2020 (5) TMI 416 - AAAR - GST

Levy of GST on inward supplies - service supplied by the sub-contracts - landscape development and maintenance of garden work for State and Central Government Departments all government local bodies (Municipalities and Corporations) etc. and other government undertakings through contract from sub-contracts - recipient of services - challenge to AAR decision - HELD THAT - In this case the Appellant who is the recipient of the supply from the sub-contractor is a Co-operative Society and not an entity specified in SI.No 3 and 3A. When this criterion of the Notification is not satisfied the sub-contractors as suppliers of service will not be eligible for the exemption under the entries 3 or 3A of the above said Notification. It is the argument of the Appellant that if the exemption is not available to the sub-contractors then the GST paid by the Appellant on the inward supply from the sub-contractors will become a cost to them since they will not be eligible to avail the input tax credit of the tax paid on the inward supply for the reason that the output supply made by them to the Government Department is exempted. While we agree that the Appellant will not be eligible for the input tax credit of the tax paid on the inward supply from the sub-contractors we do not agree that this should be a ground for allowing the sub-contractors to avail the benefit of exemption. It is a well settled law that exemption notifications are to be interpreted strictly as to their eligibility. One cannot be influenced by extraneous factors while determining a person s eligibility to an exemption notification. Therefore on a strict interpretation of the entry Sl.No 3 and 3A we hold that the supply of services by the sub-contractors to the Appellant is not eligible for the benefit of exemption under either SL.No 3 or 3A of Notification No 12/2017 CT (R) dated 28-06-2017 - decision of AAR upheld.

Summary

Issues:
1. Delay in filing the appeal.
2. Exemption from GST for services provided by sub-contractors to the appellant.

Delay in filing the appeal:
The appellant filed the appeal 14 days late, but the authority decided to condone the delay as it fell within the condonable period of 30 days from the due date. The appellant did not provide reasons for the delay, but the authority exercised its power to condone the delay in the interest of justice.

Exemption from GST for services provided by sub-contractors to the appellant:
The appellant engaged sub-contractors for gardening and landscaping work received from government departments. The appellant argued that since their outward supply to government organizations was exempt, the inward supply from sub-contractors should also be exempt. However, the authority interpreted the GST rate exemption notification strictly. It found that the appellant, being a cooperative society and not a specified entity, did not qualify for the exemption under the relevant entries. Despite acknowledging that the appellant would not be eligible for input tax credit on the inward supply, the authority held that this should not influence the sub-contractors' eligibility for exemption. The authority emphasized that exemption notifications must be strictly interpreted based on eligibility criteria, leading to the dismissal of the appeal.

In conclusion, the authority upheld the original ruling and dismissed the appeal filed by the appellant, stating that the services provided by the sub-contractors to the appellant were not eligible for exemption under the specified notifications.