2021 (9) TMI 1066 - AAR - GST

Government entity or not - Maharashtra Jeevan Pradhikaran (MJP) - Scope of service under the agreement between MDE and MJP - work intended to be carried out by MDE qualifies for exemption as per notification 12/2017-central Tax (Rate) dated 28.06.2017 or not - requirement on the part of MDE to obtain registration under GST law - HELD THAT - Maharashtra Jeevan Pradhikaran (MJP) clearly cannot be considered as a Central Government, State Government or Union territory or local authority - Maharashtra Water Supply and Sewerage Board (MWSSB) was established as per MWSSB Act 1976 for Rapid development and proper regularization of water supply and sewerage services in the State of Maharashtra, by the Government of Maharashtra. MWSSB was subsequently named as Maharashtra Jeevan Pradhikaran in 1997 - the Maharashtra Jeevan Pradhikaran is also seen to be under the control of the Government of Maharashtra. MJP is constituted and established by the State Government of Maharashtra with 100% participation by way of Equity or Control to carry out the function entrusted to it by the State Government viz. rapid development and proper regularization of water supply and sewerage services in the State of Maharashtra and therefore MJP is clearly covered under the definition of Government Entity as can be seen from the definition of a Government Entity - the applicant is supplying pure services to a Government Entity and therefore as per the provisions of Notification No. 12/2017, the said services supplied by the applicant are exempted from GST. I f it is concluded from the above that the supplies made or proposed to be made by MDE to MJP qualifies for exemption then the consequent question is whether MDE requires to obtain registration under GST law? - HELD THAT - The applicant would be liable to obtain GST registration only if it supplies taxable good or services or both, in view of Section 22(1) and in view of Section 23 (1) (a), no registration is required to be obtained by the applicant when it exclusively supplies goods or services or both that are not liable to tax or wholly exempt from tax under the CGST Act, 2017 or under the IGST Act, 2017. It is not mandated to take GST registration based on the contract with MJP, since the services rendered are Exempt service. However, there is nothing forthcoming in the application made by the applicant that they are only rendering services to MJP, under the impugned contract, which has been held to be exempt under the provisions of Notification 12/2017 mentioned above and not supplying any other taxable goods or services or both - However, other than the exempt services supplied under the impugned contract with MJP, if the applicant is engaged in supply of any taxable supply of goods or services or both, then the provisions of Section 22 of the CGST Act would come into play and it would be liable to obtain registration on attaining/crossing the threshold limit mentioned under Section 22 of the CGST Act, 2017.

Summary

Issues Involved:
1. Whether MJP can be considered as a 'government entity' under GST law.
2. Whether the work intended to be carried out by MDE qualifies for exemption as per notification 12/2017-Central Tax (Rate) dated 28.06.2017.
3. If the supplies made or proposed to be made by MDE to MJP qualify for exemption, whether MDE requires to obtain registration under GST law.

Detailed Analysis:

Issue 1: Whether MJP can be considered as a 'government entity' under GST law
- Applicant's View: MJP is a Maharashtra State Government undertaking established through a state legislature act (The Maharashtra Jeevan Authority Act, 1976). The state government holds 100% control over MJP, qualifying it as a "Government Entity" under Notification No. 31/2017-C.T. (R).
- Judgment: The applicant withdrew this question during the final hearing; hence, it was not addressed in the judgment.

Issue 2: Whether the work intended to be carried out by MDE qualifies for exemption as per notification 12/2017-Central Tax (Rate) dated 28.06.2017
- Applicant's View: The services provided by MDE to MJP fall under the scope of "pure services" related to water supply management, which is a function entrusted to municipalities under Article 243W of the Constitution. Therefore, these services should be exempt from GST as per Entry 3 of Notification No. 12/2017-C.T. (Rate).
- Judgment Analysis:
- The agreement between MDE and MJP involves pure services without any supply of goods.
- MJP qualifies as a "Government Entity" as it is established by the Maharashtra State Government with 100% control to carry out functions related to water supply and sewerage services.
- The services provided by MDE are in relation to functions entrusted to a municipality under Article 243W, specifically water supply for domestic, industrial, and commercial purposes.
- Therefore, the services provided by MDE to MJP are exempt from GST under Notification No. 12/2017-C.T. (Rate).

Issue 3: Whether MDE requires to obtain registration under GST law if the supplies made or proposed to be made to MJP qualify for exemption
- Applicant's View: Since the services provided to MJP are exempt from GST, MDE should not be required to obtain GST registration as per Section 23(1)(a) of the CGST Act, 2017.
- Judgment Analysis:
- As per Section 22(1) of the CGST Act, 2017, registration is required if the aggregate turnover exceeds the specified threshold.
- Section 23(1)(a) exempts entities from registration if they exclusively supply goods or services that are wholly exempt from tax.
- If the only services provided by MDE are those exempt under the contract with MJP, MDE is not required to obtain GST registration.
- However, if MDE engages in any taxable supply of goods or services, it must obtain GST registration upon crossing the threshold turnover as per Section 22 of the CGST Act, 2017.

Conclusion:
1. The question of whether MJP is a 'government entity' under GST law was withdrawn by the applicant and not addressed.
2. The work intended to be carried out by MDE under the contract with MJP qualifies for exemption as per Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.
3. MDE does not need to obtain GST registration if the only services provided are those exempt under the contract with MJP. However, if MDE provides any taxable supplies, it must register under GST law upon crossing the threshold turnover.