TaxTMI 
TaxTMI 
2023 (12) TMI 821
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....t') read with Section 100 of the Rajasthan Goods and Services Tax Act, 2017 (hereinafter also referred to as 'the RGST Act') by M/s Lakhlan & Qureshi Construction Co., Purani Chungi, Ajmer Road, Jaipur-Rajasthan-302021(hereinafter also referred to as the 'appellant') against the Advance Ruling No. RAJ/AAR/2021-22/31 dated 15.12.2021 BRIEF FACTS OF THE CASE 3. M/s Lakhlan & Qureshi Construction Co. (GSTIN - 08AAAFL9525H1Z7) have filed an appeal (on the portal) on 30.03.2022 against the Ruling issued by the Authority for Advance Ruling, Rajasthan vide Advance Ruling No. RAJ/AAR/2021-22/31 dated 15.12.20211. The requisite fee of CGST Rs. 10000/- and SGST Rs. 10000/-has been paid vide Challan dated 12.01.2022. The appellant in GST ARA-02 mentioned that this appeal has been filed within limitation period in pursuance to Hon'ble Supreme Court Judgment dated 10.01.2022 in Suo Motu Writ Petition (C) No. 3 of 2020. 3.1. The appellant are a partnership firm and a civil contractor engaged in construction of roads, buildings, civil structures or various other civil works as awarded from various Governmental and non-Governmental organizations. 3.2. As per the appellant, M/s Jaipur S....
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....es paid by them to JNN on behalf of M/s JSCL in relation to such contract. The activity of granting of permission for road cutting is not covered under the list of works mentioned under Article 243 W of the Constitution as entrusted to a Municipality. Thus, clause (b) of sub-section (2) of Section 7 of CGST Act, 2017 read with Notification No. 14/2017-Central Tax ( Rate) dated 28.06.2017 as amended by Notification No. 16/2018 - Central Tax (Rate) dated 26.07.2018 is not applicable for services provided by JNN to appellant. 3.4.5. Recovery of such road cutting charges by the Appellant from M/S JSCL is liable to GST at the rate 18% (i.e., 9% CGST and 9% SGST). As per clause (c) of sub-section (2) of Section 15 of CGST Act, 2017, any incidental expenses charged by the supplier to the recipient shall be included in the value of supply. Only exclusion to that is reimbursement of expenses done by the service provider in the capacity of pure agent. In the present case, the appellant does not satisfy the conditions for qualifying as a pure agent and therefore the recovery of road cutting charges from M/s JSCL shall be included in transaction value and liable to GST. 4. Aggrieve....
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....p of Government or control of Government is above 90%. Hon'ble Supreme Court in the case of Star Co. Ltd. v. CIT (1970) 3 SCC 864 has held that Positive conditions separated by "or" are to be read in the alternative. 4.5 According to the appellant, the Authority of Advance Ruling has erred in holding that since Government of Rajasthan holds only 50% shareholding in M/s JSCL and balance shareholding is held by Jaipur Nagar Nigam (hereinafter also referred to as JNN) which is not a Government. Therefore, M/s JSCL are not a "Governmental Authority" as defined in the explanation to clause (16) of Section 2 of the IGST Act, 2017 only on the basis of equity. As per the AAR, M/s JSCL are not satisfying the definition of Governmental Authority. 4.6 As per the appellant, M/s JSCL are a Government of Rajasthan undertaking as mentioned in their charter and as per the master data records of Ministry of Corporate affairs (MCA) M/s JSCL are registered as a State Government company. 4.7 According to the appellant, Jaipur Nagar Nigam is a Municipal Corporation incorporated by Rajasthan State Government under "The Rajasthan Municipalities Act, 2009. The officials working as Director, Deput....
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....ransactions specified in Schedule III; or b. such activities or transactions undertaken by the Central Government, a State Government or any local Authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services." 4.13 That Notification No. 14/2017-Central Tax ( Rate) dated 28.06.2017 states that the following activities or transactions undertaken by the Central Government or State Government or any local Authority in which they are engaged as Public Authority, shall be treated neither as a supply of goods nor a supply of service, namely "Services by way of any activity in relation to a function entrusted to a Panchayat under Article 243 G of the Constitution." Subequently, the same was amended vide Notification No. 16/2018 - Central Tax (Rate) dated 26.07.2018 to include the following - (i) after the words "State Government", the words "or Union territory" shall be inserted; (ii) after the word "Constitution", the words "or to a Municipality under Article 243W of the Constitution" shall be inserted. 4.14 As pe....
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....ent made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and (iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account. Explanation:- For the purposes of this rule, the expression "pure agent" means a person who- (a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both; (b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply; (c) does not use for his own interest such goods or services so procured; and (d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account." 4.19 The appellant are of the view that, in respect of road cutting charges paid to JNN by them on behalf of M/s JSCL, all the conditions required f....
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....bmissions which were mostly reiterations of their previous submissions. The supplemental points in the submissions are as below:- 5.1 The appellant added that the term Control is not defined under the GST Acts. The term 'Control' has been defined under Section 2(17) of the Companies Act 2013, Regulation 2(d) of Insolvency and Bankruptcy Board of India, Information Utilities) Regulations, 2017 , Regulation 2(1)(c) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 , Section 2(g) of Securities and Exchange Board of India Act, 1992 . As per Black's Law Dictionary "Control" is the direct or indirect power to direct the management and policies of a person or entity, whether through ownership of voting securities, by contract, or otherwise; the power or Authority to manage, direct, or oversee. The appellant submitted the certain Rulings/judgments in their favor. The relevant portions of the judgments are as under : a) Hon'ble Supreme Court in Arcelor Mittal India Private Limited v. Satish Kumar Gupta & Ors 2018 (10) TMI 312 held : The expression "control"is therefore defined in two parts. The first part refers to de jure control, which includes the....
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....3( xii) of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017.- 1. Greater Warangal Smart City Corporation Limited. 2. Hyderabad Metropolitan Development Authority. g) The AAR, Maharashtra in the matter of Auto Cluster Development Research Institute vide its order dated 25.05.2022 in reference of renting services provided to Pimpri Chinchwad Smart City Limited (PCSCL) (where Govt of Maharashtra and Pimpri Chinchwad Municipal Corporation have 50:50 stake in PCSCL) has held that PCSCL is clearly covered under the definition of 'Government Entity' as can be seen from the definition of a 'Government Entity' mentioned above". h) The AAR, Andhra Pradesh in a similar matter of Shapoorji Pallonji & Company Private Limited vide its order dated 25.02.2021 has held that Greater Visakhapatnam Smart City Corporation Limited (GVSCCL) rightly fits into the definition of the 'Government Entity' as per the said Notification. The functions carried out by the said GVSCCL are the functions which were entrusted by the Central Government, State Government and Local Authority i.e. of Municipal Administration." 6. The authorized representative of the appella....
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....ing be granted to them after 20.09.2023 in which they can furnish the said documents. 7.2 They supplied the additional submissions in respect of functional part of Notification No. 24/2017- Central Tax (Rate) dated 21.09.2017 vide their letter dated 21.09.2023. According to the appellant's interpretation, their work falls under the Serial No (vi) (a) of the Notification which reads as under:- (vi) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, [other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above] provided] to the Central Government, State Government, Union territory, 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) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession. 7.2.1 They further submitted that the term 'Original Work' was defined under the Service Tax Act (Finance Act 1994) in Notification No. 24/2....
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....term "work contract". Therefore, the awarder i.e. M/s JSCL deducted the GST TDS @ 2% on the work classified as Work Contract. 7.4 In the submissions, they have also furnished a certificate of completion of work dated 04.09.2023 issued by Jaipur Smart City Limited against the work order JSCL/XEN-III/2020-21/1852 assigned to M/s LQCC. It certifies that the appellant M/s Lakhlan & Qureshi Construction Co. has completed the works project "Fire Fighting System With Pump House in ABD Area, Jaipur on 11.11.2022 It mentioned that the scope of works contract was supply, laying and installation of pipelines, fire hydrants and pumps including all necessary accessories. The certificate also mentioned that the contract price was Rs. 5,14,74,250/- excluding GST and that the entire GST cost was borne by M/s JSCL themselves. 7.5 They submitted that the work allotted by M/s JSCL to the appellant was an infrastructural work and it also does not qualify to be termed as predominantly for use other than for commerce industry, or any other business or profession. In this respect they submitted the Memorandum and Articles of Association of M/s Jaipur Smart City Limited. Reliance placed upon the jud....
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....3W of the Constitution or to a Panchayat under article 243G of the Constitution. 2(zfa) "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 c. That the term 'original works' is defined vide Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017 as here-under: 2(zs) "original works" means- all new constructions; (i) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; (ii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise; d. Definition of term Control as referred in various statutes &as interpreted by Hon'ble Supreme Court are relied upon such as: • Black's Law Dictionary • Section 2(17) of the Companies Act, 2013 ....
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....has been filed by the appellant within the prescribed time. Therefore, we proceed further to decide the appeal on merit. 8.3 From the appeal memo, we note that the appellant have contested on all the issues, therefore, we are required to examine the contested issues/Ruling one by one. 9. The first question before us is to decide whether or not the service recipient i.e. M/s Jaipur Smart City Limited is a Governmental Authority as defined in the explanation to clause (16) of Section 2 of the IGST Act, 2017. On perusal of the AAR Order, we note that Authority for Advance Ruling, Rajasthan found that Government of Rajasthan holds only 50% shareholding in M/s JSCL and balance shareholding is held by Jaipur Municipal Corporation which is not a Government. Therefore, the AAR held that M/s JSCL are not satisfying the definition of Governmental Authority. 9.1 We note that the appellant have contested that participation can be in the form of "equity" or "control" or a combination of both. They submitted that Jaipur Nagar Nigam is a Municipal Corporation incorporated by Rajasthan State Government through powers vested with them by "The Rajasthan Municipalities Act, 2009. The Stat....
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.... 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 Panchayat under Article 243G or to a municipality under Article 243W of the Constitution. 9.6 Now, we proceed to examine whether M/s JSCL are qualified to be considered a Governmental Authority in view of the above conditions. Following questions need to be answered in the context:- 9.6.1 Whether M/s JSCL are set up by an Act of Parliament or a State Legislature ? M/s JSCL are not set up by an Act of Parliament or State Legislation. 9.6.2 (a) whether is it established by any Government ? M/s Jaipur Smart City Limited are a special purpose vehicle (SPV) formed on 12.03.2016 by the Rajasthan State Government (as approved by Order No. 64/2016 dated 01.04.2016 issued by the Cabinet of State of Rajasthan) to operate as a nodal agency to take up works proposed under the smart city proposal according to Smart City mission launched by the Government of India. 9.6.3 (b) whether Government possesses ninety per cent or more participation in M/s JSCL by way of equity or con....
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....lature. Therefore, the said judgment is not applicable in the facts of the case before. 9.6.3.3 Further they have also relied on Ruling of various AARs in which recipients of the supply have been held to be Government Entity/ Governmental Authority. In these recipient bodies the respective State Government & their Municipal Corporation were the promoters having 50:50 equity share holding substantiating more than 90% of participation of the respective Government. The details of the Rulings relied upon are tabulated as under : S. No Ruling Authority Party Name & Order Service Recipient Decision 1 AAR, Andhra Pradesh Order dated 05.05.2020 in case of Zigma Global Environment Solutions P Ltd. Tirupati Smart City Corporation Limited Recipient was held as Governmental Authority 2 AAR-Andhra Pradesh Order dated 25.02.2021 in case Shapoorji Pallonji & Company Private Limited Greater Visakhapatnam Smart City Corporation Limited Recipient was held as Government Entity 3 AAR- Maharashtra Order dated 25.05.2022 in case of Auto cluster Development Research Institute Pimpri Chinchwad Smart City Limited Recipient was held as Governmen....
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....by Notification No. 24/2017- Central Tax (Rate) dated 21.09.2017and further amended by Notification 46/2017- Central Tax (Rate) dated 14.11.2017 and Notification No. 03/2019 Central Tax (Rate) dated 29.03.2019 reads as:- (vi) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, [other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above] provided] to the Central Government, State Government, Union territory, 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) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession. 10.2 We observe that that the term 'original works' is defined vide Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017 as under: 2(zs) "original works" means- all new constructions; (i) all types of additions and alterations to abandoned or damaged structures on land that are required to ma....
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....n, with respect to (i) the preparation of plans for economic development and social justice; (ii) the performance of functions and the implementation of schemes as may be entrusted to them including those in relation to the matters listed in the Twelfth Schedule; (b) the Committees with such powers and Authority as may be necessary to enable them to carry out the responsibilities conferred upon them including those in relation to the matters listed in the Twelfth Schedule." 10.5 We further note that matter is listed in Twelfth Schedule and the functions entrusted to Municipality is as under - (a) Urban planning including town planning. (b) Regulation of land-use and construction of buildings. (c) Planning for economic and social development. (d) Roads and bridges. (e) Water supply for domestic, industrial and commercial purposes. (f) Public health, sanitation conservancy and solid waste management. (g) Fire services. (h) Urban forestry, protection of the environment and promotion of ecological aspects. (i) Safeguarding the interests of weaker sections of society, including....
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....n of firefighting system in the contracted area. The said service of granting approval is in relation to function entrusted to the Municipality under Article 243W of the Constitution i.e., functions enumerated under clause (d) - roads and bridges and clause (g) - Fire Services of Schedule XII of Article 243W of the Constitution of India. Further they added that as per clause (b) of sub-section (2) of Section 7 of CGST Act, 2017 and Notification No. 14/2017-Central Tax ( Rate) dated 28.06.2017 amended by Notification No. 16/2018 - Central Tax (Rate) dated 26.07.2018, services by the Central Government or State Government or Union territory or any local Authority by way of any activity in relation to a functions entrusted to a Panchayat under Article 243 G of the Constitution or to a Municipality under Article 243 W of the Constitution are considered as neither supply of goods nor supply of services. 12.2 From the AAR Ruling Order, we find that it is not under dispute that Jaipur Nagar Nigam is a Municipality/ local Authority. Only question before us is to decide whether the activity to recover road cutting charges from appellant is in relation to any function entrusted to a mu....
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....not hold any title to the NOC procured from JNN and were acting only on the behalf of M/s JSCL. In this regard, we have perused the 'Demand Note' dated 26.03.2021 issued by Jaipur Nagar Nigam addressed to appellant. In this demand note, approval has been given to the appellant for the work of 'road cut' in relation to work of laying fire fighting pipeline being done on behalf of M/s Jaipur Smart City Limited. Thus, we note that the AAR, Rajasthan has erred in mentioning at the last Para of Page 22 of their order that 'nowhere the name of M/s JSCL is mentioned in the said demand note/letter dated 26.03.2021. 13.3 The appellant further contested that in the light of the Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017 the reimbursement of amount by M/s JSCL to the appellant for the NOC fees paid is in the nature of pure services provided in relation to activities mentioned in Article 243W of the Constitution and therefore its reimbursement from M/s JSCL attracts nil rate of tax. 13.4 It is imperative to ascertain the conditions to qualify as pure agent as well the provisions of Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017. 13.4.1 We note that the ....
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....a Municipality under Article 243W of the Constitution NIL NIL 13.4.3 As can be seen from the above, three conditions are required to be satisfied for a service to be covered under Entry No. 3 of the Notification which are : (1) It must be pure service not involving any supply of goods. (2) It must be provided to the Central Government or State Government or Union territory or local Authority or a Governmental Authority or a Government Entity. (3) It must be an activity in relation to any function entrusted to a (i) Panchayat under Article 243 G of the Constitution; or (ii) Municipality under Article 243 W of the Constitution. 13.4.4 We find that the appellant have fulfilled the condition No. 1 i.e reimbursement of road cutting charges by M/s JSCL to the appellant involves no supply of goods. Thus, the activity is purely in nature of service. Further, as it has already been decided that M/s Jaipur Smart City Limited are a 'Governmental Authority', therefore the second condition is also satisfied. However, we find that the recovery of road cutting charges is not covered under an activity in relation to any function entrusted to a (i) Panchaya....