AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 416
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....rtue of item (vi) of serial number 3 of the Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 by considering the Construction & Design Services Division of the Uttar Pradesh Jal Nigam as a "Local Authority" or the same will be subject to GST at the rate of 18% (9% CGST + 9% SGST) under item (xii) of serial number 3 of the Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 by considering the Construction & Design Services Division of the Uttar Pradesh Jal Nigam as a "Governmental Authority"? 4. As per the declaration given by the applicant in Form ARA-01, the issue raised by the applicant is neither pending in any proceedings nor decided in any proceedings in the applicant's case under any of the provisions of the CGST Act, 2017/UPGST Act, 2017. 5. The applicant has submitted that- (1) The applicant is predominantly engaged in the business of providing works contract services to the Construction & Design Services Division of the Uttar Pradesh Jal Nigam (hereinafter referred to as "the C&DS division of the U.P. Jal Nigam"). (2) U.P. Jal Nigam has been established under the Uttar Pradesh Water Supply and Sewerage Act, 1975 (hereinaf....
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....powers conferred by clause (xiv) of section 14 of the said Act and has authorised the C&DS division of the U.P. Jal Nigam to carry out any construction or related activity whether or not bearing a direct nexus to the water supply and sewerage treatment. (7) Until 31.12.2021, by virtue of item (vi) of serial no. 3 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 as amended, the GST rate of 12% (CGST 6% + SGST 6%) was applicable on the works contract services provided to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession or a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment. (8) By virtue of Notification No. 22/2021 - Central Tax (Rate) dated 31.12.2021, items (iii), (vi), (vii), (ix) and (x) against serial number 3 of the Notif....
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.... U.P. Jal Nigam including its C&DS division. (11) Notwithstanding the fact that, being an integral unit of the U.P. Jal Nigam, the C&DS division has been registered under the provisions of the Income Tax Act, 1961 under one PAN as a "Local Authority", the commercial nature of the C&DS division of the U.P. Jal Nigam carrying out activities as an independent contractor undertaking projects of tremendous magnitudes in areas outside the State of Uttar Pradesh and not having any direct nexus to the water supply and sewerage treatment as was envisioned by the parent statute has fuelled a conundrum as to whether the C&DS division of the U.P. Jal Nigam can be considered a "Local Authority" at all. The nature of activities and the scope of the operations of the C&DS division of the U.P. Jal Nigam ostensibly stretch beyond the confines of the responsibilities which are ordinarily entrusted to a local authority. (12) The provisions of the Uttar Pradesh Water Supply and Sewerage Treatment Act, 1975 apply only to the extent of the actions taken or omitted to be taken which are subservient to the principal objectives of the said Act viz, to provide for the development and regul....
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....has further submitted as under:- (1) Clause (119) of section 2 of the CGST Act defines the term "works contract" as under. (119) "works contract" means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract,. (2) On a perusal of the Letter of Acceptance ("LOA"), it can be observed that since the applicant has entered into a contract for the construction of various structures which constitute an immovable property and the said contract involves application of goods for the construction of the immovable property resulting into transfer of property in goods, the activity of the applicant qualifies to be a "works contract services" within the meaning of clause (119) of section 2 of the CGST Act. (3) On perusal of the LOA, it can be deduced that the immovable property so constructed is intended to be used for non-commercial purposes. Accordingly, the works contract servic....
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....te Legislature; or (ii) established by any Government, with 90 per cent or more participation by way of equity or control, to carry out any function entrusted to a Municipality under article 243W of the Constitution or to a Panchayat under article 243G of the Constitution. (x) "Government Entity" means an authority or a board or any other body including a society, trust, corporation, (i) set up by an Act of Parliament or State Legislature; or (ii) established by any Government, with 90 per cent or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Territory or a local authority. (8) U.P. Jal Nigam appears to qualify as a "Local Authority" by virtue of sub-clause (c) of clause (69) of section 2 of the CGST Act since, as can be found on a perusal of the Uttar Pradesh Water Supply and Sewerage Act, 1975, U.P. Jal Nigam has been entrusted by the Government of Uttar Pradesh with the management of local fund which shall be called the Nigam Fund by virtue of section 40 of the Uttar Pradesh Water Supply and Sewerage Act, 1975 and the same shall be....
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....nd drainage on the directions of the State Government; (iv) to review and advise on the tariff, taxes and charges of water supply in the areas of Jal Sansthans and local bodies which have entered into an agreement with the Nigam under Section 46; (v) to assess the requirement for materials and arrange for their procurement and utilisation; (vi) to establish State standards for water supply and sewerage services; (vii) to perform all functions, not stated herein which were being performed by the Local Self-Government Engineering Department before the commencement of this Act; (viii) to review annually the technical, financial, economic and other aspects of water supply and sewerage system of every Jal Sansthan or local bodies which have entered into an agreement with the Nigam under Section 46; (ix) to establish and maintain a facility to review and appraise the technical, financial, economic and other pertinent aspect of every water supply and sewerage scheme in the State; (x) to operate, run and maintain any waterworks and sewerage system, if and when directed by the State Government, on such terms and conditions and f....
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....as defined in section 3 of the Cantonments Act, 1924 (2 of 1924); (11) A perusal of the definition of the expression "Local Authority" in the above provision of the Income Tax Act, 1961 reveals that precisely the same definition has been borrowed in the provisions of the CGST Act. Clauses (i) to (iv) in the Explanation to clause (20) of section 10 of the Income Tax Act, 1961 have been echoed by clauses (a) to (d) of the clause (69) of section 2 of the CGST Act in the same order. The ambit of the expression "Local Authority" has been enlarged under the provisions of CGST Act by appending clauses (e) to (g) so as to cover "Regional Council", "District Council" and "Development Board" within the meaning of the term "Local Authority". (12) Even though all the divisions of the U.P. Jal Nigam have been registered under the Income Tax Act, 1961 as a "Local Authority", the ambiguity in the said status exists more particularly for the C&DS division emanating from the fact that the C&DS division of the U.P. Jal Nigam has been granted unbridled authority to carry out any type of construction activity not merely within the jurisdiction of the U.P. Jal Nigam but also beyond, i....
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....9. At the outset, we would like to make it clear that the provisions of both the CGST Act and the UPGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the UPGST Act. Further for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / UPGST Act would be mentioned as being under the `CGST Act'. 10. We have gone through the submissions made by the applicant and have examined the explanation submitted by them. The applicant has ticked following issues in column no. 13 of Form GST ARA-01- (1) Classification of any goods or services or both (2) Applicability of a notification issued under the provisions of this Act. We find that the issue raised in the application is squarely covered under Section 97(2) of the CGST Act 2017. We therefore, admit the application for consideration on merits. 11. We observe that the question sought by the applicant is as under- `With effect from 01.01.2022, whether the works contract services provided by way of cons....
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....d to be called the Nigam Fund which shall be deemed to be a local fund and to which shall be credited all moneys received otherwise than by way of loans by or on behalf of the corporation. 13. The applicant has submitted that the UPJN is covered in the definition of 'local authority' as well as 'Governmental Authority'. We find that for answering the question raised by the applicant, it is necessary to examine as to whether Construction & Design Services Division of the Uttar Pradesh Jal Nigam is 'local authority' or 'governmental authority'. 14. The term local authority is defined in S. 2(69) of the CGST Act as follows: (69) "local authority" means- (a) a "Panchayat" as defined in clause (d) of article 243 of the Constitution; (b) a "Municipality" as defined in clause (e) of article 243? 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....
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....ommittee, District Board or Body of Port Commissioners shares with any other local authority? First, the authorities must have separate legal existence as Corporate bodies. They must not be mere Governmental agencies but must be legally independent entities. Next, they must function in a defined area and must ordinarily, wholly or partly, directly or indirectly, be elected by the inhabitants of the area. Next, they must enjoy a certain degree of autonomy, with freedom to decide for themselves questions of policy affecting the area administered by them. The autonomy may not be complete and the degree of the dependence may vary considerably but, an appreciable measure of autonomy there must be. Next, they must be entrusted by Statute with such Governmental functions and duties as are usually entrusted to municipal bodies, such as those connected with providing amenities to the inhabitants of the locality, like health and education services, water and sewerage, town planning and development, roads, markets, transportation, social welfare services etc. etc. Broadly we may say that they may be entrusted with the performance of civic duties and functions which would otherwise be Governme....
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....ay not be complete and the degree of the dependence may vary considerably but, an appreciable measure of autonomy there must be. Perusal of the UPWSS Act reveals that the UPJN is not enjoying appreciable nature of autonomy as discussed below- (1) As per Section 6(3) of the UPWSS Act, the Chairman shall hold office on such terms and conditions as the State Government may, by order, specify. (2) As per Section 14 of the UPWSS Act, the UPJN is entrusted o prepare State plans for water supply, sewerage and drainage on the directions of the state government. (3) As per Section 50 of the UPWSS Act, the UPJN is obliged to submit a statement of programme of its activities to the state Govt. before the commencement of financial year and may at any time during financial year. Further, the accounts of UPJN shall be audited by such auditor as the State Govt. may direct. (4) As per Section 89 of the UPWSS Act, the UPJN shall be guided by such directions on questions of policy as may be given to it by the State Govt. (5) As per Section 90 of the UPWSS Act, the UPJN shall submit to the State Govt. an annual report giving an account of its activities du....
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....Supreme Court in the cases of Valjibhai Muljibhai Soneji (supra), R.C. Jain (supra), Commissioner of Income Tax. Vs. U.P. Forest Corporation (supra), Agricultural Produce Market Committee, Narela, Delhi (supra), read with Part IX and IXA of the Constitution and Section 3 (31) of General Clauses Act, the U.P. Jal Nigam does not seem to be the 'local authority' under Section 10 (20) of the Income Tax Act, 1961 even prior to Finance Act, 2002. The word, "local authority" has been defined in the Section 3 (31) of the General Clauses Act, 1897, an old Central Act, which has been interpreted by the Hon'ble Supreme court by catena of judgments (supra). Order dated 22.09.2011 delivered by Hon'ble Justice Satish Chandra Further, Hon'ble Apex Court held that the U.P. Forest Corporation is not an authority, though, under section 3(3) of the U.P. Forest Corporation Act, 1974 it is provided that for all purposes, it shall be the 'local authority'. Hence, on the similar analogy, provisions of Section 3 (3) of U.P. Act no. 1975 is of no use to the assessee. Thus, to hold statutory body as an "authority", it shall be necessary that the authority must h....
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....rt. 22. Further, the relevant clarification contained in Service Tax Educational Guide published in erstwhile tax regime is reproduced below- "2.4.9 Are all local bodies constituted by a State or Central Law local authorities? No. The definition of 'local authority' is very specific as explained in point no 2.4.8 above and only those bodies which fall in the definition comprise 'local authorities '. It would not include other bodies which are merely described as a local body by virtue of a local law. 23. Thus, we are of the view that the UPJN and also its branch 'Construction & Design Service' is not a 'local authority'. 24. Now we proceed to examine as to whether the UPJN is 'Governmental Authority'. It is relevant to note that the term "Governmental Authority" is not defined in the CGST Act. However, Notification No. 31/2017-Central Tax (Rate) dated October 13, 2017, which amended the Notification No 11/2017 - Central Tax (Rate) dated June 28, 2017, defined Governmental Authority as follows: "ix. Governmental Authority" means an authority or a board or any other body, - (i) set up by an Act of Pa....
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.... of the Central Goods and Services Tax Act, 2017, supplied to the Central Government, State Government, Union territory or a local authority, by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of - (a) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958); (b) canal, dam or other irrigation works; (c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal. 6 28. As such, by way of Notification No. 15/2021-Central Tax (Rate) dated November 18, 2021, the lower rate of tax of 12% provided by Entry 3(iii) of Notification No.11/2017- Central Tax (Rate) dated June 28, 2017, was restricted to works contract supplied to Central Government, State Government, Union territory and a local authority only. As the UPJN does not qualify as a 'local authority' and it qualifies as a governmental authority, tax rate of 18% is applicable on the works contract services provid....