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2022 (10) TMI 910 - AAR - GSTLevy of GST - payments made by PTCUL to UK CAMPA as Compensatory Afforestation Value - Net Present Value and recovery made towards dwarf species cost - payments made by PTCUL to Divisional Forest Officer (DFO) towards lease rent - scope of Government as laid under section 2(53) of the Central Goods Service Tax (CGST) Act, 2017 - supply of services or not - section 12AA registered entity of The Income Tax Act 1961 or not - reverse charge mechanism or not - GST on compensation paid by PTCUL to DFO, the Government of Uttarakhand - heading of the GST tariff. Whether UK CAMPA, falls under the ambit of the definition of Government as laid under section 2(53) of the Central Goods Service Tax (CGST) Act, 2017? - HELD THAT - There is no doubt that Forest (Conservation) Act, 1980 in the state of Uttarakhand is also implement and regulated by the Forest Department of State Government of Uttarakhand and the UK CAMPA is under the aegis of Forest Department of State Government of Uttarakhand, as they administer, manage and regulate the said act - in the calculation sheet and on the body of the said letters, 18% GST has been calculated, this clearly and evidently shows that GST is leviable on such demands raised for UK CAMPA by the Forest Department of State Government of Uttarakhand and that the applicant has been sanctioning the requisite funds - UK CAMPA falls under the category of State Government as defined in Section 2(103) of the CGST Act, 2017 which specifies that State includes a Union Territory with Legislature. Whether services rendered by UK CAMPA for which compensation is paid by PTCUL, qualifies as a 'supply of services' as per section 7 of CGST Act, 2017? - HELD THAT - If grants are given freely in which the grantor does not receive any benefit in return, then they are not consideration for any supply and are therefore outside the scope of GST but if the grantor receives a benefit in return, then the grant is treated as a consideration for the supply and in the instant case the applicant has admitted that the amount paid is to compensate for loss of land by land' and 'trees by trees', which imply that although the assignment of the value has to be calculated for loss of land by land' and 'trees by trees', but the said assignment of the value also includes consideration for various other activities viz. assisted natural regeneration, conservation and protection of forests, infrastructure development, wildlife conservation and protection and other related activities and for matters connected therewith or incidental thereto - both of the two major elements i.e. Supply is done for a consideration and Supply is done in course of furtherance of business are fulfilled as the services rendered are through the Forest Department of State Government of Uttarakhand, for which compensation is paid by PTCUL, qualifies as a 'supply of services' as per section 7 of CGST Act, 2017. Whether services supplied by UK CAMPA, which is a section 12AA registered entity of The Income Tax Act 1961, be covered under Serial No 1 (Chapter 99) of Notification No 12/2017-Central Tax (Rate) dated 28th June 2017 read with section 11 of the CGST Act 2017? - HELD THAT - It is opined that charity means generosity and helpfulness especially toward the needy or suffering that is to say aid given to those in need. The list of activities given in the above said notification are the activities which are eligible for exemption but for the exemption to come into picture the act of charity has to be fulfilled and in the instant case, the money is being charged and collected for specific purposes, which evidently does not constitute charity' and hence services rendered through the Forest Department of State Government of Uttarakhand, is not covered under Entry No 1 (Chapter 99) of Notification No 12/2017 - Central Tax (Rate) dated 28th June 2017 read with section 11 of the CGST Act 2017. Under which heading of the GST tariff shall the said supply of service be covered? - HELD THAT - The services provided through the Forest Department of state Government of Uttarakhand falls under the Heading 999799 - Other services nowhere else classified in the Group 99979- other miscellaneous services and hence not covered under Serial No 6 of the Notification No 12/ 2017 and it is observed that the above services under Heading 999799 does not figure in the Notification No. 12/ 2017 and hence is liable to tax. Identification of person liable to deposit such GST with the Government authorities i.e. is such payment covered under the Reverse Charge mechanism or normal forward charge rules? - HELD THAT - The applicant being a business entity is liable and mandated to follow the provisions of the Notification No. 13/2017-Central Tax (Rate) dated 28th June, 2017 and is liable to pay due tax under reverse charge mechanism on the total assigned value for which demand is raised by the Forest Department of State Government of Uttarakhand, as per the provisions of the CAMPA Act. Whether compensation paid by PTCUL to DFO, the Government of Uttarakhand, is subject to levy of GST? - HELD THAT - In the Section 7 of the CGST Act, 2017 it has been mandated that the expression - supply includes - all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business , and the consideration (although termed as compensation by the applicant) is actually Premium or Annual Lease as evident from the demand letters of the DFO, submitted by the applicant on 08.08.2022 - both of the two major elements i.e. Supply is done for a consideration and Supply is done in course of furtherance of business are fulfilled by the DFO of the Forest Department of State Government of Uttarakhand and hence services rendered for which Premium or Annual Lease is paid by PTCUL, qualifies as a 'supply of services' as per section 7 of CGST Act, 2017. Under which heading of the GST tariff shall the said supply of service be covered? - HELD THAT - It is found that at Heading 997212 under the head of Description of Service , Rental or leasing services involving own land or leased non-residential property , have been kept, and it is opined that the services provided by the DFO of the Forest Department of State Government of Uttarakhand falls under the above Heading and hence not covered under Serial No 6 of the Notification No 12/ 2017 and it is observed that the above services under Heading 997212, does not figure in the Notification No. 12/ 2017 and hence is liable to tax.
Issues Involved:
1. Whether UK CAMPA falls under the definition of "Government" as per Section 2(53) of the CGST Act, 2017. 2. Whether services rendered by UK CAMPA qualify as a 'supply of services' under Section 7 of the CGST Act, 2017. 3. Whether services supplied by UK CAMPA are covered under Serial No 1 (Chapter 99) of Notification No 12/2017-Central Tax (Rate). 4. If not covered under Serial No 1, under which heading of the GST tariff should the services be classified. 5. Identification of the person liable to deposit GST, i.e., whether under Reverse Charge Mechanism (RCM) or normal forward charge rules. 6. Whether compensation paid by PTCUL to DFO is subject to GST. 7. If subject to GST, under which heading of the GST tariff should the services be classified. Detailed Analysis: Issue 1: Definition of "Government" UK CAMPA, established under the Compensatory Afforestation Fund Act, 2016, is managed by the Forest Department of the State Government of Uttarakhand. The judgment concludes that UK CAMPA falls under the category of State Government as defined in Section 2(103) of the CGST Act, 2017. Issue 2: Supply of Services The judgment refers to Section 7 of the CGST Act, 2017, which defines "supply" as including all forms of supply of goods or services for consideration in the course or furtherance of business. The payments made by PTCUL to UK CAMPA are considered a statutory obligation and are not exempt from being classified as consideration. Thus, services rendered by UK CAMPA qualify as a 'supply of services' under Section 7. Issue 3: Exemption under Notification No 12/2017 The judgment clarifies that services rendered through the Forest Department of the State Government of Uttarakhand do not fall under Entry No 1 (Chapter 99) of Notification No 12/2017 - Central Tax (Rate) dated 28th June 2017. The activities performed by UK CAMPA are not considered charitable activities as defined in the notification. Issue 4: GST Tariff Classification The services provided by UK CAMPA are classified under Heading 999799 - "Other services nowhere else classified" in the "Group 99979- Other miscellaneous services." These services are not covered under Serial No 6 of Notification No 12/ 2017 and are liable to tax. Issue 5: Liability to Deposit GST The judgment refers to Notification No. 13/2017- Central Tax (Rate) dated 28th June, 2017, which mandates that services supplied by the State Government to a business entity are subject to GST under the Reverse Charge Mechanism (RCM). Hence, the applicant (PTCUL) is liable to pay GST under RCM on the total assigned value for which demand is raised by the Forest Department. Issue 6: GST on Compensation to DFO The compensation paid by PTCUL to the DFO for diversion of forest land for non-forest purposes is considered a consideration for leasing services. The judgment concludes that these payments qualify as a 'supply of services' under Section 7 of the CGST Act, 2017. Issue 7: Classification of Lease Services The services provided by the DFO fall under Heading 997212 - "Rental or leasing services involving own land or leased non-residential property." These services are not covered under Serial No 6 of Notification No 12/ 2017 and are liable to tax. Ruling: 1. UK CAMPA falls under the category of State Government as per the CGST Act, 2017. 2. Services rendered through the Forest Department of the State Government of Uttarakhand qualify as a 'supply of services' under Section 7 of the CGST Act, 2017. 3. These services are not covered under Entry No 1 (Chapter 99) of Notification No 12/2017. 4. The services fall under Heading 999799 - "Other services nowhere else classified." 5. The applicant (PTCUL) is liable to pay GST under the Reverse Charge Mechanism as per Notification No. 13/2017. 6. The compensation paid to the DFO qualifies as a 'supply of services' under Section 7 of the CGST Act, 2017. 7. The services fall under Heading 997212 - "Rental or leasing services involving own land or leased non-residential property."
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