertaking excavation work reveal that the permission was sought and was granted for a trench of length/ are of 10 mtrs. The function in relation to 'Roads' as entrusted by the Constitution does not entitle the Municipality, as the one performing the function, to receive any charges from anyone for doing the said work. It is by nature a sovereign function done for the community at large. These are governmental functions which are legislated to be performed by the Municipalities. Such functions are in the nature of performing works for public. In the present case, the business entities while performing their business activities request the Municipal Authorities to be allowed to dig up trenches for works such as laying or repairing some cables or pipes. There are so many such entities such as the....
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....ticle 243 W of the Constitution. However, we find that the arguments fail to make a point. As regards the case laws, we only observe that the facts and provisions aren't in pari materia with those in the present case. We find that there is no other entry in the Schedule contained in the Notification No.12/2017-Central/State Tax (Rate) for services exempted from GST which would cover the impugned transaction. Neither is a specific entry for the impugned transaction in the Notification No. 11/2017-CentraI/State Tax (Rate) for services taxable to GST at various rates. In view thereof, the residuary entry no.35 of the Notification No.11/2017-Central/State Tax (Rate) covering "services nowhere else classified" and attracting GST @18% [9% each of CGST and MGST] would be applicable. Question 2 Whether access charges paid to Municipal Authorities would liable to GST? The reinstatement charges apply towards restoration of excavation work on the roads carried out by the various business entities providing services such as gas, telephone, electricity, etc. The Guidelines for Trenching activity-2015 [No:AMC/ES/7725/II Dated 18.12.2014 - policy guidelines for granting tr....