TaxTMI 
TaxTMI 
2026 (9) TMI 1267
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....uch appeal shall be filed in accordance with Section 100 (3) of the GST Act and the Rules prescribed thereunder, and the Regulations prescribed by the West Bengal Authority for Advance Ruling Regulations, 2018. 1.1 At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like manner except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the above, henceforth, for the purposes of these proceedings, the expression "GST Act" would mean both the CGST Act and the WBGST Act. 1.2 The applicant, Indian Institute of Engineering Science and Technology (IIEST), Shibpur, is an Institution of National Importance established under the NITSER Act, 2014 and undertakes consultancy projects for governmental bodies, public sector undertakings, private organisations and other clients through its Research and Consultancy Division. Th....
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....t) 2014 and is designated as an Institute of National Importance. The Applicant Institute undertakes, inter alia, research, consultancy, scientific testing and executive development activities through its institutional Research and Consultancy (R&C) Division. The R&C Division functions under separate institutional Consultancy, EDP and Testing Rules framed by the Institute. 2.2 The Applicant submits that, for effective translation of engineering and scientific knowledge into societal benefit, it operates an institutional Research and Consultancy Wing. External engineering, corporate and public sector clients approach the Applicant Institute for specialised technical consultancy, scientific testing and executive development services. The contractual relationship for such assignments is exclusively between the client and IIEST, Shibpur on a principal-to-principal basis. Individual faculty members do not enter into independent contracts with external clients. 2.3 The Applicant submits that all consultancy assignments are undertaken by the Institute and not by individual faculty members in their personal capacity. The Consultancy, EDP and Testing Rules specifically provide that al....
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.... of the consultancy remuneration amongst the faculty members, technical assistants and office staff, as applicable. Such disbursement is an internal allocation made pursuant to the institutional rules and after completion of the prescribed administrative procedures. 2.8 The Applicant further submits that the consultancy remuneration payable to faculty members is not a payment received directly from the external client. The client has no contractual relationship with the individual faculty member and the individual faculty member does not issue an invoice or bill to the client. The external client deals exclusively with IIEST, Shibpur. Consequently, the subsequent distribution of a portion of the consultancy receipts to the faculty member is an internal institutional disbursement and not a separate commercial transaction between the faculty member and the client. 2.9 The Applicant submits that the Consultancy Rules establish a comprehensive institutional framework for undertaking consultancy projects. The organisational structure consists of the Dean (R&C), Advisory Committee, Associate Deans (R&C), administrative officers and the R&C Cell support staff. The Research and Consu....
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....ency/Consumables, Lodging, boarding, field expenses, travel etc. C F. Honorarium to Technical/Supporting Staff D G. Honorarium to CI and Co-CIs E H. Cost of Testing Service P = 2 x (F+C+D+E) I. Institute Overhead Charge (IOC) 0.5P The Rules further provide that the equipment used in consultancy should also be calculated using the prescribed methodology. 2.13 The Applicant submits that the institutional overhead and distribution mechanism further establishes that the faculty remuneration is merely an internal distribution of the consultancy receipts. The distribution prescribed under the Consultancy Rules is as follows: Type of Project R&C Support charge DDF PDF Research and Consultancy (R & C) Promotional Activity Fund Consultancy Project 65% 15% 15% 5% Testing Project 65% 15% 15% 5% EDP/Short term Course/Training Programme 65% 15% 15% 5% 2.14 The Applicant further submits that where there are Co-Consultancy In-charges, the Professional Development Fund is distributed in the prescribed proportion, namely 60% to the CI and the remaining 40% equally amongst the Co-CIs. Where th....
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.... The Applicant submits that the Rules expressly contemplate payment of honorarium to staff members involved in Consultancy, Testing and EDP work. A staff member involved in such work may receive an honorarium up to the prescribed maximum, subject to the condition that the consultancy assignment does not interfere with the regular duties of the individual consultant. The Rules also prescribe indicative rates where a faculty member acts as a consultant for discussions, suggestions or advice to external clients, while requiring administrative approval from the Dean (R&C). 2.19 The Applicant submits that the payment made to the faculty member is therefore in the nature of remuneration or performance-linked institutional allocation arising from the faculty member's participation in an Institute consultancy project. The fact that the amount varies depending upon the consultancy work undertaken or the amount received by the Institute does not alter the underlying relationship of employer and employee. The faculty member remains a permanent, regular and full-time employee of IIEST, Shibpur and performs the consultancy-related functions within the institutional framework and under the co....
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..... For the secondary consultancy fee share, the Institute presently applies TDS under section 194J. The Applicant submits that the application of a particular TDS provision under the Income-tax Act cannot, by itself, determine the nature of a transaction under the GST law. The GST classification has to be determined independently on the basis of the statutory provisions governing supply and the employer-employee relationship. 2.24 The Applicant submits that the use of section 194J for the consultancy-related disbursement is an administrative/direct tax compliance mechanism and does not convert the permanent employee into an independent consultant. The faculty member continues to be appointed, controlled, supervised and remunerated as an employee of IIEST, Shibpur. The consultancy work is undertaken through the Institute, under the Institute's rules and administrative approvals and not through any separate business or professional establishment of the faculty member. 2.25 The Applicant places reliance on the settled principle of determining whether a relationship is one of contract of service or contract for service by considering the nature of control and supervision. The Appl....
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....mber. 2.29 The Applicant therefore submits that the amount distributed to a faculty member out of consultancy receipts is not consideration for an independent supply of services by such faculty member to IIEST, Shibpur. It is an internal distribution of consultancy remuneration under the institutional Consultancy Rules to an employee who has participated in an Institute consultancy project. The external supply, if any, is made by IIEST, Shibpur to the external client, for which the Institute itself raises the invoice and discharges the applicable GST. 2.30 In view of the foregoing facts and submissions, the Applicant submits that the amount disbursed to the full-time faculty member as a share of consultancy receipts under the Consultancy Rules does not constitute consideration for an independent supply of services by the faculty member to the Applicant Institute. The faculty member is an employee of IIEST, Shibpur and the relevant activities are performed in the course of or in relation to employment and are consequently covered by Entry 1 of Schedule III to the CGST Act, 2017. 2.31 Consequently, the Applicant submits that the amount so distributed is not liable to GST in ....
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....s a specified portion of the consultancy receipt to the Consultancy In-charge as per the Consultancy Rules framed by the applicant. The Consultancy In-charge raises an invoice to the applicant for the specific portion of the consultancy amount received by him. In the context of the above facts, the applicant has placed the following three questions before this authority: 1. Whether the amount disbursed by the applicant institute to its full time faculty member, being a share of consultancy receipts constitutes consideration for an independent supply of services by the faculty member to the institute under the provisions of the CGST Act, 2017? 2. If the response to Question 1 is in the affirmative, whether such distributed amount is liable to GST and whether the individual faculty member is legally mandated to obtain registration under Section 22 of the CGST Act, 2017 subject to the applicable statutory threshold limits? 3. If statutory registration is determined to be required, whether the faculty member is required to issue a formal tax invoice to the applicant under Section 31 of the CGST Act, 2017 for receiving such payment or can it be disbursed lawfu....