2021 (1) TMI 584 - AAR - GST

Supply or not - various activities carried out by the Applicant to the plot holders in terms of provisions of GIDC Act 1962 - charges collected for the same - Section 7 of the Central Goods and Services Act 2017 - Gujarat Industrial Development Corporation - Central Government State Government Union Territory Local authority or Governmental Authority or not - N/N. 12/2017-Central Tax (Rate) dated 28.06.2017 - N/N. 14/2018-Central Tax(Rate) dated 26.07.2018 (effective from 27.07.2018) vide which certain amendments were made in Entry No.4 of Notification No.12/2017-Central Tax(Rate) dated 28.06.2017 - HELD THAT - Gujarat Industrial Development Corporation has come into existence by virtue of Gujarat Industrial Development Act 1962 of the Government of Gujarat (Gujarat Act No.XXIII of 1962). The entire top Management of the Corporation including the Chairman vice-Chairman Managing Director Chief Accounts Officer as well as the Directors of the Corporation are directly appointed by the State Government i.e. the Government of Gujarat. It can also be seen from the website of the applicant that the Managing Director as well as the Joint Managing Director are officers from the cadre of Indian Administrative Service(IAS) whereas the Executive Director is an officer belonging to the cadre of Gujarat Administrative Service (GAS). Also on going through the various sections of the GID Act mentioned hereinabove it appears that the said Corporation is totally governed by the State Government and functions just like any other Department of the State Government i.e. State of Gujarat. Further on perusal of the Audit Report and Annual Accounts of Gujarat Industrial Development Corporation for the financial year 2013-14(available online) it is specifically mentioned therein at Point No.4(Related Party Disclosure) that Gujarat Industrial Development Corporation is a wholly owned corporation of Government of Gujarat. Hence it is a state controlled enterprise as defined in Para-9 of Accounting Standard AS 18 Related Party Disclosure issued by the Institute of Chartered Accountants of India. Thus no disclosure is required keeping the spirit of the accounting standard in mind. Thus Gujarat Industrial Development Corporation is nothing but a wing of the State Government i.e. the Government of Gujarat which has come into existence by virtue of the Gujarat Industrial Development Act and Rules 1962 of the Government of Gujarat. The supply of goods/services provided by the applicant are covered in sub-sections 1 and 1(A) above since as per their submission itself they are involved in sale transfer rental lease etc. and are earning income from provision/supply of various services/goods as listed in para-14 above. However the second part of the said provision specifically states that the aforementioned supply of goods and services should be made or agreed to be made for a consideration by a person in the course or furtherance of business. It can therefore be seen from the above that supply would include supply of goods or services or both in all the forms made by a person in course or furtherance of business for consideration. Thus the primary requirement under Section 7(1)(a) is that all forms of supply of goods or services or both mentioned in the section should be in the course or furtherance of business and to qualify to be supply under Section 7(1)(a) of CGST Act 2017 the said phrase in the course or furtherance of business will have to be satisfied. Unless and until there is a specific entry pertaining to the establishment or development of industries in the aforementioned list it cannot by any stretch of imagination be construed that the applicant is a Corporation that has been established to carry out activities in relation to functions entrusted to the municipalities under Article 243W of the Constitution of India merely on the grounds that establishment organisation and development of industries would lead to economic development and would thus be covered under the aforementioned Entry No.3 of the list. In view of the above facts we conclude that the applicant namely Gujarat Industrial Development Corporation is not eligible for the exemption mentioned at Entry No.4 of Notification No.12/2017-Central Tax(Rate) dated 28.06.2017(as amended from time to time). It can be seen from the Entry No.6 that the services supplied by the applicant who is providing or supplying the services as a public authority and falling under the category of State Government as discussed earlier would be covered under item(d) above which provides that any service other than services covered under entries (a) to (c) above provided to business entities would be exempted from GST. It is seen that the services supplied/provided by the applicant is to the various industries located in the Industrial area. All the industries as we know are undoubtedly business entities i.e. entities built or created for the purpose of carrying on business only with the motive of earning profit and are covered under the definition of business as defined in Section 2(17) of the CGST Act 2017 - in view of the item(d) of Entry No.6 of Notification No.12/2017-Central Tax(Rate) dated 28.06.2017 (as amended from time to time) no exemption will be available to the applicant - it can be concluded that the various activities carried out by the Applicant to the plot holders in terms of provisions of GIDC Act 1962 and charges collected for the same as may be notified from time to time amounts to supply under Section 7 of the Central Goods and Services Act 2017 and are liable to tax under GST.

Summary

Issues Involved:
1. Whether the activities carried out by the applicant to the plot holders amount to supply under Section 7 of the CGST Act, 2017.
2. Whether the applicant qualifies as a "Governmental Authority" and is eligible for exemptions under Notification No.12/2017-Central Tax (Rate) dated 28.06.2017.

Issue-wise Detailed Analysis:

1. Whether the activities carried out by the applicant to the plot holders amount to supply under Section 7 of the CGST Act, 2017:

The applicant, Gujarat Industrial Development Corporation (GIDC), was established under the Gujarat Industrial Development Act, 1962, to secure the orderly establishment and organization of industries in industrial areas and estates in Gujarat. The applicant provides plots of land on lease, infrastructure facilities, and maintenance services to plot holders. The applicant sought a ruling on whether these activities amount to a supply under Section 7 of the CGST Act, 2017.

Section 7(1) of the CGST Act defines "supply" to include all forms of supply of goods or services made for consideration in the course or furtherance of business. The term "business" under Section 2(17) includes trade, commerce, manufacture, profession, vocation, adventure, or any other similar activity, whether or not it is for pecuniary benefit. It also includes any activity or transaction undertaken by the Central Government, a State Government, or any local authority in which they are engaged as public authorities.

The applicant argued that their activities do not amount to business as they are statutory duties performed under the GIDC Act. However, the ruling emphasized that the activities provided by the applicant fall under the definition of "business" as per Section 2(17) of the CGST Act. Therefore, the activities of leasing plots, providing infrastructure, and maintenance services to plot holders are considered as supply under Section 7 of the CGST Act, 2017, and are liable to GST.

2. Whether the applicant qualifies as a "Governmental Authority" and is eligible for exemptions under Notification No.12/2017-Central Tax (Rate) dated 28.06.2017:

The applicant claimed exemption under Entry No.4 of Notification No.12/2017-Central Tax (Rate), which exempts services provided by the Central Government, State Government, Union territory, local authority, or governmental authority by way of any activity in relation to any function entrusted to a municipality under Article 243W of the Constitution.

The ruling examined whether the applicant qualifies as a "Governmental Authority." The GIDC was established by the Gujarat Industrial Development Act, 1962, and its top management, including the Chairman, Vice-Chairman, Managing Director, and Directors, are appointed by the State Government. The ruling referred to judicial precedents, including the Supreme Court's decision in the applicant's own case, which indicated that the GIDC functions as a wing of the State Government.

The ruling concluded that the GIDC is a part of the State Government and functions as an agency of the Government in carrying out the purpose and object of industrial development. Therefore, the GIDC falls under the category of "State Government" and not as a separate "Governmental Authority."

Further, the ruling examined whether the services provided by the applicant are in relation to any function entrusted to a municipality under Article 243W of the Constitution. The Twelfth Schedule of the Constitution lists functions such as urban planning, regulation of land-use, water supply, public health, and sanitation. The ruling found that the establishment and development of industries do not fall under these functions.

The ruling also referred to Entry No.6 of Notification No.12/2017-Central Tax (Rate), which exempts services provided by the Central Government, State Government, Union territory, or local authority, except services provided to business entities. Since the applicant provides services to business entities (industries), the exemption under Entry No.6 is not applicable.

Conclusion:

The ruling concluded that the various activities carried out by the applicant to the plot holders amount to supply under Section 7 of the CGST Act, 2017, and are liable to GST. The applicant does not qualify for exemptions under Notification No.12/2017-Central Tax (Rate) as they fall under the category of "State Government" and their services are provided to business entities.