9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (3) TMI 851 - AAR - GSTWorks Contract - service recipient is Governmental Authority or not - explanation to clause (16) of section 2 of the IGST Act, 2017 - payments related to work order for Fire Fighting System installation at contracted area between applicant and Jaipur Smart City Limited - applicability of serial number 3 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 24/2017- Central Tax (Rate) dated 21.09.2017 - GST rate for the work undertaken by applicant for M/s Jaipur Smart City Limited - applicability of reverse charge mechanism in respect of road cutting charges paid by them to Jaipur Nagar Nigam (JNN) on behalf of M/s. Jaipur Smart City Limited in relation to such contract - rate of GST - road cutting charges by the Applicant from M/s. Jaipur Smart City Limited liable to GST or not. Whether the service recipient i.e. M/s. Jaipur Smart City Limited is a Governmental Authority as defined in item No. ix (of paragraph 4) of an explanation to Notification No 11/2017CT(R) dated 28.06.2017? - HELD THAT - Jaipur Smart City Limited (JSCL) is a Special Purpose Vehicle (SPV) for development of Jaipur City - The Municipal Corporation, Jaipur is not Government but it is a Local Authority. Thus, shareholding of State Government is almost 50% only in the JSCL. Therefore, M/s JSCL is not satisfying the conditions of item No. ix (of paragraph 4) of an explanation to Notification No 11/2017-CT(R) dated 28.06.2017 in respect of 'Governmental Authority'. Applicability of Item number (vi) in Column (3) of serial number 3 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 24/2017- Central Tax (Rate) dated 21.09.2017 3/2019-Central Tax (Rate) dated 29.03.2019 - HELD THAT - When M/s JSCL not qualified as Governmental authority then services provided to it by the applicant is also not considered as services provided to the governmental authority. Thus, Item number (vi) in Column (3) of serial number 3 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 as amended time to time is not applicable on applicant in this case - services provided by the applicant will be covered under Item number (xii) in Column (3) of serial number 3 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 as amended time to time and is liable to GST @ 18%. Applicability of GST under RCM in respect of road cutting charges paid by applicant to Jaipur Nagar Nigam (JNN) on behalf of M/s. Jaipur Smart City Limited in relation to such contract - HELD THAT - The Executive Engineer, Jaipur Nagar Nigam (JNN) i.e. municipality vide demand note dated 26.03.2021 (as provided by the applicant) raised a demand to the applicant for road cutting charges in respect of Fire Fighting pipeline. Further, as per clause no. (viii) of point no. 1 of the general scope of work as mentioned under heading 5.3 of Section V - Procuring Entity's Requirements of RFP, any approval required from any line agency should be taken by the contractor in the name of entities. In the instant case road cutting charges are to be deposited by the applicant to the Jaipur Nagar Nigam (JNN) i.e. Local Authority and the same will be reimbursed by the JSCL on submission of running bill. Further, as per item No. 5 of the Notification No. 13/2017-CT(R) dated 28.06.2017, central tax leviable under section 9 of the said Central Goods and Services Tax Act, shall be paid on reverse charge basis by the recipient when Services supplied by the Central Government, State Government, Union territory or local authority to a business entity. In the present case, services of permission/fees of road cutting is provided by the Local Authority i.e. Jaipur Nagar Nigam (municipality) to the business entity i.e. M/s Lakhlan Qureshi Construction Company (applicant) for the consideration of ₹ 3,85,10,775/-(i.e. more than Five thousand rupees). Hence, the applicant is liable to pay GST as a recipient for the charges paid or to be paid to the Jaipur Nagar Nigam under reverse charge mechanism. It is pertinent to mention here that activity of giving permission for road cutting charges is not mentioned in the list of works as provided under article 243 W of the constitution entrusted to a Municipality - Thus, clause (b) of sub-section (2) of section 7 of CGST Act, 2017 read with notification no. 14/2017 as amended by notification no. 16/2018 of central tax (rate) is not applicable in this case and the applicant is liable to pay GST as a recipient. Liability of GST on recovery of such road cutting charges by the Applicant from M/s. Jaipur Smart City Limited (JSCL) - HELD THAT - Clause (c) of sub section (2) of Section 15 of the CGST Act, 2017 states that any incidental expenses charged by the supplier to the recipient and any other amount charged for anything done during the supply until the time of delivery of the goods or supply of the services shall be included in the value of the supply. Hence, any goods or services provided by the supplier, for which a consideration is charged from the recipient, shall be included in the transaction value and chargeable to tax. With regard to reimbursement of expenses incurred as a pure agent, Rule 33 of the CGST rules, 2017 provides that any expenditure incurred as a pure agent will be excluded from the value of supply, and hence, from the aggregate turnover as well. In the instant case, as M/s JSCL is not a governmental authority therefore, serial number 3 of Notification No. 12/2017 of central tax (rate) dated 28th June 2017 as amended by Notification No. 02/2018 of central tax (rate) dated 25th January 2018 is not applicable on applicant - the applicant does not satisfy the condition of pure agent and does not fall under the ambit of 'Pure Agent' as per Rule 33 of the CGST rules, 2017. As per clause (c) of Section 15(2) of CGST Act, 2017, recovery of such road cutting charges by the Applicant from M/s. Jaipur Smart City Limited will be included in the value of supply under GST. Thus, the applicant is liable to pay GST @18% on recovery of such road cutting charges.
Issues Involved:
1. Whether Jaipur Smart City Limited (JSCL) qualifies as a "Governmental Authority." 2. Applicability of Item number (vi) in Column (3) of serial number 3 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 24/2017- Central Tax (Rate) dated 21.09.2017. 3. GST rate for the work undertaken by the applicant for JSCL. 4. Liability of the applicant to pay GST under RCM for road cutting charges paid to Jaipur Nagar Nigam (JNN). 5. GST applicability on the recovery of road cutting charges by the applicant from JSCL. Detailed Analysis: Issue 1: Whether JSCL qualifies as a "Governmental Authority" The applicant contended that JSCL should be considered a "Governmental Authority" as it is a Special Purpose Vehicle (SPV) formed by the Government of Rajasthan for the development of Jaipur as a smart city. The shareholding pattern indicates that the Government of Rajasthan and the Jaipur Municipal Corporation each hold 50% of the shares. However, the definition of "Governmental Authority" requires 90% or more participation by way of equity or control by the Government. Since the Government of Rajasthan does not meet this threshold, JSCL does not qualify as a "Governmental Authority." Conclusion: JSCL is not a "Governmental Authority." Issue 2: Applicability of Item number (vi) in Column (3) of serial number 3 of Notification No. 11/2017 The applicant argued that the services provided to JSCL should attract a GST rate of 6% under Item number (vi) of serial number 3 of Notification No. 11/2017. Since JSCL does not qualify as a "Governmental Authority," the services provided to it do not fall under this item. Conclusion: Item number (vi) in Column (3) of serial number 3 of Notification No. 11/2017 is not applicable. Issue 3: GST rate for the work undertaken by the applicant for JSCL Given that JSCL is not a "Governmental Authority," the services provided by the applicant fall under Item number (xii) of serial number 3 of Notification No. 11/2017, which attracts a GST rate of 18% (9% CGST + 9% SGST). Conclusion: The applicable GST rate is 18% (9% CGST + 9% SGST). Issue 4: Liability of the applicant to pay GST under RCM for road cutting charges paid to JNN The applicant paid road cutting charges to JNN on behalf of JSCL. As per Notification No. 13/2017-CT(R) and Notification No. 12/2017-CT(R), services provided by a local authority to a business entity are subject to GST under the reverse charge mechanism (RCM) if the consideration exceeds ?5,000. The road cutting charges paid by the applicant exceed this threshold, making the applicant liable to pay GST under RCM at 18% (9% CGST + 9% SGST). Conclusion: The applicant is liable to pay GST under RCM at 18% (9% CGST + 9% SGST). Issue 5: GST applicability on the recovery of road cutting charges by the applicant from JSCL The applicant sought to recover the road cutting charges from JSCL. According to Section 15(2)(c) of the CGST Act, 2017, any incidental expenses charged by the supplier to the recipient are included in the value of supply and are subject to GST. The applicant does not qualify as a "pure agent" under Rule 33 of the CGST Rules, 2017, as they hold the title to the services procured. Therefore, the recovery of road cutting charges is subject to GST at 18% (9% CGST + 9% SGST). Conclusion: The recovery of road cutting charges by the applicant from JSCL is subject to GST at 18% (9% CGST + 9% SGST). Ruling: 1. JSCL is not a "Governmental Authority." 2. Item number (vi) in Column (3) of serial number 3 of Notification No. 11/2017 is not applicable. 3. The GST rate for the work undertaken by the applicant for JSCL is 18% (9% CGST + 9% SGST). 4. The applicant is liable to pay GST under RCM at 18% (9% CGST + 9% SGST) for road cutting charges paid to JNN. 5. The recovery of road cutting charges by the applicant from JSCL is subject to GST at 18% (9% CGST + 9% SGST).
|
