TaxTMI 
TaxTMI 
2021 (8) TMI 143
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....lai, Teynampet, Chennai. Tamil Nadu.600 006. (hereinafter called the Applicant) are registered under GST with GSTIN.33AAATT3751D1ZT The applicant has sought Advance Ruling on: 1. Applicability of GST registration to Tamil Nadu Labour Welfare Board 2. Applicability of GST towards the rental income received by the board from Government and business entities. 3. Applicability of Reverse Charge Mechanism on for the rent on immovable properties received by the board from Government and business entities. The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs. 5,000/ - each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that they have been constituted by the Government of Tamilnadu in the year 1972 by Tamilnadu Labour Welfare Fund Act 1972 (Act No.36 of 1972) enacted by the Legislature of the State of Tamil Nadu with a view to promote the welfare of the employees and their family/dependents with the Minister of Labour, Govt of Tamilnadu as the Chairman of the Board to administer the Tamilnadu Labour Welfa....
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....ail Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital media. The applicant consented and the hearing for admission of the application was held on 19.02.2021. The Authorized representatives Shri. M.Ravi, Financial Advisor and Chief Accounts Officer and CA Prasanna R, Chartered Accountant appeared for the hearing virtually and reiterated their written submissions. They claimed that they are local Authorities. They were asked to furnish documents/ submissions to establish themselves as a 'Local Authority', Rent receipts, rental agreements in respect of which the ruling is sought. They undertook to furnish the above details in a week's time. 3.2 In pursuant to the Virtual Personal Hearing held on19.02.2021, the applicants submitted additional submissions vide their Letter No. E2/29880/2020-1 dated 26.02.2021, wherein apart from their earlier submissions, they stated as follows: • The Statutory Labour Welfare Board was formed with effect from 1.4.1975 with the Minister In-charge of Labour as Chairman, five representatives of employees, five representatives of employers, three members of Stat....
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....bility of GST towards the rental income received by them from Government and business entities and Applicability of Reverse Charge Mechanism on for the rent on immovable properties received by them from Government and business entities • Since they are a Local authority as defined under section 2(69) of the CGST Act, 2017 GST on services provided by them by way of renting of commercial properties to business entities are to be paid by the recipient of services under reverse charge mechanism. • Since they are a Local authority as defined under section 2(69) of the CGST Act,2017 GST on services provided by the applicant by way of renting of immovable properties to Government and other local authorities are exempted from GST as per notification No. 12/2017-C.T.(Rate). • From the above, it is clearly evident that the GST obligation is not cast on the applicant neither on the rent collected from business entities nor from Government and Local authorities. • To substantiate their view that the applicant is a Local authority, they have referred to the definition of Local Authority' under Section 2(69) of the CGST Act 2017 and has sta....
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....luntary donations; (g) any amount raised by the Board from other sources to augment the resources of the Board; ................................. • Section 12 of TN labour welfare Act, 1972 states that The functions of the Board shall be the administration of the Fund and such other functions as may be assigned by or under this Act. • Section 17(2) of TN labour welfare Act, 1972 provides that: (2) Without prejudice to the generality of the provisions of sub-section (1), the moneys in the Fund may be utilised by the Board to defray expenditure on the following, namely: -- (a) community and social education centres; (b) vocational training; (c) community necessities; (d) entertainment and other forms of recreation; (e) convalescent homes for tuberculosis patients; (f) holidays home in health resorts; (g) part-time employment for housewives of employees; (h) pre-schools; (i) nutritious food to children of employees; (j) employment opportunities to the disabled employees or the widows of the deceased employees; (k) cost of administering this Act....
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....e prepared and maintained by the Accounts Officer of the Board in such form as may be prescribed by the Examiner of Local Fund Accounts, Madras, and audited by him once a year. The Secretary of the Board is responsible for the disposal of the audit note. • In view of the above, the fund of the applicant is local fund as mentioned in clause of 2(69) of the CGST Act, 2017 and the applicant is an 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; they can be classified as Municipal or local panchayat, hence the applicant is a Local authority as defined under section 2(69) of CGST Act,2017 The applicant had submitted the following documents: (i) Copy of the TN Welfare Fund Act 1972 and rules framed thereunder (ii) Scheme of Tamil Nadu Welfare Board, (iii) Sample Rental Agreements (iv) List of Tenants with address (v) Sample rental receipts (vi) Copy of the AAR filed by the applicant (vii) CGST Rate Notification No.12/2017, 13/2017 and 3/2018 4.1 The State Jurisdictional Officer, Assistant Commissioner(S....
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....g sought on the first question was dependent on the 2^nd and 3^rd question. Hence the applicability of GST towards the rental income received by them from Government and business entities and Applicability of Reverse Charge Mechanism on for the rent on immovable properties received by the board from Government and business entities are to be decided which would eventually answer the first question. Prima facie, the questions raised being applicability of GST on the supply of renting service and the applicability of the Notification providing for Reverse Charge Mechanism and whether the applicant has to get registered under the Act, the questions are admissible under Section 97 (2) read with 95(a) of the GST Act and hence are admitted. 7.1 From the Submissions, we find that the applicant is constituted by the Government of Tamilnadu in the year 1971 by an executive order of the Government (G.O.Ms No. 222 Labour Dept. dated 20.02.1971). The Tamilnadu Labour Welfare Fund Act 1972 was passed by the State and was given effect from 1.1.1973 and the statutory Board was formed effective 01.04.1975. The applicant has stated that as per the Tamilnadu Labour Welfare Fund Act 1972, and the ....
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....ipal or local fund." Hon'ble Supreme Court in the case of Union of India & ors Vs. R C Jain & Ors [1981 SCC (2) 308] has handed over the 'Tests for determining whether a body is a local authority' when the 'other authority' leg of the definition is said to cover such authority. In the said case, the Apex court has observed as follows: 'Local Fund' is again not defined in the General Clauses Act. Though the expression appears to have received treatment in the Fundamental Rules and the Treasury Code, we refrain from borrowing the meaning attributed to the expression in those rules as it is not a sound rule of interpretation to seek the meaning of words used in an Act, in the definition clause of other statutes. The definition of an expression in one Act must not be imported into another. "It would be a new terror in the construction of Acts of Parliament if we were required to limit a word to an unnatural sense because in some Act which is not incorporated or referred to such an interpretation is given to it for the purposes of that Act alone" (per Loreburn L.C. in Macbeth v. Chislett. For the same reason we refrain from borrowing upon the defi....
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.... or obtained by borrowing or otherwise. What is essential is that control or management of the fund must vest in the authority. In Municipal Corporation of Delhi v. Birla Cotton, Spinning & Weaving Mills Delhi & Anr., Hidayatullah, J., described some of the attributes of local bodies in this manner: "Local bodies are subordinate branches of governmental activity. They are democratic institutions managed by the representatives of the people. They function for public purposes and take away a part of the government affairs in local areas. They are political sub divisions and agencies which exercise a part of State functions. As they ale intended to carry on local self-government the power of taxation is a necessary adjunct to their other powers. They function under the supervision of the Government". Thus, from the above, it is evident that for an entity to be local authority the following are to be in affirmative: 1. The authorities must have separate legal existence as corporate bodies. 2. They must function in a defined area and must ordinarily, wholly or partly, directly or indirectly, be elected by the inhabitants of the area. 3. Th....
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.... the Government as stated in the Act and these are not functions and duties as are usually entrusted to municipal bodies. • Section 3 of the Act, provides for the constitution of the Fund and 3(2), lists the various items to be credited to the Fund, in which 3 (g)- provides 'any amount raised by the Board from other sources to augment the resources of the Board', under which the applicant claims that the rent receipts are accounted.- The applicant is not vested with any separate power to raise revenue by levying taxes, rates, charges, or fees. Thus, it is seen that the applicant do not satisfy the tests advocated by the Hon'ble Supreme Court, to be considered as 'Local Authority' under 'other authority' in the definition of 'Local Authority', though they claim that the 'Fund' managed by them is a 'Local Fund' as per the Treasury Rules. 7.4 In this connection, it is pertinent to note that, Apex Court in the case of Commissioner of Income Tax Lucknow Vs. U.P, Forest Corporation. The Apex Court, in this case while deciding whether U.P. Forest Corporation is a 'Local authority' as defined under the General C....
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....ability to pay when such properties are leased to Government and business entities i.e., • on the applicability of entry No. 8 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017, when leased to Government, i.e., whether exempted, and • entry No.7 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017 read with Notification No. 13/2017-C.T.(Rate) dated 28.06.2017 as amended by Notification No. 3/2018-C.T.(Rate) dated 25.01.2018 when rented to business entities, i.e. taxable but the liability to pay is on the service receiver. 8.2 The entry No. 8 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017 is as under: Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent) Condition 1 2 3 4 5 8 Chapter 99 Services provided by the Central Government, State Government, Union territory or local authority to another Central Government, State Government, Union territory or local authority: Provided that nothing contained in this entry shall apply to services- (i) By the Department of Posts by way of speed post, express parcel post, life insurance and age....