TaxTMI 
TaxTMI 
TaxTMI 
2023 (4) TMI 44
X X X X Extracts X X X X
X X X X Extracts X X X X
.... made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the DGST Act. BRIEF FACTS OF THE CASE 3.1 The Appellant is a Government of India enterprise and engaged in project management consultancy, real estate development and EPC contracts. They have has signed a memorandum of understanding on 25.10.2016 with Ministry of Housing and Urban Affairs (MoHUA), Government of India, wherein MoHUA has appointed the Appellant as the executing agency for redevelopment of colonies having "General Pool Residential Accommodation" (in short GPRA) and "Government Pool Office Accommodation" (in short GPOA) at Nauroji Nagar, Sarojini Nagar and Netajl Nagar in Delhi. Under this arrangement, the Appellant is required to organise construction of GPRA (i.e. dwelling units), GPOA (i.e. office spaces), commercial space and supporting infrastructure, such as local convenience shopping centre, banquet hall/ community centre, creche, schools, hospital/dispensary. ATM/Banks, parking facilities, parks and play grounds etc. at the specified locations in place of old existing buildings. The Appellant Is also required to maintain the co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s redeveloped by it for MoHUA. 3.5 The details of question on which advance ruling has been requested for are as under a) Whether the Appellant is liable to pay GST on sale of commercial super built up area on behalf of MoHUA, Government of India, by considering the Appellant also as the supplier of service while selling such commercial built-up space as an agent on behalf of the Government of India in the colonies under redevelopment. b) Whether the MoHUA, Government of India, is liable to pay GST on sale of commercial built-up space, and whether it relates to any function entrusted to a municipality under Article 243W of the Constitution. c) Whether the Appellant is liable to pay GST on sale of built-up space for which part of the consideration was received prior to 01.07.2017, and partly on or after 01.07.2017 d) Whether the Appellant is liable to pay GST on consideration received under an agreement to sell constructed units in a building which is under construction. 3.6 On the application of the appellant, the AAR vide Order No. 07/DAAR/2018 dated 05.10.2018, held that:- A. "The Appellant is covered in the definitions of "Agent" under Section 2(5), "Supplier" under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n", and sections 2(105), 22 and 24 of the CGST Act, provides that a supplier of goods or services is a taxable person. Hence, ordinarily, supplier of goods or services is liable to pay tax on the consideration received by him. However, DAAR has held that the appellant is acting as an agent of and, therefore, it is supplier of service as defined in section 2(105) of the CGST Act, Hence, the appellant is liable to pay GST on such capacity. Section 2(105) of the Act defines the expression "supplier" as the person supplying the said goods or services or both and shall include an agent of supplier. 4.3 The appellant submits that DAAR has not appreciated that all the agents of a supplier appointed for discharging various business functions, cannot be construed as "supplier" as defined under section 2(105) of the Act. The inclusive part of the definition covers only those agents of a supplier who are supplying the goods and services to the customers on its behalf. To appreciate the proper meaning of the expression "supplier", it is necessary to consider paragraph 3 of the Schedule 9 of the Act wherein supply of goods and service by a principal to his agent where the agent undertakes to s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lant cannot be held responsible for payment of GST on sale of commercial space as it cannot be construed as taxable person making any taxable supply to the persons who had booked the space/units in the buildings. The appellant is not liable to pay GST on the amount received from sale of built-up area, irrespective of taxability of the transactions with the bidders. If at all, the Government is the taxable person. 4.7 The appellant has also submitted that it is registered under Real Estate Regulation Act, 2016 as the promoter but it would not lead to a conclusion that the appellant is a supplier. It has taken registration under RERA being a representative of MoHUA. In fact, the appellant cannot be construed as promoter under RERA. 5.1 Appellant has submitted that GST was not applicable on sale of under-construction space by MoHUA, being exempted from payment of tax under the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, which provides for exemption from tax in respect of certain supplies. A similar exemption has been given for payment of Delhi GST. However, with effect from 27.07.2018, there is an amendment to Sr. No. 4 of Notification No. 14/2018-Centarl Tax (Rate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....commercial space to non-business entities are not taxable. DAAR has referred to Sl. No. 6 of this Notification and has stated that benefit of this is not applicable to services provided to business entities. 5.4. Sl. No. 5 of the Notification No. 13/2017-CT (R) mandates that on services supplied by the Central Government to a business entity, excluding certain activities that does not include sale of under-constructed units, the tax will be paid by business entity under the reverse charge mechanism. Therefore, a combined effect of SI. No. 6 of Notification No. 12/2017-CT (R) dated 26.07.2017 and Sl. No. 5 of Notification No. 13/2017-CT (R) dated 27.06.2017, in sale of under-constructed commercial space to a non-business entity is exempted from tax, and any such sale to a business entity would be subjected to reverse charge mechanism. Accordingly, the Central Government is not required to pay any tax, even if there is no exemption on activity in relation to a function entrusted to a municipality under Article 243W of the Constitution. 5.5 The appellant has cited the Delhi Municipal Corporation Act, 1957, to point out that construction of markets is a normal function of municipalit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... years at the rate prescribed in the scheme. The project was awarded to a real estate developer by the Municipality through competitive bidding. However, this was challenged by the appellants in the Bombay High Court. The High Court however, did not accept the grounds and the appellants moved the Supreme Court. The Supreme Court dismissed the appeals. 5.8 DAAR has also referred to an amendment in the notification no. 12/2017-Central Tax (Rate) w.e.f. 26.07.2018, which confines the exemption to governmental authorities only. The appellant submits this amendment is prospective and will not apply to them for their transactions taking place before this date. In VVF Ltd. v. Union of India 2017 (349) E.L.T. 20 (Guj.), the Hon'ble Gujarat High Court has held that it is by now well settled that the subordinate legislation or a delegated legislation can be made with prospective effect and cannot be made with retrospective effect. Hence, DAAR has wrongly relied upon the subsequent amendment in the exemption notification. 6.1 The appellant had explained to DAAR that some built-up space has already been sold through e-action on 30.05.2017 and, instalment of sale price has been received p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unt received after 01.07.2017 cannot be considered as consideration attributable to any supply taking place after 01.07.2017. It is a cardinal principle of the law that a single supply cannot be vivisected to tax two segments differently. Further, there is no mechanism under the law to segregate the composite transaction and derive the value of supply made after 01.07.2017 in a case, where supply commenced prior to 01.07.2017. Section 13 of the Act cannot be construed as a mechanism to split a composite contract, This section merely provides that the liability to pay tax on a service shall arise at the time of supply as determinable under this section. This section does not prescribe levy of tax on the supply made prior to 01.07.2017. 7.1 DAAR has wrongly rejected the appellant's submission that no GST is payable on consideration received under an agreement to sell constructed units in a building which is under construction on the basis of the Department's FAQ. DAAR failed to notice that the FAQ has lost its significance after the retrospective amendment in section 7 of the Act. 7.2 From a bare reading of the aforesaid provisions, it can be appreciated that DAAR is wrong ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... India. He was requested to provide the following documents: 1. Copy of agreement/entered into with Ministry of Housing & Urban Development. 2. Whether Sale proceeds linked to sale price of commercial space or there is a mark-up. 3. Whether the sale proceeds accrued from sale of Commercial space get credited to Consolidated Fund of India. 9.4 Appellant vide their letter dated 03.03.2021 submitted a copy of MOU entered into with Ministry of Housing and Urban Affairs (MoHUA), Government of India. It was also submitted that (i) Sale proceeds are based on sale price fixed by e-auction and reserve sale price decided by the Cabinet. There is no mark-up in sale proceeds (ii) the sale Proceeds are credited/deposited in Escrow account of Ministry of Housing and Urban Affairs directly by customers. The escrow account is a public account under Article 266 (2) of the constitution of India. The Escrow Account is managed/operated by MoHUA, Government of India 9.5 The matter was posted again for Personal Hearing on 30.11.2022. Shri P. K. Sahu, Advocate submitted his submission vide e-mail dated 29.11.2022 and appeared for Personal Hearing on 30.11.2022 before the new member of the Appella....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t such exemption was applicable prior to this date is incorrect. 5. Even otherwise, the Central Government is not liable to pay GST as Notification No. 13/2017-CT (R) dated 27.06.2017 which requires GST to be paid under reverse charge mechanism (RCM) for any taxable service rendered by the Central Government. DISCUSSION AND FINDINGS 10. We have carefully gone through the records of the case and taken into consideration the submissions made by the Appellant in their grounds of appeal and at the time of the personal hearing. We have also carefully gone through the additional submissions given by the Appellant. 11.1 The first issue raised by the appellant is regarding liability to pay GST on the sale of commercial super built up area on behalf of MoHUA, Government of India. It is contended that MoHUA itself is selling the constructed units. Therefore, the appellant cannot be considered as their agent while selling these constructed units. As per appellant, the Delhi Authority for Advance Ruling (DAAR) has wrongly construed that the appellant is a supplier of the service being an agent of MoHUA. 11.2 We find that it was held by Authority for Advance Ruling that the appellant are ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hich shall be managed by Capital Management Committee constituted by MoHUA. Capital Management Committee shall review the status of the escrow account on a yearly basis, determine the amount, accrued in excess of 20% of the total cost of the said redevelopment work which is required to be deposited in the Consolidated Fund of India. MoHUA will be responsible for allotment/handing over of commercial space to the allottees/shopkeepers/schools after completion of the project. L&DO shall be responsible for relocation and rehabilitation of JJ clusters, if any. In terms of the MOU, the appellant has announced sale of commercial super built-up area on behalf of MoHUA through e-auction on MSTC website on 30.05.2017 and 05.12.2017. In the e-auction details given on MSTC website, inviting bid for sale of proposed built-up area in the buildings to be constructed by the appellant as part of re-development work, it is mentioned that the appellant is selling the proposed built-up area on behalf of MoHUA. The terms and conditions of such sale provide that Government of India through a nominated officer will sign the agreement to sell and the sale deed with the successful bidder. The appellant had....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the MoU dated 25.10.2016 signed between the appellant and MoHUA that the Capital Management Committee shall review the status of Escrow Account on yearly basis, and determine the amount, accrued in excess of 20% above the total cost approved by the Cabinet for redevelopment of all the seven GPRA colonies, to be deposited in Consolidated Fund of India (CFI). The appellant shall be paid Project Management Charges (PMC) @ 8% of the approved/ estimated cost or actual cost, whichever is less for redevelopment of areas by them. They are also being paid agency charges and interest @ 12% per annum on cost of capital investment. In addition, 1% of the sale proceeds shall be payable to the appellant on account of expenditure towards appointment of real estate consultant, publicity, e-auction etc., of commercial and residential areas 11.6 From the above it is clear that supplier means any person supplying the goods or services or both and it also includes an agent. The definition of agent includes a commission agent, broker etc. acting as such on behalf of supplier in relation to the goods or services or both. Combined reading of the definitions of both the supplier and the agent as given ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of exemption from payment of GST under S. No. 4 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 as amended vide Notification No. 14/2018-Central Tax (Rate) dated 26.07.2018 is that the service provider should be "governmental authority". However, the said notification does not define the expression "governmental authority". The same has been defined in Explanation to Clause (16) of Section 2 of the IGST Act, 2017 as under: Explanation.-For the purposes of this clause, the expression "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 any Government, with ninety 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; From the above explanation it is clear that to be considered as "governmental authority" an entity must have been set up or established specifically to carry out the functions which are entrusted to a municipality under article 243W of the Constitution. The list of functions envisaged under Twelfth Schedule [Article 243W of the Constitutio....