2024 (6) TMI 740 - AAR - GST

Applicability of Reverse Charge Mechanism or Forward Charge - UKPSVEN can have Dual Status i.e. for some purposes it may be deemed to be Local Authority while for others it may not? - HELD THAT - The term local authority is defined in Section 2(69) of CGST Act, 2017. The definition of local authority in the CGST, Act includes within its ambit any other authority legally entrusted by the Central Government or any State Government with the Control or Management of a municipal or local fund . Thus, for the purpose of the GST Laws, any authority legally entitled to or entrusted by the Government with the control or management of a municipal or local fund qualifies as a 'Local Authority' - the UKPSVEN, is not satisfying some of the conditions for qualifying as a local authority . The Apex court in the UNION OF INDIA ORS. VERSUS RC. JAIN ORS. 1981 (2) TMI 200 - SUPREME COURT has held that the main requirement to qualify as a local authority' is that the authority must be legally entitled to or entrusted by the Government with, the control and management of a Municipal or local fund. In case of UKPSVEN, there is no local fund entrusted by the Government with UKPSVEN, but the Act would reveal that no municipal or local fund has been entrusted by the Government. The fund of UKPSVEN is its own fund and cannot be equated with a fund entrusted by the Government. Thus, the important requirement in order to qualify as a local authority viz. control and management of a municipal/local fund is absent in the present case. The UKPSVEN is a body corporate formed by the State legislature under UPWSS Act enacted by the UP State Legislature. Further, as per section 3 of the Uttaranchal (The Uttar Pradesh Water Supply and Sewerages Act, 1975) Adaptation and Modification Order, 2002 read with UPWSS Act, UK Peyjal Nigam is a body corporate established by the Government of Uttarakhand, as such, the requirement of governmental authority has been fulfilled in the present case - the service provider in the instant case i.e. UKPSVEN (M/s Uttarakhand Peyjal Sansadhan Vikas Evam Nirman Nigam) is not a 'local authority', within the meaning and ambit of the provisions of the CGST/SGST Act, 2017, but is a governmental authority . The provider of services in the instant case i.e. UKPSVEN (M/s Uttarakhand Peyjal Sansadhan Vikas Evam Nirman Nigam) is not a 'local authority' within the meaning and ambit of the provisions of the CGST/SGST Act, 2017, but falls under the category of a Governmental Authority and in view of the provisions of the Notification No. 12/2017-Central Tax (Rate), dated 28.6.2017, as amended, the instant work is a construction service and pertains to supply of water which is an activity in relation to a function entrusted to a Municipality Panchayat under article 243W 243G respectively of the Constitution of India and is exempted from payment of tax.

Summary

Issues Involved:
1. Whether the Applicant needs to pay GST under Forward charge or under RCM?
2. Whether UKPSVEN can have Dual Status i.e. for some purposes it may be deemed to be Local Authority while for others it may not?

Summary:

Issue 1: Whether the Applicant needs to pay GST under Forward charge or under RCM?

The applicant, THDC India Limited (THDCIL), sought an advance ruling on the determination of the liability to pay tax on services under Section 97(2)(e) of the CGST/SGST Act, 2017. The services in question were provided by Uttarakhand Peyjal Sansadhan Vikas Evam Nirman Nigam (UKPSVEN) for the design, engineering, and construction of a 500 KL RCC Over Head Tank at THDCIL Campus, Rishikesh. UKPSVEN claimed that they did not qualify as a "Local Authority" for this specific work and thus charged GST under Forward charge. The applicant contended that UKPSVEN, being a Local Authority, should have the tax paid under RCM as per Notification No. 13/2017 (CTR) dated 28/07/2017.

Upon examination, it was determined that UKPSVEN does not qualify as a "Local Authority" under Section 2(69) of the CGST Act, 2017, but is a "Governmental Authority" as defined in Notification No. 31/2017-Central Tax (Rate), dated October 13, 2017. Consequently, the services provided under the MOU are exempt from payment of tax under Notification No. 12/2017-Central Tax (Rate), dated 28.6.2017, as amended. Therefore, there is no applicability of RCM or Forward Charge for the applicant.

Issue 2: Whether UKPSVEN can have Dual Status i.e. for some purposes it may be deemed to be Local Authority while for others it may not?

The ruling clarified that UKPSVEN does not qualify as a "Local Authority" within the meaning and ambit of the provisions of the CGST/SGST Act, 2017. The authority examined the constitution and functions of UKPSVEN and concluded that it does not meet the criteria for a Local Authority as defined under Section 2(69) of the CGST Act, 2017. Therefore, UKPSVEN cannot have a dual status and is not deemed to be a Local Authority for any purposes under the CGST/SGST Act, 2017.

Ruling:

1. GST Payment under Forward charge or RCM: The answer is negative. There is no applicability of the RCM as per Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017, as the supplier of services is not a "Local Authority". The services provided under the referred MOU are exempt in view of Notification No. 12/2017-Central Tax (Rate), dated 28.6.2017, as amended. Therefore, the applicant does not need to pay GST under Forward Charge.

2. Dual Status of UKPSVEN: The answer is negative. M/s Uttarakhand Peyjal Sansadhan Vikas Evam Nirman Nigam does not qualify to be a "Local Authority".