TaxTMI 
TaxTMI 
2022 (9) TMI 603
X X X X Extracts X X X X
X X X X Extracts X X X X
....ks contracts services in relation to sewage treatment plant made by the Applicant to Uttar Pradesh Jal Nigam, on or after 1^st Jan 2022? 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) It is a Company incorporated and registered under the Companies Act, 1956, and is a leader in water resource management (2) Uttar Pradesh Jal Nigam ("UP Jal Nigam/UPJN") is a body corporate formed by the State legislature under the Uttar Pradesh Water Supply and Sewerage Act, 1975. The U.P. Jal Nigam is the apex body responsible for formulation, execution, promotion, financing, fixing tariffs etc., for implementation of water supply, sewerage, sewage treatment and disposal, river pollution abatement projects etc., including fixing State Standards for water supply and sewerage services. (3) UPJN invited bids for "Design, Construction, Supply, Installation, Testing & Commissioning and Trial run of Tertiary Sewage Treatment Plant, laying....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... or a local authority". Description of Service Rate (percent) "(iii) Composite supply of works contract as defined in clause (119) of 6 section 2 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 (10) 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 autho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ality under article 243 W of the Constitution or to a Panchayat under article 243 G of the Constitution." (iii) It is relevant to note that under the erstwhile service tax regime, services to governmental authority were exempt under the Mega Exemption Notification No. 25/2012-ST dated June 20, 2012. The definition of "Governmental Authority" as provided under clause (s) of Para 2 of the said Mega Exemption Notification read as follows: "Governmental Authority" means an authority or a board or any other body; (i) set up by an Act of Parliament or a State Legislature; or (ii) established by Government, with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution." (4) That as can be seen, the word "Governmental Authority" was worded similar to the meaning connoted to the term vide Notification No. 31/2017-Central Tax (Rate) dated October 13, 2017. Given this, reference may be made to the Education Guide issued under the erstwhile regime, the relevant paragraph of which is as follows: "2.4.9 Are all local bodies constituted by a State or Cen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....read with Twelfth Schedule of the Constitution of India, water supply for domestic, industrial and commercial purposes and public health, sanitation conservancy and solid waste management is a function of municipality. (10) In view of the above, the requirement that the authority must be established to carry out any function entrusted to a Municipality under article 243 W of the Constitution has also been fulfilled in the present case. (11) Reliance in this regard is also placed on the Advance Ruling passed in the case of In Re. Indian Hume Pipe Company Ltd. 2020 (35) G.S. T.L. 217 (A.A.R. - GST - T.N.) wherein Tamil Nadu Water Supply and Drainage Board, a body similar to UPJN, was held to be governmental authority for the purpose of GST Laws. (12) Further, in In Re. Sewerage & Infrastructural Dev. Corporation of Goa Ltd. 2019 (31) GSTL 116 (A.A.R. - GST), the Advance Ruling Authority held that the applicant incorporated under Companies Act, 1956 with 100% participation by way of equity by the State Government and responsible for overall management of all components of project on technical, financial and contractual matters during implementation of sewera....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l committee, district board, body of port commissioners or other authority legally entitled to, or entrusted by the Government with, the control or management of any municipal or local fund; ... (16) That as can be seen from the above, the term local authority has been similarly worded in all statutes inter alia to mean any other authority legally entitled to or entrusted by the Central or any State Government with the control and management of any municipal or local fund. Thus, the case-laws relating to the said laws can be gainfully relied upon to determine the scope of "any other authority" via-a-vis local authority. (17) The Apex Court in the landmark decision of Union of India v. R.C. Jain, (1981) 2 SCC 308 while deciding whether the Delhi Development Authority is a "local authority" or not, explained the scope of the term local authority under the General Clauses Act as follows: "2. Let us, therefore, concentrate and confine our attention and enquiry to the definition of "local authority" in Section 3(31) of the General Clauses Act. A proper and careful scrutiny of the language of Section 3(31) suggests that an authority, in order to be a local auth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Act, 1897 as follows; "local authority" shall 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.." The definitions given in the General Clauses Act, 1897 govern all Central Acts and Regulations made after the commencement of the Act, No doubt, this Act, was enacted later in point of time than the Land Acquisition Act; but this Act was a consolidating and amending Act and a definition given therein of the expression "local authority" is the same as that contained in the earlier Acts of 1868 and 1887. The definition given in Section 3(31) will therefore, hold good for the expression "local authority" occurring in the Land Acquisition Act. We have already quoted the definition. 12. It will be clear from the definition that unless it is shown that the State Transport Corporation is an "authority" and is legally entitled to or entrusted by the Government with control or management of a local fund it cannot be regarded as a local authority. No material has been placed before us from which it could be deduced th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be a separate corporate body. UPJN is a body corporate formed by the State legislature under S. 3 of the UPWSS Act. Thus, the first condition that the authority must be a separate corporate body having a legal existence stands fulfilled in the present case. (22) That as per S. 1 (2) of the UPWSS Act, the Act extends to the whole of Uttar Pradesh excluding cantonment area. Thus, UPJN, being a statutory body under the Act, can function only within the State of U.P. (23) However, UPJN is not elected by the inhabitants of the area but is established by the State. As per S. 4 of the UPWSS Act, the UPJN shall consist of Chairman appointed by the State Government and other members specified therein. Thus, the second condition is not met in the present case. (24) The third requirement to qualify as a local authority is that the said authority must have some autonomy. In RC Jain (supra), the Apex Court held that the authority 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, there mu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... furtherance of their activities and the fulfilment of their projects by levying taxes, rates, charges, or fees. (29) As per section 52 of the UPWSS Act, Jal Sansthan, a body corporate constituted under the said Act, and guided by the policy of UPJN, has the power to levy water tax and sewerage tax. Further, the Sansthan, as per S. 63, may charge such fees, for connection, disconnection, reconnection of any water supply or sewer or testing or supervision or for any other service rendered or work executed or supervised as may be provided by bye-laws. (30) Further, as per S. 40, UPJN shall have its own fund 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 UPJN. Further, UPJN shall also have another fund to be called the Local Fund, which shall also be deemed to be a local fund and to which shall be credited all moneys received by or on behalf of the UPJN by way of loans. (31) Therefore, the requirement that the authority must have the power to raise funds for the furtherance of their activities and the fulfilment of their projects by lev....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2021. (38) Thus, persons / entities claiming 12% GST rate as Governmental Authorities prior to the amendment cannot claim the same post the amendment vide Notification No. 15/2021-Central Tax (Rate) dated November 18, 2021. (39) In view of the above, the Applicant humbly submits that the Applicant is liable to discharge tax at the rate of 18% on the works contract service provided to UPJN. 7. The application for advance ruling was forwarded to the Jurisdictional GST Officer to offer his comments/views/verification report on the matter. The Assistant Commissioner, CGST & Central Excise Division III, Kanpur vide his letter C.No. 37/DGARM Data/R-XV/D- III/2019/21 dated 19.05.2022 submitted that UPJN qualifies as a governmental authority and thus, tax rate of 18% is applicable on the works contract services provided to UPJN by way of Entry 3(xii) of Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017. 8. The opportunity of personal hearing was granted on 27.06.2022 which was attended by Ms. Ms. Priyanka Rathi, Advocate and Ms. Ashwini Chandrasekaran, Advocate. During personal hearing, the applicant reiterated the submissions made in the applicat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... matters connected therewith. (ii) The Section 3(3) of the UPWSS Act provides that the assessee corporation shall for all purposes be deemed to be a local authority and Section 4 of the UPWSS Act relates to its constitution, according to which it shall consist of a Chairman, to be appointed by the State Government. It also provides that the Members other than the Chairman shall be a Managing Director, a Finance Director, both to be appointed by the Government, and the Secretary to the State Government in the Finance Department (Ex-officio), Secretary to the State Government in the Local Self Government Department (Ex-officio), the Director of Local Bodies, Uttar Pradesh (Ex-officio), the Director of Medical and Health Services U.P. (Ex-officio) and three elected Heads of Local Bodies in the State, to be nominated by the State Government. (iii) Section 40(1) of the UPWSS Act provides that the corporation shall have its own fund 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 co....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... explained the scope of the term local authority under the General Clauses Act as follows- Let us, therefore, concentrate and confine our attention and enquiry to the definition of 'Local Authority' in Sec.3(3) of the General Clauses Act. A proper and careful scrutiny of the language of Sec.3(31) suggests that an authority in order to be a. local Authority, must be of like nature and character as a Municipal Committee, District Board or Body of Port Commissioners, possessing, therefore, many, if not all, of the distinctive attributes and characteristics of a Municipal Committee, District Board, or Body of Port Commissioners, but, possessing one essential feature, namely, that it is legally entitled to or entrusted by the Government with, the control and management of a municipal or local fund. What then are the distinctive attributes and characteristics, all or many of which a Municipal Committee, 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 functio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ects by levying taxes, rates, charges, or fees. (6) Essentially, control or management of the funds must vest in such authority. 19. The UPJN is not satisfying some of the above conditions for qualifying as 'local authority' as discussed below- 19.1 The Apex court in the RC Jain case (supra) has held that that the authority should be elected by the inhabitants of the area. As per Section 4 of the UPWSS Act, the UPJN shall consist of Chairman and members appointed by the state government. As such, the UPJN is not elected by the inhabitants of the area but the same is established by the state. Therefore, the said is not satisfied in the case of UPJN. 19.2 The Apex court in the RC Jain case (supra) has held that that the authority 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. Perusal of the UPWSS Act reveals that the UPJN is not enjoying appreciable nature of autonomy as discussed below- (1) As per Section 4(1) of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the State Legislature, and b) cause the accounts of the Nigam to be published in such manner as it thinks fit. (7) 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. (8) 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 during the previous financial year and the State Govt. shall cause every such report to be laid before the State Legislature. Above provisions are clear indicators to the fact that UPJN does not enjoy autonomy of work and has little freedom to decide for themselves questions of policy affecting the area administered by them. 19.3 The Apex court in the RC Jain case (supra) has held that the main requirement to qualify as a local authority is that the authority must be legally entitled to or entrusted by the Government with, the control and management of a Municipal or local fund. In case of UPJN, there is no local fund entrusted by the Government with UPJN. A perusal of the UPWSS Act would reveal that no municipal or local fund has been entrusted by the Government. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 have 'local fund' which shall be spent for providing civic amenities and also shall have right to generate fund by imposing taxes within the statutory jurisdiction, managed by elected body. Merely because a corporation has local fund, does not mean that it shall be the "local authority" as contemplated under Section 3 (31) of the General Clauses Act. At the cost of repetition, it may be mentioned that in the instant case, the assessee has three wings namely; (i) Jal Nigam Wing; (ii) Nalkoop Wing; and (iii) Construction & Des....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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, - (iv) set up by an Act of Parliament or a State Legislature; or (v) 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 243 W of the Constitution or to a Panchayat under article 243 G of the Constitution." (vi) 25. Thus, in order to qualify as a governmental authority, such authority must be set up by an act of Parliament/State Legislature, should have 90% or more stake of government, and should carry out any function entrusted to a Municipality under article 243 W of the Constitution of India. 26. As already discussed, the UPJN is a body corporate formed by the State legislature under UPWSS Act enacted by the UP State Legislature. As such, the first requirement of a governmental authority stands fulfilled in the present case. Further, as per Section 3 of the UPWSS Act, UPJN is a body corporate established by the Government of U.P., as such, the second re....