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2021 (4) TMI 560 - AAR - GSTGovernmental Authority or not - National Institute of Design, Paldi, Ahmedabad (NID) - liability to pay GST on procurement of services under reverse charge mechanism - Security services received from any person other than body corporate as per N/N.13/2017 Central Tax (Rate) - Access to e-books/e-database from service provider located outside India as import of service as per N/N.10/2017 IGST (Rate) - requirement to be registered as a tax deductor under GST as per the provision of Section 24 of the CGST Act. Whether NID would qualify as governmental authority as defined under the Integrated Goods and Services Tax Act, 2017? - HELD THAT - For the applicant to fall under the definition of Governmental Authority , the following 3 conditions will be required to be satisfied (1) It has to be set up by an Act of Parliament or a State Legislature or has to be established by any Government; (2) The Government should have 90 per cent or more participation by way of equity or control and (3) It should be established for carrying out any function entrusted to a municipality under Article 243W of the Constitution or to a Panchayat under Article 243G of the Constitution. Since the applicant has fulfilled the conditions of being formed by an Act of Parliament and being established to carry out the function entrusted to a municipality under Article 243W of the Constitution and to a Panchayat under Article 243G of the Constitution, it is concluded that the applicant will fall under the definition of Governmental Authority if it also fulfils the condition namely ninety percent or more participation of Government by way of equity or control. Whether NID is liable to pay GST on procurement of (a)security services received from any person other than body corporate as per Notification No.13/2017-central Tax Rate (b)access to e-books/e-database from service provider located outside India as import of service as per Notification No.10/2017-IGST(Rate) under reverse charge mechanism, in view of the exemption granted in Sr.No.3 of Notification No.12/2017-Central Tax(Rate) or Sr.No.3 of Notification No.09/2017-IGST(Rate)? - HELD THAT - Sr.No.3 of aforementioned Notifications No.12/2017-Central Tax(Rate) dated 28.06.2017 and Notification No.09/2017-IGST(Rate) dated 28.06.2017 exempts Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental Authority or a Government Entity by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. In the present case, in view of non-submission of copies of agreement or contract with regard to the services received/to be received by the applicant, it would not be possible to give a decision in the matter. Whether NID is required to be registered as a tax deductor under GST as per the provision of Section 24 of the CGST Act? - HELD THAT - NID has been formed by an Act of Parliament of the Government of India i.e. the NID Act. However, they have not given any proof with regard to fifty-one percent, or more participation of Government by way of equity or control, to carry out any function . Hence, it is found that since it has been established that NID has been formed by an Act of Parliament, the applicant will have to be registered as a tax deductor under the provisions of Section 24 of the CGST Act read with Section 51 of the Act, if, and only if, they fulfil the condition of fifty-one percent, or more participation of Government by way of equity or control, to carry out any function . It is therefore concluded that the applicant will have to be registered as a tax deductor under the provisions of Section 24 of the CGST Act read with Section 51 of the Act, if they fulfil the condition of fifty-one percent, or more participation of Government by way of equity or control, to carry out any function .
Issues Involved:
1. Qualification of NID as a 'Governmental Authority' under the Integrated Goods and Services Tax Act, 2017. 2. Liability of NID to pay GST on procurement of security services and access to e-books/e-database under reverse charge mechanism. 3. Requirement for NID to be registered as a tax deductor under GST as per Section 24 of the CGST Act. Issue-wise Detailed Analysis: 1. Qualification of NID as a 'Governmental Authority': The applicant, National Institute of Design (NID), sought to determine if it qualifies as a 'Governmental Authority' under the IGST Act, 2017. The definition of 'Governmental Authority' under Section 2(16) of the IGST Act requires: - The entity to 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. - The entity must carry out functions entrusted to a municipality under Article 243W or a Panchayat under Article 243G of the Constitution. The applicant argued that NID was set up by an Act of Parliament and is controlled by the Central Government, thus meeting the first condition. However, the applicant did not provide proof of the Government having 90% or more participation by way of equity or control. The ruling concluded that NID would qualify as a 'Governmental Authority' if it fulfills the condition of 90% or more participation by way of equity or control by the Government. 2. Liability to Pay GST on Procurement of Services: The applicant sought clarification on whether they are liable to pay GST on the procurement of security services and access to e-books/e-database under reverse charge mechanism, given the exemption under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) and Notification No. 09/2017-IGST (Rate). The conditions for exemption include: - The service must be a pure service (excluding works contract service or other composite supplies involving supply of any goods). - The service must be provided to the Central Government, State Government, Union territory, local authority, Governmental Authority, or Government Entity. - The service must relate to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution. The applicant did not submit copies of agreements or contracts with service providers, making it impossible for the authority to determine whether the services received are 'pure services'. Consequently, the ruling could not provide a decision on the matter. 3. Requirement to Register as a Tax Deductor: The applicant questioned whether NID is required to register as a tax deductor under GST as per Section 24 of the CGST Act. Section 24 mandates registration for persons required to deduct tax under Section 51, which includes: - An authority or board set up by an Act of Parliament or State Legislature, or established by any Government with 51% or more participation by way of equity or control. The ruling noted that NID was formed by an Act of Parliament, but the applicant did not provide proof of 51% or more participation by way of equity or control by the Government. Therefore, NID must register as a tax deductor if it meets the condition of 51% or more participation by way of equity or control. RULING: 1. Qualification as 'Governmental Authority': NID qualifies if it meets the condition of 90% or more participation by way of equity or control by the Government. 2. Liability to Pay GST on Procurement of Services: No decision due to non-submission of necessary agreements or contracts. 3. Requirement to Register as a Tax Deductor: NID must register if it meets the condition of 51% or more participation by way of equity or control by the Government.
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