TaxTMI 
TaxTMI 
2021 (4) TMI 563
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....ssed by the Municipality on June 10, 1940 in the General Board meeting to begin transport services. The main purpose of the transport service was to avoid the population density in city area and thereby to provide affordable means of transportation facility for the citizens staying far from the main city area. The profit motive was not there at all at any stage. 4. The applicant submitted that until the year 1950, the transport department was considered as a section of Municipality. However, in the year 1950 a separate transport fund created and accordingly, separate accounts of AMTS service were started to be maintained. The first AMTS estimate Budget-'B' was presented in the General Meeting of Municipal Corporation by transport committee through standing committee in Dec. 1950. 5. Since the creation of a separate transport fund, AMTS is managed by Transport Manager under transport committee and Municipal Corporation in accordance with the powers derived from the Gujarat Provincial Municipal Corporations Act, 1949 (hereafter referred as 'GPMC Act'). 6. The applicant submitted that "Local authority" as per GPMC Act means the Corporation of a City, a municipalit....
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....43W of the Constitution of India ('COI') is exempted. 11. The Applicant submitted that they believe that they would merit the category of Local Authority since it is managed by the Municipal Corporation under GPMC Act. Moreover, the Applicant believes that their activity of providing transportation services is covered under either of the following functions of Article 243W of COI: • Provision of urban amenities and facilities such as parks, gardens, playgrounds;- • Public amenities including street lighting, parking lots, bus stops and public conveniences; And the services received by them in relation to / pertaining to transportation services should be eligible for exemption from payment of GST. 12. Accordingly, the applicant sought the Advance Ruling on the following question: Part A- Whether AMTS would be qualified as 'Local Authority' as defined under the Central Goods and Services Tax Act, 2017? Part B -Whether AMTS is liable to pay GST on procurement of security services received from any person other than body corporate under reverse charge mechanism, considering the exemption granted in Sl. No. 3 of ....
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....3P 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 Cantonment 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 16. As per GPMC Act, "Local authority" means the Corporation of a City or a municipality for a municipal borough. Further, "Local Authorities" has been defined under Local Authorities Loans Act, 1914 as any person legally entitled to the control or management of any local or municipal fund, or legally entitled to impose any cess, rate, duty or tax within any local area. 17. The 'local fund' used in the above definition has been defined under Gujarat Treasury Rules, as (i) revenue administered by bodies which by law or rule having the forc....
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....e Ruling upheld that NKDA would be considered as Local Authority if they satisfy the aforesaid tests for local authority as decided in Union Bank of India vs R.C. Jain (1981) 2 SCC 308. 25. The Applicant would like to further submit that in the judgement of Union of India vs. R.C.Jain (supra), it is decided that an entity would be considered as a "local authority" only if the following tests are satisfied : Sr.No. Condition Whether conditions is fulfilled? 1. Separate Legal existence Yes. The first and foremost test that any entity should satisfy to be considered as local authority is that it should have a separate legal entity. The applicant has a separate legal entity and it would continue to exist irrespective of continuity of its members or directors. 2. Functions in a defined area Yes. The entity must function in a defined area and must ordinarily be elected wholly or partly, directly or indirectly by the inhabitants of the area. In the given case, AMTS is functioning in the municipal limit of Ahmedabad and the ultimate control of AMTS rests with the AMC which is elected by the residents of Ahmedabad. 3. Power to raise funds Yes. ....
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....d that the Article 243W was inserted in the constitution of India while enacting the Constitution (Seventy-fourth Amendment) Act, 1992 in order to enable the Urban Local bodies perform effectively as vibrant democratic units of self - government. The extract of the Statement of Objects and Reasons is given as under: "In many States local bodies have become weak and ineffective on account of a variety of reasons, including the failure to hold regular elections, prolonged supersession and inadequate devolution, of powers and functions. As a result, Urban Local Bodies are not able to perform effectively as vibrant democratic units of self-government." 30. Article 243W of COI entrusts the Powers, authority and responsibilities of Municipalities and provision of the same has been reproduced below for easy reference: Subject to the provisions of this Constitution, the Legislature 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 of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Municipalities, subject to....
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.... station, community hall and library, cinema theatre, swimming pool,, stadium, open air theatre, religious building, Auditorium, parks, play grounds, water supply, drainage, sanitation, Burial ground etc. 34. The applicant believes that the transportation services rendered by it would be considered as provision of urban amenities and facilities listed under twelfth schedule. 35. Moreover, Section 91 of the Gujarat Municipalities Act (GMA'), attached as Annexure-C, mentions certain discretionary function entrusted to them. An extract of the Section 91 of GMA is reproduced hereunder: In the sphere of public works, (a) giving relief to, and establishing and maintaining relief works in time of famine or scarcity for, destitute persons within the limits of the municipal borough; (b) constructing, establishing or maintaining, public parks, gardens, libraries, museums, lunatic asylums, halls, offices, shops, markets dharmashalas, rest-houses, places of entertainment and homes for the disabled and destitute and other public buildings: (c) the construction, maintenance, management, organization or purchase of telephone lines, or for guaranteeing....
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.... well as an indirect significance, depending on the context. They are not words of restrictive content and ought not to be so construed." 39. Thus, from above, the Applicant submitted that the term 'in relation to' is very wide and the intention of the legislature is to encompass all those services which are provided so as to enable the organization to perform function entrusted in Article 243W of COL In present case, the Applicant believes all those services which are directly used for providing passenger transportation service or those service without which it is difficult to provide passenger transport service such as security services would be included within the term 'in relation to' and accordingly, would be covered within pure service as envisaged in the exemption Notification. 40. Apart from above, the Applicant place reliance on the recent Advance Ruling in the case of A. B. Enterprise vide order # GUJ/GAAR/R/2020/18 wherein the Applicant is engaged in supplying manpower for security and housekeeping to the Central Government, State Government and Local Authority. It is upheld in the AAR that these pure services would be eligible for exemption fr....
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....dgjng Developers Private Limited vide order # 49/WBAAR/2019-20 dated June 10, 2019. 43. The Applicant submitted that based on discussion above, the security of a transport undertaking is of utmost importance considering possibility of unfortunate events that may threaten the safety of Vehicles. 44. The applicant further submitted that the fact is that security is vital for safe-keep of undertaking and it can be ensured only by way of keeping enough security measures and procedures in place; that security service has direct nexus with the transportation service, being one of the functions of Municipality. Even, in Ruling of A.B. Enterprise (supra), it is upheld that supply of manpower for security service would be eligible for exemption from payment of tax. Therefore, same would be eligible for exemption and the Applicant would not be liable to make payment of tax under reverse charge mechanism. Part C -Whether AMTS is required to pay GST on advertisement services or the service recipient of AMTS is required pay GST under reverse charge mechanism considering Notification No. 13/2017-Central tax (Rate) dated 28-06-2017? 45. The Applicant submitted that they are also provi....
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....btain registration as GST TDS deductor. 50. The Applicant submitted that without prejudice to above submission, they requests Your Honor to grant an opportunity of personal hearing in this matter in order to explain the matter more lucidly. The Applicant reserves their right to modify, rescind or alter any part of submissions and to place additional evidence in support of their contention at the time of personal hearing. Personal Hearing 51. Personal hearing in the matter was held on 23.12.2020. Authorised representative of the company appeared on behalf of the applicant and re-iterated the submission made in the Application. DISCUSSION & FINDINGS 52. We have considered the submissions made by the applicant in their application for advance ruling as well as the arguments/discussions made by their representative. We have also considered the issues involved on which Advance Ruling is sought by the applicant. 53. At the outset, we would like to state that the provisions of both the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017 are the same except for certain provisions. Therefore, unless a mention is specifically made to su....
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....hayat, or as the case may be, a gram panchayat; and includes, where such Corporation, municipality or panchayat has been superseded or dissolved, the person or persons appointed to exercise the powers or to perform the functions of such Corporation, municipality or panchayat. 59. Section 2(69)(c) of the GST Act is similar to Section 3(31) of the General Clauses Act, 1897, which defines a local authority to mean a municipal committee, district board, body of port commissioners or other authority legally entitled to, or entrusted by the Government with the control or management of a municipal or local fund. In Agricultural Produce Market Committee Narela, Delhi [(2008) 9 SCC 434] the Apex Court has examined the context in which it has earlier interpreted the words 'other authority' in R.C. Jain (supra). The court adopted the test of 'like nature'. As the words 'other authority' came after the words 'Municipal Committee', 'District Board' or 'Body of Port Commissioners', it took color from these earlier words. The purpose and object are, therefore, to cover those bodies, which are discharging municipal functions but are not covered by the definition of municipalities as required to....
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....nema theatre, swimming pool, stadium, open air theatre, religious building, Auditorium, parks, play grounds, water supply, drainage, sanitation, Burial ground etc. Therefore, the transportation services rendered by the applicant would be considered as provision of public amenities and facilities listed under Article 243W of 12th Schedule of the Constitution. 61. AMTS is, therefore, a statutory authority established to carry out the functions entrusted to a Municipality under Art. 243W of the Constitution. It is a body discharging municipal functions, although not a municipality as required to be constituted under Art. 243Q of the Constitution and is fit to be included as 'other authority' under Section 2(69)(c) of the GST Act. It will also be a local authority within the meaning of the above section of the GST Act if the Applicant is legally entitled to or entrusted by the State Government with the control or management of a municipal or local fund. 62. The GST Act does not define a local fund. Section 2 of the Local Authorities Loans Act, 1914, defines a local authority as a person legally entitled to control or management of any local or municipal fund, or legally entitled ....
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....ng the Corporation shall, subject to the approval of the 1[State] Government, appoint a fit person to be the Transport Manager of the Transport Undertaking. (2) The Transport Manager Shall receive such monthly salary and allowances as the Corporation shall from time to time, with the approval of the 1 [State] Government determine: Provided that the salary of the Transport Manager shall not be altered to his disadvantage during his period of office. 64.3 Further, "Transport Undertaking" is defined under Section 70 of GPMC Act which is read as under: (70) "Transport Undertaking" means all undertakings acquired, organised, constructed, maintained, extended, managed or conducted by the Corporation for the purpose of providing mechanically propelled transport facilities for the conveyance of the public and includes all moveable and immovable property and rights vested or vesting in the Corporation for the purposes of every such undertaking; 65. For better understanding the Administration and funding of AMTS is defined as under: Administration & funding of AMTS 66. From the perusal of the above discussion it can be construed that "Ahmedabad Municipa....
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....l authority or a Government Entity by way of any activity in relation to any function entrusted to a Panchayat under 243G of the constitution or in relation to any function entrusted to a Municipality under article 243W of the constitution is not liable to GST. 69.2 In the discussion of question No.1, we have already held that AMTS is "local authority" in terms of Section 2(69) of CGST Act, 2017 as such the applicant i.e. AMTS renders transportation services and it is squarely covered in the following services specified in Article 243W of 12th Schedule of the Constitution functions entrusted to the municipality, are as under: • Provision of urban amenities and facilities such as parks, gardens, playgrounds; • Public amenities including street lighting, parking lots, bus stops and public conveniences; 70. We find that the term 'in relation to' used in above exemption is very much wide enough to cover every kind of services that results in performance of the functions as mentioned in Article 243W of the Constitution of India either directly or indirectly. Even the services provided for enabling the organization to perform defined functions would also b....
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....s under: Not. No. 29/2018-CT (Rate) dated 31.12.2018 Sl.No. Category of Supply of Services Supplier of service Recipient of Service (1) (2) (3) (4) 14. Security services (services provided by way of supply of security personnel) provided to a registered person : Provided that nothing contained in this entry shall apply to, - (i)(a) a Department or Establishment of the Central Government or State Government or Union territory; or (b) local authority; or (c) Governmental agencies; which has taken registration under the Central Goods and Services Tax Act, 2017 (12 of 2017) only for the purpose of deducting tax under section 51 of the said Act and not for making a taxable supply of goods or services; or (ii) a registered person paying tax under section 10 of the said Act. Any person other than a body corporate A registered person, located in the taxable territory"; 72.1 As per the above Notification Reverse Charge Mechanism on Security Service provided to local authority by any other person other than body corporate is not applicable. Therefore, the applicant being a "local authority" in terms of Section 2(69) of C....
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....cipient of Service is liable to payment of GST. 76. Now, we take up the fourth question of the applicant that whether AMTS is required to be registered as a Deductor under GST as per the provision of Section 24 of the CGST Act. 77. To examine whether the applicant is required to be registered as a Deductor under GST we refer the Section 24 of CGST Act, 2017 which is read as under: Compulsory registration in certain cases 24. Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,-- (vi) persons who are required to deduct tax under section 51, whether or not separately registered under this Act; Section 51 of CGST Act, 2017 is read as under : Tax deduction at source. 51. (1) Notwithstanding anything to the contrary contained in this Act, the Government may mandate,-- (a) a department or establishment of the Central Government or State Government; or (b) local authority; or (c) Governmental agencies; or (d) such persons or category of persons as may be notified by the Government on the recom....
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....alified as 'Local Authority' as defined under the Central Goods and Services Tax Act, 2017? Ans. The applicant merits qualification as "Local Authority" as defined under the Central Goods and Service Tax Act, 2017. Q. B Whether AMTS is liable to pay GST on procurement of security services received from any person other than body corporate under reverse charge mechanism, considering the exemption granted in Sl. No. 3 of Notification No. 12/2017 - Central Tax (Rate) or Sl. No. 3 of Notification No. 09/2017 - IGST (Rate)? Ans. Negative in view of the above discussion. Q. C Whether AMTS is required to pay GST on advertisement services or the service recipient of AMTS is required to pay GST under reverse charge mechanism considering Notification No. 13/2017-Central tax (Rate) dated 28-06-2017? Ans. The service recipients of AMTS are required to pay GST under reverse charge mechanism on advertisement service in view of the above discussion. Q. D Whether AMTS is required to be registered as a Deductor under GST as per the provision of Section 24 of the CGST Act? Ans. Affirmative in view of the above discussion. ============= Document 1 i Contemplated a....