TaxTMI 
TaxTMI 
2022 (9) TMI 603
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt made by the Applicant to Uttar Pradesh Jal Nigam, on or after 1st 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 of Pipe Line & other allied works for Treated Waste Water Reuse at ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 authority only. (11) As per the Applicant, UPJN qualifies as a governmental authority and thus, tax rate of 18% is applicable on the wor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ces 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 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rity 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 sewerage projects is a governmental authority. (13) 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 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment 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 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 munic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 that the funds of the Corporation can be regarded as local funds. It was no doubt submitted by the learned Attorney-General that the Corporation was furnished with funds by the Government for commencing for its business; but even if that were so, it is difficult to appreciate how that would make the funds of the Corporation local funds." (19) In State Bank of India Staff Association, Local Head Office Unit, Patna v. Election Commission of India, 1993 SCC OnLine P....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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 must be an appreciable measure of autonomy. (25) In case of UPJN, a perusal of various provisions of the UPWSS Act clearly reveal that UPJN does not have autonomy in its functions- (i) That the Chairman is appointed by the State Government under Section 3 of the Act and shall hold office on such terms and conditions as the State Government may, by order, specify. He can also be suspended by the State Government under Section 6 of the Act. (ii) As per S. 14 of the UPWSS Act, UPJN is trusted with the function to operate, run and maintain any waterworks and sewerage s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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 levying taxes, rates, charges, or fees, has been fulfilled in the present case. (32) The last and the main requirement to qualify as a local authority is that such an authority must be legally entitled to or entrusted by the Government with, the control and management of a Municipal or local fund. (33) In case of UPJN, there is no local fund entrusted by the Government with UPJN. That a perusal of the UPWSS Act would reveal that no municipal or local fund has been entrusted by the Government. The fund of UPJN is its own fund and cannot be equated with a fund entrusted by the Government. Thus, the important requirement in order to qualify as a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubmitted 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 application of advance ruling and cited the case law of Hon'ble High Court Allahabad in Income Tax Appeal No. 128/2008 which has upheld that the UP Jal Nigam is not a local authority. DISCUSSION AND FINDING 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.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 covered in the definition of '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 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 managemen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es 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 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 ci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tonomy 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 UPWSS Act, the Chairman shall be appointed by the State Government. (2) As per Section 6(3) of the UPWSS Act, the Managing Director and finance director shall hold office on such terms and conditions as the State Government may, by order, specify. (3) As per Section 14 of the UPWSS Act, the UPJN is entrusted (i) to prepare State plans for water supply, sewerage and drainage on the directions of the state government. (ii) to operate, run and maintain any waterworks and sewerage system, if and when directed by the State Government, on such terms and conditions and for such periods as may be specified by the State Government; (iii) such other functions as may be entrusted to the Nigam by the State Government by notification in the Gazette. (4) As per section 46(2) of the UPWSS Act, the UPJN may, from time to time, with the previous sanction of the State Government and subject to the provisions ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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. The fund of UPJN is its own fund and cannot be equated with a fund entrusted by the Government. Thus, the important requirement in order to qualify as a local authority, viz. control and management of a municipal/local fund is absent in the present case. 20. Further, the Hon'ble High Court, Allahabad (Lucknow Bench) in the Income Tax Appeal No. 128/2008 has held that UP Jal Nigam is not a 'local authority. While passing the order, the Hon'ble High Court has discussed various case laws including RC Jain case (supra). The relevant portion of the order is reproduced below- Order dated 22.09.2011 delivered by Hon'ble Justice Devi Prasad Singh 43. 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 fu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t case, the assessee has three wings namely; (i) Jal Nigam Wing; (ii) Nalkoop Wing; and (iii) Construction & Design Wing. In the case of R. C. Jain; AIR 1981 (SC) 951, it was observed that the "local authority" 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. Broadly, it may say that they may be entrusted with the performance of civic duties and functions which would otherwise be governmental duties and function. Finally, they must have the power to raise funds for the furtherance of their activities and the fulfillment of their projects by levying taxes, rates, charges, or fees. This may be in addition to money provided by Government or obtained by borrowing or otherwise. What is essential is that control or management of the fund must vest in the authority. 21. Although, the aforesaid order in Income Tax Appeal No. 128/2008 denying UP Jal Nigam the status of local auth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hed by the Government of U.P., as such, the second requirement of governmental authority has also been fulfilled in the present case. Moreover, the UPJN is constituted for the development and regulation of water supply and sewerage services in the State of U.P. Under the Section 14 of UPWSS Act, UPJN is inter alia entrusted with the function to operate, run, and maintain any waterworks and sewerage system. As per Article 243W 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. 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. Thus, the UPJN is a governmental authority in our view. 27. The Notification No.11/2017- Central Tax (Rate) dated June 28, 2017 was amended vide Notification No. 15/2021-Central Tax (Rate) dated November 18, 2021, wherein, in Entry 3 (iii), the words "Union territory, a local authority, a Governmental Authority or a Government Entit....