2019 (10) TMI 1390 - AAR - GST

Government Entity or not - Haryana Warehousing Corporation - scope of 'Government Entity' as contained in Para 2 (zfa) in Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 32/2017- Central Tax (Rate) dated 13.10.2017 - HELD THAT - In order to qualify for a Government Entity the applicant must have been setup by an Act of the Legislature of the Union or of the State or it must have been established by any of the Governments i.e. the Union or of the State. It is a matter of fact that the Haryana Warehousing Corporation is established under Section 18 of the Warehousing Corporation Act, 1962 which is an Act of Parliament. But the definition also provides for 90% or more participation by way of equity or control of the respective Governments. It means that if the Authority or Board or any other body is established by an Act of Parliament, the Union Government must have 90% or more participation by way of equity or control. The condition applies to a State Government if such body is established by a State Legislature. In this case, admittedly the equity share of Central Government is 55.02%. Therefore, the condition of 90% or more participation by way of equity is not fulfilled. Further, the applicant has submitted that as per Section 20 of the Warehousing Corporation Act 1962, five directors are nominated by Central Warehousing Corporation with the condition that one shall be nominated in consultation with the State Bank and at least one shall be non- official. Five directors are nominated by the State Government and a Managing Director is appointed by the State Government in consultation with the ten directors discussed above. Firstly, since out of ten directors, five are nominee of the State Government, the Central Government cannot be said to have more than 90% control. Secondly, even if the cumulative control of Central and State Government is considered, the same falls short of the condition of 90% control as stipulated in the definition - Reason being, at least one of the five directors nominated by the Central Warehousing Corporation is a non-official and one has to be appointed in consultation with the State Bank which has only 54% share of the Government of India. So, essentially at the maximum, eight out of the ten directors are purely Government nominees. The Managing Director is appointed by the State Government in consultation with the ten directors discussed above. In nutshell, the applicant fails to satisfy the condition of 90% control also. The applicant i.e. Haryana Warehousing Corporation is not a 'Government entity' in light of the definition contained in Para 2 (zfa) in Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 32/2017- Central Tax (Rate) dated 13.10.2017.

Summary

Issues:
Whether the applicant qualifies as a 'Government Entity' as per the definition provided in Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 32/2017.

Analysis:
The applicant, a Warehousing Corporation established under Section 18 of the Warehousing Corporations Act, 1962, sought an advance ruling to determine if it falls under the definition of a 'Government Entity.' The definition requires an entity to be set up by an Act of Parliament or State Legislature, with 90% or more participation by way of equity or control from the respective Government entities. In this case, the Haryana Warehousing Corporation is established under an Act of Parliament, but the equity share of the Central Government is only 55.02%, falling short of the required 90% control. Additionally, the composition of the Board of Directors, with nominations from both Central and State Governments, does not meet the criteria of 90% control either. The Board structure includes non-official members and nominees from entities with less than 90% government control, further disqualifying the applicant from being classified as a 'Government Entity.'

Ruling:
The Authority for Advance Ruling, Haryana, concluded that the Haryana Warehousing Corporation does not meet the criteria to be classified as a 'Government Entity' as defined in the relevant notifications. Therefore, the applicant is not considered a 'Government entity' based on the specified definition.

Judgment:
The ruling was delivered by the Authority for Advance Ruling, Haryana, determining that the applicant, the Haryana Warehousing Corporation, does not qualify as a 'Government Entity' under the defined parameters. The decision was based on the lack of 90% government control in terms of equity and the composition of the Board of Directors, leading to the conclusion that the applicant does not meet the necessary criteria outlined in the relevant notifications.