TaxTMI 
TaxTMI 
2025 (7) TMI 455
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted that they are a Government department and falls within the definition of "person" as per Section 2(84) of the CGST/KGST Act. They are engaged in- a-Supply of stationery materials to Government offices, various Government departments, High Court of Kerala and for self-consumption. Such supplies are made in execution of the statutory function of the department and these supplies are made without consideration. The sourcing of the items so supplied is financed by the Government of Kerala. b-Procurement and supply of stationery items to local authorities, PSU, Government companies, Central Government departments, against consideration. c-Procurement and supply of stationery to government authorities, Adalats, Commissions, Boards etc. where the supply could be with or without consideration depending on case to case basis. d-Acting as intermediaries for sourcing of stationery by Election Commission and Education department, without consideration. e-Conduct of periodical verification of stores and stocks of stationery material issued to the various government departments and in case of undue loss, initiate proceedings to levy recoveries/ fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o has the view that the provisions of Section 17(1) and (2) are inapplicable and no reversal is due as the goods are used for its statutory function of issuing material to other departments of Kerala itself and reversal of ITC is unwarranted. 4.2.5. The applicant submits that the rate and classification of goods adopted by them as declared in ANNX 1 is the appropriate classification of the same. 4.2.6. The applicant states that the levy of fines and damages and forfeitures are for breach of contract and does not tantamount to a supply. Alternatively, even to the extent they do tantamount to supply, they will be exempted from supplies as per Entry 62 of Notification 12/2017. 4.2.7. The applicant submits that sale of scrap is a taxable supply falling under RCM for which the liability to pay tax falls on the recipient who is a registered person only. 5. Comments of the Jurisdictional Officer The application was forwarded to the jurisdictional officer as per provisions of Section 98 (1) of the CGST Act. The Jurisdictional officer reported that no proceedings related to issue raised in the advance ruling application pending in that office. Hence it is construed that no pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d hence it cannot be claimed that these supplies are made in the course or furtherance of business under Section 2(17)(i). Hence, these supplies would not fall within the ambit of Schedule I to the Act as well. Such supplies, as evident, are neither in the 'course or furtherance of business', nor are they enlisted in Schedule I of the CGST Act, 2017. Explanatory notes issued by CBIC on the meaning and scope of Supply states that "Any transaction involving supply of goods or services without consideration is not a supply, barring few exceptions, in which a transaction is deemed to be a supply even without consideration". Further, it is also clarified therein that "GST is essentially a tax only on commercial transactions. Hence, only those supplies that are in the course or furtherance of business qualify as supply under GST". In the light of the above facts, we are of the view that stationery items supplied by the applicant to various government departments and authorities without receipt of consideration in any manner do not fall under the scope of business as envisaged under Section 2(17) of the CGST Act, 2017. When the supply fails to fall under the scope of business as e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o such supply is made, but is just recovery of loss to Government and is not ordinarily within the purview of Supply under the Act. Now it has to be considered whether the activity falls under the scope of Schedule I or II of the CGST Act, 2017. We find that none of the categories enlisted in Schedule I or II apply to the instant situation. In this regard, CBIC, vide Circular No. 178/10/2022-GST dated 03-08-2022 has clarified that "Laws are not framed for tolerating their violation. They stipulate penalty not for tolerating violation but for not tolerating, penalizing and deterring such violations. There is no agreement between the Government and the violator. specifying that violation would be allowed or permitted against payment of fine or penalty. There cannot be such an agreement as violation of law is never a lawful object or consideration. The service tax education guide issued in 2012 on advent of negative list regime of services explained that fines and penalties paid for violation of provisions of law are not considerations as no service is received in lieu of payment of such fines and penalties. It was also clarified vide Circular No.192/02/2016-Service Tax, dated 13.0....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l authority in the event of a successful bidder failing to act after winning the bid, for allotment of natural resources, is a mere flow of money, as the buyer or the successful bidder does not get anything in return for such forfeiture of earnest money. Forfeiture of Earnest money is stipulated in such cases not as a consideration for tolerating the breach of contract but as a compensation for the losses suffered and as a penalty for discouraging the non-serious buyers or bidders. Such payments being merely flow of money are not a consideration for any supply and are not taxable. The key in such cases is to consider whether the impugned payments constitute consideration for another independent contract envisaging tolerating an act or situation or refraining from doing any act or situation or simply doing an act. If the answer is yes, then it constitutes a 'supply' within the meaning of the Act, otherwise it is not a "supply". From the question and details submitted by the applicant, it is found that the same is recovered consequent to breach of contract and therefore, we are of the opinion that the said transactions are to be treated as supplies under Schedule II and ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat disposal of waste paper and printing supplies as scrap or otherwise or Auction thereof falls under the Scope of Supply within the meaning of Section 7 of the CGST Act, 2017. (h) Sale of physical tender forms. From the application, it is evident that the sale of tender forms is made against a consideration. Tender notice is issued in the furtherance of business and sale of tender form is ancillary to such an act and in this case, is done for a consideration. Therefore, as per the ratio discussed in paragraph (b) above, we are of the opinion that such sales falls within the meaning of Supply as envisaged under Section 7 of the Act. (i) Sale of used motor vehicle-The sale falls within the meaning of Supply as envisaged under Section 7 of the Act for reasons already discussed and explained in paragraph (g) above. (j) The next question is whether the above, i.e., the items in paragraph 2 of the questions, are supply of goods or supply of services, if they tantamount to supply-As per Section 2 (52) of the CGST Act, 2017, "goods" means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....able/exempted supplies. The provisions of Section 17 of the CGST Act, 2017 states as follows. (1) Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business. (2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. Rule 42/43 of the CGST Rules, 2017 stipulates the formula for apportioning ITC already availed, (i.e., ITC eligible to be credited to electronic credit ledger) between exempted and taxable supplies and the manner of reversing the ITC attributable to supplies that do not attract GST. Accordingly, we are of the opinion that if the applicant has availed ITC on inputs or input services which are used &#....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eries/fines/penalties do not fall within the scope of Supply as per Section 7. . ii. From suppliers of goods and services as Liquidated damages, EMD/SD forfeiture for breach of contract etc. Ruling: Yes. Such recoveries/fines/penalties do fall within the scope of Supply as per Section 7. iii. From department staff as part of disciplinary proceedings Ruling: No. Such recoveries/fines/penalties do not fall within the scope of Supply as per Section 7. e. Repair services for stationary-related equipment for other government departments. Ruling: No answer can be provided since the applicant has not specified whether the servicing is done against consideration or not. However, if the servicing is done against consideration, then the supply does fall within the scope of Supply as per Section 7. Alternatively, if the service is done without consideration, then it does not fall within the scope of Supply as per Section 7. f. Disposal of waste paper and printing supplies as scrap or otherwise or Auction thereof. Ruling: Yes. Such supplies fall within the scope of Supply as per Section 7. g. Sale of Physical tender forms. Ruling- Yes. Such supplies fall within the s....