2020 (7) TMI 805 - AAAR - GST

Exemption from GST - entity registered under section 12-AA of Income Tax Act, 1961 - services provided by CREDA, scrap battery sale and sale of tender forms - applicability of GST Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017 - HELD THAT - Section 12A (a) read with Section 12AA (1) (b) does not confirm any right of exemption upon the appellant under Section 11, 12 and 13 of the Income Tax, 1961. Such exemption from taxation will be available only after the Assessing Officer is satisfied about the genuineness of the activities promised or claimed to be carried on in each financial year relevant to the assessment year and at the provision of law acted upon - The exemption under Section 12A / 12AA of the Income Tax Act, 1961 does not cover all incomes or activities of the appellant. The exemption under said provisions are admissible based on the nature of activity and source of such incomes. Hence, exemption under CGST Act, 2017 on income is admissible only if the same is towards any charitable activity. In the instant case, CREDA implements various schemes relating to solar energy, wind energy, mini micro hydel, biomass, biogas and solid waste management. Some of the major activities include sour sujla yojna, solar drinking water pumping scheme, saubhagya yojna, solar community irrigation scheme, solar high mast, saur shakti yojna, solar on grid and roof top scheme, solar cold storage scheme, solar highmast, solar water purification, solar electrification of Government Buildings, solar water heating systems, National biogas and manure management programme, solar rural electrication/majaratola scheme, energy conservation programme, energy education park etc. The above schemes are funded by the grants received from the Central Government and State Government. CREDA creates empanelment of systems integrators, vendors and contractors to work as channel partner for implementing various solar photovoltaic/solar thermal applications in market mode in the state. The system integrator shall be the agency for integration and installation of Solar PV/Solar Thermal Systems - The contactors means civil and electrical contractors to be engaged for carrying out various small construction and repair civil works and works of laying of power distribution network at various sites as per requirement of CREDA. For the schemes funded by the grants received from the Central Government and State Government CREDA, the appellant creates empanelment of systems integrators, vendors and contractors to work as channel partner for implementing various solar photovoltaic/solar thermal applications in market mode in the state of C.G and further the aforesaid activities are being undertaken by the integrators, vendors, contractors. Further for implementation of these schemes, the appellant receives consideration for the allied services rendered by them from their clients / channel partners, in the form of Registration Fees, Supervision / Service Charges, Processing Fees, RVE CONNECTION Charges, Processing Fees (Sour-Sujila), Entry Fees to Energy Park, Penalty Charges Received and RE issuance Charges. This apart they also receive consideration for activities such as Scrap battery sale and from sale of tender forms. Thus the said activities of CREDA the appellant, per se cannot be merely or primarily for the preservation of environment so as to qualify being considered under clause (r) of para 2 of the said Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017. The aforesaid activities of the appellant cannot he treated as charitable activities as envisaged under the statute, as the above mentioned fees/ charges are being collected from the channel partners/ contractors/consumers as a consideration for tender work/supply of services, provided to them - the said supplies being not covered under the definition of charitable activities as envisaged, the impugned services / supply of goods rendered by the appellant are not covered under Sr.no. I of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017

Summary

Issues Involved:
1. Applicability of GST Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017 regarding GST exemption to an entity registered under section 12-AA of Income Tax Act, 1961 with regard to services provided by CREDA, scrap battery sale, and sale of tender forms.

Issue-wise Detailed Analysis:

1. Applicability of GST Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017:

Facts of the Case:
The appellant, Chhattisgarh State Renewable Energy Development Agency (CREDA), is a nodal agency of the State Government for promoting renewable energy sources. CREDA is registered under Section 12AA of the Income Tax Act, 1961. The appellant sought an advance ruling on whether the services provided by them, including the sale of scrap batteries and tender forms, are exempt from GST under Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017.

Appellant's Contention:
The appellant argued that they are engaged in charitable activities as defined in the notification, which includes the preservation of the environment. They contended that their activities, such as research, development, and popularization of non-conventional and renewable sources of energy, have substantial environmental benefits like reducing carbon emissions, conserving water, and improving public health. Thus, they claimed eligibility for GST exemption under the said notification.

AAR's Ruling:
The AAR ruled that the services provided by CREDA are not exempt from GST under Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017. Consequently, the appellant is liable to pay GST on the impugned supply of goods or services.

Appellate Authority's Analysis:
The Appellate Authority examined the provisions of the CGST Act and CGGST Act, 2017, and the specific notification in question. The authority noted that the exemption under Notification No. 12/2017-Central Tax (Rate) applies to services by an entity registered under Section 12AA of the Income Tax Act, 1961, by way of charitable activities. The term "charitable activities" includes activities related to public health, advancement of religion, education, and preservation of the environment.

Detailed Analysis:
- Status of CREDA: CREDA is a nodal agency for implementing solar energy projects and is registered under Section 12AA of the Income Tax Act.
- Objectives and Activities: CREDA's objectives include promoting renewable energy sources and implementing various schemes funded by the Central and State Governments. Their activities involve empanelment of system integrators, vendors, and contractors for solar energy projects.
- Nature of Services: The services provided by CREDA include registration fees, supervision/service charges, processing fees, RVE connection charges, entry fees to the energy park, penalty charges, re-issuance charges, scrap battery sale, and sale of tender forms.

Conclusion:
The Appellate Authority concluded that the activities undertaken by CREDA, despite being environmentally friendly, do not qualify as "charitable activities" under the notification. The primary purpose of these activities is to provide allied facilities for a consideration, rather than the preservation of the environment. Therefore, the services provided by CREDA are not exempt from GST under Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017.

Order:
The appeal filed by CREDA was dismissed, and the order passed by the AAR, Chhattisgarh, was upheld. The ruling clarified that the services provided by CREDA are not exempt from GST, and the appellant is liable to pay GST on the impugned supply of goods or services.