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2021 (4) TMI 563 - AAR - GSTLocal Authority or not - Ahmedabad Municipal Transport Service - engaged in rendering passenger transportation services and runs public buses in the city of Ahmedabad within the limits of Municipal Corporation - GST on procurement of security services received from any person other than body corporate under reverse charge mechanism - GST on advertisement services or the service recipient of AMTS is required to pay GST under reverse charge mechanism - registration as a Deductor under GST as per the provision of Section 24 of the CGST Act. Whether the applicant i.e. AMTS would be qualified as local authority as defined under the CGST Act, 2017? - HELD THAT - AMTS is a statutory authority established to carry out the functions entrusted to a Municipality under Art. 243W of the Constitution. It is a body discharging municipal functions, although not a municipality as required to be constituted under Art. 243Q of the Constitution and is fit to be included as other authority under Section 2(69)(c) of the GST Act. It will also be a local authority within the meaning of the above section of the GST Act if the Applicant is legally entitled to or entrusted by the State Government with the control or management of a municipal or local fund. Thus, Ahmedabad Municipal Transport Service (AMTS), is a statutory authority discharging municipal functions (although not a municipality as required to be constituted under Art. 243Q of the Constitution), is legally entitled to and entrusted by the State Government with the control or management of a local fund as defined in Gujarat Treasury. In view of the above discussion we hold that Ahmedabad Municipal Transport Service (AMTS) can be termed as a local authority under Section 2(69)(c) of the GST Act. Liability to pay GST on procurement of security services received from any person other than body corporate under reverse charge mechanism - exemption under Sl. No. 3 of N/N. 12/2017 - Central Tax (Rate) or Sl. No. 3 of N/N. 09/2017 - IGST (Rate) - HELD THAT - The term in relation to is very wide and the intention of the legislature is to encompass all those services which are provided so as to enable the organization to perform function entrusted in Article 243W of Constitution Of India. In the instant case Security Service is necessary to provide the passenger transport service without any hurdle. The security of a transport undertaking is of utmost importance considering possibility of unfortunate events that may threaten the safety of Vehicles. The fact is that security is vital for safe-keep of undertaking and it can be ensured only by way of keeping enough security measures and procedures in place. Thus, the security service has direct nexus with the transportation service. Accordingly, security services would be included within the term in relation to and would be covered within pure service as envisaged in the exemption Notification No.12/2017-CT (Rate) dated 28.06.2017. As per the N/N. 29/2018-CT (Rate) dated 31.12.2018 Reverse Charge Mechanism on Security Service provided to local authority by any other person other than body corporate is not applicable. Therefore, the applicant being a local authority in terms of Section 2(69) of CGST Act, 2017 as discuss in above Para s is not liable for payment of GST under Reverse Charge Mechanism on receipt of Security Service. Whether the applicant is required to pay GST on advertisement services or the service recipient of AMTS is required pay GST under reverse charge mechanism considering Notification No. 13/2017-Central tax (Rate) dated 28-06-2017? - HELD THAT - The applicant i.e. AMTS is considered as local authority in terms of Section 2(69) of CGST Act, 2017. Therefore, in terms of Sl. No. 5 of Notification No. 13/2017-CT (Rate) dated 28.06.2017, Services supplied by the Central Government, State Government, Union territory or local authority to a business entity located in taxable territory is liable to payment of GST under reverse charge mechanism - In view of the Sl. No. 5 of the Notification No. 13/2017-CT (Rate) dated 28.06.2017 applicant being a local authority is providing advertisement service to the business entity, accordingly as per the aforesaid Notification applicant is not liable to payment of GST but under reverse charge mechanism recipient of Service is liable to payment of GST. Whether AMTS is required to be registered as a Deductor under GST as per the provision of Section 24 of the CGST Act? - HELD THAT - The applicant is considered as local authority under Section 2(69) of CGST Act, 2017. In view of the clause (b) of Section 51 of the CGST Act, 2017 local authority is compulsory required to take GST Registration for the purpose of deduction of TDS on the payments made to the supplier of taxable goods and/or services. Govt. of India vide Notification No. 50/2018-Ct dated 13.09.2018 has specified the category of person which includes local authority to whom TDS is to be deducted - the applicant being local authority is required to obtain registration as GST TDS deductor in terms of Section 51 of CGST Act, 2017.
Issues Involved:
1. Qualification of AMTS as a 'Local Authority' under the CGST Act, 2017. 2. Liability of AMTS to pay GST on procurement of security services under reverse charge mechanism. 3. Liability of AMTS or service recipient to pay GST on advertisement services under reverse charge mechanism. 4. Requirement for AMTS to register as a Deductor under GST as per Section 24 of the CGST Act. Issue-wise Detailed Analysis: Part A: Qualification as 'Local Authority' Classification as Local Authority: The applicant, AMTS, argued that it is managed by AMC under the GPMC Act and thus qualifies as a 'Local Authority' under Section 2(69) of the CGST Act. The definition includes entities like a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to manage a municipal or local fund. AMTS, being established and managed by AMC, performs functions entrusted to a municipality under Article 243W of the Constitution, such as providing urban amenities and public conveniences. The judgment referenced the ruling in Union of India vs. R.C. Jain, which outlines criteria for an entity to be considered a 'local authority,' including separate legal existence, functioning in a defined area, power to raise funds, autonomy, and being entrusted with governmental functions. Judgment: AMTS fulfills the criteria for a 'local authority' under Section 2(69)(c) of the CGST Act, as it is a statutory authority established to carry out functions entrusted to a Municipality under Article 243W of the Constitution. Part B: Liability to Pay GST on Procurement of Security Services Exemption Analysis: The applicant contended that security services procured by AMTS should be exempt from GST under Sl. No. 3 of Notification No. 12/2017 - Central Tax (Rate), which exempts pure services provided to a local authority in relation to functions entrusted under Article 243W. The term 'in relation to' was interpreted broadly to include services necessary for performing municipal functions, such as security services for transportation. Judgment: AMTS, being a 'local authority,' is not liable to pay GST under reverse charge mechanism on procurement of security services, as these services are considered 'in relation to' the performance of municipal functions and thus exempt under Notification No. 12/2017 - Central Tax (Rate). Part C: Liability to Pay GST on Advertisement Services Reverse Charge Mechanism: The applicant provides advertising services and argued that under Notification No. 13/2017 - Central Tax (Rate), services supplied by a local authority to a business entity are subject to reverse charge, meaning the service recipient should pay the GST. Judgment: The service recipients of AMTS are required to pay GST under reverse charge mechanism on advertisement services, as AMTS qualifies as a 'local authority' under Section 2(69) of the CGST Act. Part D: Requirement to Register as a Deductor under GST TDS Provisions: The applicant argued that as a 'local authority,' AMTS is required to deduct tax at source (TDS) under Section 51 of the CGST Act and thus must register as a Deductor. Judgment: AMTS, being a 'local authority,' is required to obtain registration as a GST TDS deductor in terms of Section 51 of the CGST Act, 2017. Ruling Summary: 1. AMTS qualifies as a 'Local Authority' under the CGST Act, 2017. 2. AMTS is not liable to pay GST on procurement of security services under reverse charge mechanism. 3. The service recipients of AMTS are required to pay GST under reverse charge mechanism on advertisement services. 4. AMTS is required to register as a Deductor under GST as per Section 24 of the CGST Act.
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