AI Drafter 
TaxTMI 
TaxTMI 
2026 (5) TMI 1792
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....ding provisions of the KSGST Act, Rules and the Notifications issued thereunder. 3. Brief facts of the case: 3.1. The brief facts of the appeal are as follows. The appellant is an NBFC registered under GST law with GSTIN 32AABCM6882E1ZK and their major incomes come from Gold loan, money transfer, purchase and sale of foreign currency etc. The applicant owns 58 cents of land in Trichur District, which was indicated to be 'wetland' in the village records and they wanted to change it to 'dryland' for construction of office at the said premises. For this change, the appellant paid the applicable fee paid to the Government. The fee is prescribed under the Kerala Conservation of Paddy Land and Wetland Act, 2018. They filed an Advance Ruling application in order to clarify the taxability of the said payment. The Personal Hearing in this regard was conducted on 08-12-2021 and Ruling was issued on 03-04-2023. The appellant wants to know if the payment made to Government for "change of description of land from wetland to dryland" was liable to GST on Reverse Charge basis as affirmed by AAR. In this regard the appellant submits as follows:- (i) there was no supply as per Notifi....
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....statutory fee prescribed under Section 27A of the Kerala Conservation of Paddy Land and Wetland Act, 2008, and is not made pursuant to any commercial agreement for service. The Notice dated 21.10.2020 is a statutory communication requiring payment for administrative changes in land records and does not constitute a contract for service provision. 3.2.2. Moreover, even assuming but not admitting that there is a supply of service, Notification No. 14/2017-Central Tax (Rate) dated 28.06.2017 clarifies that any service provided by Central/State Government or a local authority in relation to the functions entrusted to a Panchayat under Article 243G of the Constitution shall be treated neither as a supply of goods nor a supply of service. The Eleventh Schedule of the Constitution (read with Article 243G) outlines the functions entrusted to Panchayats, which include inter alia: i-Agriculture, including agricultural extension; ii-Land improvement, implementation of land reforms, land consolidation and soil conservation; iii-Minor irrigation, water management and watershed development; and several others. 3.2.3. The Kerala Conservation of Paddy Land and Wetl....
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....and falls squarely within the exemption under Notification No. 14/2017-Central Tax (Rate). Thus, there is no supply, no consideration, and hence no GST liability-neither under forward nor reverse charge mechanism. Further, without prejudice to the above, they further submitted that even if the activity is assumed to be a supply, there is no element of 'agreement to render service' between the Government and the appellant, which is fundamental for the imposition of GST under the CGST Act, 2017. The payment is a statutory fee, and not a quid pro quo consideration. 3.2.6. Additionally, the order passed by the AAR is barred by limitation. As per Section 98(6) of the CGST Act, 2017, the Authority is required to pronounce its ruling within 90 days from the date of receipt of the application. The application in this case was filed on 20.07.2021, while the order was passed on 03.04.2023, far beyond the statutory time limit. Therefore, the ruling is void ab initio. 4. Grounds of Appeal: 4.1. The appellant contended that there was no supply of service and no consideration was paid. The same is examined as below. 4.2. Section 7 of the CGST Act defines "supply" to include all forms....
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....e to pay Service Tax on statutory activities performed in terms of concerned EPF Act .The facts of the instant case are with respect to conversion of wetland to dry land and the requisite fee that is required to be paid. Hence, reliance on the said case law is not justified as detailed below: 4.9.1. Nature of the Activity and its Outcome (a). EPFO case - The Employees' Provident Fund Organisation was performing statutory social security functions mandated under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. These activities were for the collective benefit of members and part of sovereign, trust-based administration of funds - there was no element of commercial exploitation or exclusive advantage to any single entity. The organisation was acting as a custodian, not as a service provider for consideration. (b). Wetland conversion case - The local authority, while acting under statute, is performing a regulatory permission-granting function that confers a specific, measurable, and exclusive benefit to an applicant. Once the land is converted from wetland to dry land, the applicant gains enhanced commercial and residential development ....
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.... a direct quid pro quo between appellant and authority. 4.10.2. Link between Payment and Service (a). DIAL case - The UDF was not consideration for a service rendered to each paying passenger; it was a statutory levy earmarked for future capital works. There was no contractual or direct nexus between the payment and an individualised service, and passengers did not receive a special benefit by paying UDF. (b). Wetland conversion case - The conversion fee has a clear, immediate, and direct nexus with the permission granted. Without payment, the appellant cannot lawfully change the land use. The permission is the sole and direct outcome of the fee payment, making it a consideration for a supply under GST law. 4.10.3. Statutory vs. Commercial Nexus (a). DIAL case - The statutory character of UDF dominated; it was more akin to a cess/tax to fund public infrastructure. Its imposition and utilisation were controlled by statute, with no direct service agreement with the payer. (b). Wetland conversion case - While the fee arises under statute, the statutory power is exercised in a permission granting, regulatory capacity for the exclusive benefit o....
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....Notification No. 10/2017 IT(R) dt. 28-06-2017. After paying the bare fee without GST, the Appellant has filed ARA-01 before Authority for Advance Ruling. 6.6. Let us first examine the position on Admissibility of Advance Ruling under GST. 6.7. The mechanism of Advance Ruling under the GST law is intended to provide clarity and certainty to taxpayers before undertaking a transaction. As per the provisions of Section 95(a) and Section 97(2) of the CGST Act, 2017, the application before the Authority for Advance Ruling (AAR) must relate to matters pertaining to a proposed supply or an ongoing supply. 6.8. It is not the intention of the AAR mechanism to regularize or legitimize past transactions already undertaken without payment of GST. Approaching the AAR after executing a transaction without discharging GST, and then seeking a ruling on whether GST was applicable, defeats the preventive and clarificatory purpose of the AAR system. 6.9. Therefore, issues involving completed transactions where GST has not been paid fall outside the purview of AAR, and such applications may be liable to be rejected at the threshold for being non-admissible under law. 6.10. Advance ruling....
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.... rates, conversion procedures, and legality of land use. 6.14. The AAR in their Order dt 03-04-2023, have concluded in Para 7.11 that: "The fee charged for conversion can be considered as a consideration compensation charged for conferring such private benefit at the cost of public good of conservation of Paddy land and wetland.". 6.15. Thus the fee can be interpreted as a form of compensation. It represents a cost imposed on the appellant for altering the natural status of the land. The appellant is deriving a private benefit-such as being able to build, sell, or develop the land for personal gain. The rationale behind charging the fee is that the fee acknowledges that a public cost is being incurred to provide a private gain. It acts as a disincentive or deterrent to indiscriminate land conversion 6.16. The key question is whether the land-conversion fee is a taxable service by the State government to the appellant. Under Notification No. 13/2017-CT(R) (as amended) services supplied by a State or local government to a business entity are specifically subject to GST under reverse charge. Item 5 of this Notification provides that "Services supplied by the Central ....
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.... c) Soil conservation and erosion control d) Building bunds, drainage channels e) Adding organic matter or fertilizers to improve fertility 6.22. The purpose is to enhance agricultural productivity, prevent land degradation, or make the land more suitable for its current use. 6.23. The legal status of land improvement would be f) No change in land classification or revenue records g) Usually encouraged by governments h) May qualify for subsidies or schemes (e.g., MGNREGA works) 6.24. Land Conversion:- Land conversion means changing the legal classification of land-for example, converting agricultural (wet/dry) land into non-agricultural land for purposes like housing, industry, or commercial use. Examples could be a) Converting paddy field into a plot for residential buildings b) Changing dry land to commercial land for setting up shops/factories c) Wetland converted to dry land for non-agricultural purposes 6.25. The Purpose is to enable non-agricultural development such as infrastructure, urban expansion, or industrial use. 6.26. The legal Status of land conversion a) Requires approval....