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2020 (7) TMI 379 - AAR - GSTGovernmental Authority or not - undertaking drinking water supply projects in Anantapur District, Andhra Pradesh - exemption from the GST by virtue of Entry 3 in Notification 12/2017 (Rate), dt 28.06.2017 - requirement of remission of GST to its suppliers for any services it procures by virtue of its activities of supplying water for domestic purposes. Governmental Authority or not - HELD THAT - The applicant is not set up by an Act of Parliament or a State Legislature - applicant is constituted by the Government i.e., the State of Andhra Pradesh under G.O. Ms No. 344 dated 16.09.1997 - The Board of the applicant i.e., Sri Satya Sai Water Supply Project Board consists of 9 Members, out of which 7 are officers /Employees of the Government of Andhra Pradesh that qualifies for 77% of Government control falling short of the designated 90% as required by the Act. Even the cost of the operation and maintenance of the water supply scheme is contributed at a ratio of 70% by the State Government, while 30% of the cost is being borne by the applicant from the water charges collected from the users - In the instant case the applicant falls short of the qualifying mark of 90% in terms of equity or control. Hence the applicant does not fit in the category of Governmental authority . Thus availment of exemption for the services received by the applicant by virtue of SI.No. 3 of Notification No 12/2017 - Central Tax (Rate), dt 28.06.2017 does not arise in this context. Taxability of the services procured by the applicant from its Contractor M/s. Larsen Toubro Limited, Water Supply Distribution Business Unit, Water Effluent Treatment IC - HELD THAT - The Contractor is responsible for the Operation and Maintenance of the plant such as engaging of labour, supervisors to oversee the labour and managers for overall supervision along with amenities, tools tackles provided for all the above personnel like vehicle, office establishment etc., while the applicant would ensure uninterrupted power supply and supply of material /spares as and when necessitated by the Contractor. Thus the services provided by the Contractor are pure services of Operation and Maintenance of plant devoid of any supply of material or goods in the due process. The services under question fall under SI.No. 25, Heading 9987 Maintenance repair and installation (except construction) Services attracting tax rate of 18% under Notification 11/2017- Central Tax (Rate) dt 28.06.2017.
Issues Involved:
1. Whether the applicant qualifies as a 'Governmental Authority' under the Act. 2. Whether the services availed by the applicant are exempt from GST by virtue of Entry 3 in Notification 12/2017 (Rate) dated 28.06.2017. 3. Whether the Applicant is liable to remit GST to its suppliers for services procured for supplying water for domestic purposes. Issue-wise Detailed Analysis: 1. Qualification as a 'Governmental Authority': The applicant, M/s Sri Satya Sai Water Supply Project Board, contended that it qualifies as a 'Governmental Authority' under the GST Act. The definition under Section 2(16) of the IGST Act and Notification No. 31/2017 - Central Tax (Rate) states that a 'Governmental Authority' must be set up by an Act of Parliament or State Legislature or established by any Government with 90% or more participation by way of equity or control to carry out any function entrusted to a panchayat or municipality under the Constitution. Upon examination: - The applicant is constituted by the Government of Andhra Pradesh under G.O. Ms No. 344 dated 16.09.1997, thus meeting the criterion of being established by the Government. - However, the Board consists of 9 members, with only 7 being officers/employees of the Government of Andhra Pradesh, equating to 77% government control, which falls short of the required 90% participation by way of equity or control. Therefore, the applicant does not meet the criteria to be considered a 'Governmental Authority' under the Act. 2. Exemption from GST under Entry 3 in Notification 12/2017 (Rate) dated 28.06.2017: The applicant sought exemption under Entry 3 of Notification 12/2017, which exempts pure services provided to a 'Governmental Authority' in relation to any function entrusted to a Panchayat or Municipality under the Constitution. Since the applicant does not qualify as a 'Governmental Authority', it cannot avail of the exemption under Entry 3 of Notification 12/2017. Consequently, the services procured by the applicant are not exempt from GST. 3. Liability to Remit GST for Services Procured: The services procured by the applicant from contractors, such as M/s. Larsen & Toubro Limited, for the operation and maintenance of water supply schemes, are classified under SI.No. 25, Heading 9987 "Maintenance repair and installation (except construction) Services". These services attract a tax rate of 18% (CGST 9% + SGST 9%) under Notification 11/2017- Central Tax (Rate) dated 28.06.2017. Therefore, the applicant is liable to remit GST at the specified rate for the services procured. Ruling: 1. The applicant does not qualify as a 'Governmental Authority' under the Act, and thus, the services procured by it are not exempt from GST but are taxable. 2. The services procured by the applicant fall under SI.No. 25, Heading 9987 "Maintenance repair and installation (except construction) Services" and attract a tax rate of 18% (CGST 9% + SGST 9%) under Notification 11/2017- Central Tax (Rate) dated 28.06.2017.
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