2021 (8) TMI 785 - AAR - GST

Local Authority or not - levy of GST - procurement of security services received from any person other than body corporate under reverse charge mechanism - advertisement services or the service recipient of AJL is required pay GST under reverse charge mechanism - Deductor of tax or not - Local Authority or government entity/governmental authority? - applicability of sl. no. 3 of N/N. 12/2017 Central Tax (Rate), sl. no. 3 of N/N.09/2017 IGST (Rate) and N/N. 13/2017-Central tax (Rate) dated 28-06-2017. HELD THAT - The funds of AJL has not been notified as local/ municipal funds by any Legislative Act passed by Gujarat legislature or by Gujarat Treasury Rules. Further, we do not find AMC to be the Central Government/ The State Government. We bear in mind that AJL has separate legal existence and is a legal person incorporated with Registrar of Companies with PAN no.AAGCA6478F. AJL is a Private limited Company and when Funds of any nature- be it local funds/ municipal funds or otherwise are granted to AJL, those funds in the hands of AJL become grants/ Revenue for AJL and unless the State Government notifies those grants or revenues now in the hands of AJL as a local/municipal fund, the grants/revenue of AJL does not merit to be termed local/municipal funds any longer - the AJL has neither been set up by an Act State Legislature nor been established by the State Government of Gujarat. Government is defined at section 2(53), CGST Act as Central Government and at Section 2(53) GGST as Government of Gujarat - there are no merit to consider AJL a Government authority/ Government entity. The applicant placed reliance on cases pertaining to different persons which have different constitution and establishment and are different from it in legality and as a person. Further as per law as stipulated in Section 103, CGST Act, Advance Rulings pronounced shall be binding only on the applicant who had sought it in respect of any matter referred to in Section 97(2) CGST Act for Advance Ruling and the concerned officer or the jurisdictional officer in respect of the applicant. The applicant without establishing that its revenues are notified as local/municipal funds by the competent authority cannot make a case by misplaced reliances on other Advance Rulings as per said section 97(2) CGST Act. Ahmedabad Janmarg ltd. is not a Local Authority - Ahmedabad Janmarg ltd is liable to pay GST on security services under RCM, as per relevant Notification - Ahmedabad Janmarg ltd is liable to pay GST on advertisement services supplied by it - Ahmedabad Janmarg ltd is not required to be registered as a Deductor under GST - Ahmedabad Janmarg ltd is not a Government Entity/ Governmental Authority.

Summary

Issues Involved:
1. Whether Ahmedabad Janmarg Ltd (AJL) qualifies as a 'Local Authority' under the CGST Act, 2017.
2. Liability of AJL to pay GST on procurement of security services under reverse charge mechanism (RCM).
3. Liability of AJL to pay GST on advertisement services or whether the recipient is liable under RCM.
4. Requirement for AJL to register as a Deductor under GST.
5. Whether AJL can be construed as a 'Government Entity' or 'Governmental Authority'.

Detailed Analysis:

1. Local Authority Status:
- Definition and Criteria: As per Section 2(69)(c) of the CGST Act, a 'Local Authority' includes a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to or entrusted by the Central or State Government with the control or management of a municipal or local fund.
- AJL’s Position: AJL is a private limited company with separate legal existence, incorporated with the Registrar of Companies. The funds received by AJL from AMC are considered grants/revenue and not local/municipal funds. The authority to notify funds as local/municipal rests with the Gujarat State Legislature or via Gujarat Treasury Rules.
- Judgment: AJL does not meet the criteria to be classified as a 'Local Authority' because its funds have not been notified as local/municipal funds by any legislative act or treasury rules, and AMC is not the Central or State Government.

2. Liability to Pay GST on Security Services:
- Exemption Criteria: Notification No. 12/2017 exempts pure services provided to a local authority by way of any activity in relation to a function entrusted to a Municipality under Article 243W of the Constitution.
- AJL’s Argument: AJL contends that it qualifies for exemption as it is managed by AMC and its activities fall under the functions of Article 243W.
- Judgment: Since AJL is not classified as a 'Local Authority,' it is liable to pay GST on procurement of security services under RCM as per the relevant notification.

3. Liability to Pay GST on Advertisement Services:
- Notification Reference: Notification No. 13/2017 specifies that services supplied by the Central Government, State Government, Union territory, or local authority to a business entity are covered under RCM.
- AJL’s Argument: AJL argues that it should not be liable to pay GST on advertisement services.
- Judgment: AJL is liable to pay GST on advertisement services supplied by it, as it does not qualify as a local authority.

4. Requirement to Register as a Deductor under GST:
- Section 24 and 51 of CGST Act: Section 24(vi) mandates registration for persons required to deduct tax under Section 51. Section 51(1) specifies that certain entities, including local authorities, are required to deduct tax.
- AJL’s Position: AJL does not fall under the categories specified in Section 51(1).
- Judgment: AJL is not required to register as a Deductor under GST.

5. Government Entity/Governmental Authority Status:
- Definitions:
- Government Entity: An authority or body including a society, trust, corporation 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.
- Governmental Authority: An authority or body 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 Municipality under Article 243W or to a Panchayat under Article 243G.
- AJL’s Argument: AJL claims it qualifies as both a 'Government Entity' and a 'Governmental Authority.'
- Judgment: AJL has neither been set up by an Act of State Legislature nor established by the State Government of Gujarat. It is constituted by the order of Municipality (AMC), which is not the Government. Therefore, AJL does not qualify as a 'Government Entity' or 'Governmental Authority.'

Conclusion:
1. AJL is not a Local Authority.
2. AJL is liable to pay GST on security services under RCM.
3. AJL is liable to pay GST on advertisement services.
4. AJL is not required to be registered as a Deductor under GST.
5. AJL is not a Government Entity/Governmental Authority.