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2024 (9) TMI 1387 - AAR - GSTApplicant (THDCIL) is a Government Entity or not? - Legal Services provided by the advocates including Senior Advocate or firm of Advocate is exempt from GST for THDCIL - reverse charge mechanism - HELD THAT - In order to qualify as a Government Entity , such ENTITY must be either set up by an Act of Parliament or State Legislature; or established by any Government, with 90per cent, or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Territory or a local authority . The applicant is claiming to be a Government Entity , by interpreting the definition as Government Entity means an authority or a board or any other body including a society, trust, corporation, established by any Government, with 90 per cent, or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Territory or a local authority - as on the date of filing of the application dated 01.05.2024 for the present proceedings, the Equity in the applicant company i.e. THDC India Limited is shared between NTPC Limited and Government of UP in a ratio of 74.496 % and 25.504 %, which is less than the stipulated 90% of equity and hence does not fulfill the condition of with 90 per cent, or more participation by way of equity or control, . There is no doubt that at the time of registering the Company, as a Public Limited Company, under the Companies Act, 1956, in July 1988, the Government had 100 % equity or control (Govt, of India and Govt, of Uttar Pradesh in the ratio of 75 25), but as admittedly accepted by the applicant in their application and during the course of personal hearing on 07.06.2024, the equity or control of the Government became less that 90 %, as Government of UP held only 25.504 % of the total equity i.e. paid up capital - the status of the applicant i.e. the Company with respect to equity or control of the Government did not remained same and got reduced to 25.504 %, which is less than the stipulated 90 % or more. At present the equity or control of the Government is less than the stipulated 90% and hence cannot be categorized and considered as Governmental Entity in terms of Notification No 11/2017-Central Tax (Rate), dated 28 June 2017, as amended by the Notification No. 31/2017-Central Tax (Rate), dated 13 October 2017. And hence the provisions of Entry No. 45 of the Notification No. 12/2017-Central Tax (Rate), dated 28 June 2017, shall not be applicable in the case of the applicant.
Issues Involved:
1. Whether the Applicant (THDCIL) is a Government Entity or not. 2. If yes, whether Legal Services provided by advocates are exempt from GST for THDCIL under RCM. Detailed Analysis: Issue 1: Whether the Applicant (THDCIL) is a Government Entity or not The applicant sought an advance ruling on whether THDCIL qualifies as a "Government Entity" under the Notification No. 11/2017-Central Tax (Rate) as amended by Notification No. 31/2017-Central Tax (Rate). The definition of "Government Entity" requires: - An authority or a board or any other body including a society, trust, corporation, - Established by any Government, - With 90% or more participation by way of equity or control, - To carry out a function entrusted by the Central Government, State Government, Union Territory, or a local authority. The applicant argued that since THDCIL was initially established with more than 90% government participation, it should be considered a Government Entity. However, the authority noted that the current equity participation by the Government of Uttar Pradesh is only 25.504%, which is less than the stipulated 90%. The authority emphasized that the definition does not contemplate the continuous fulfillment of such requirements post-establishment. Therefore, the applicant does not meet the criteria of a Government Entity as per the current equity structure. Issue 2: Whether Legal Services provided by advocates are exempt from GST for THDCIL under RCM The applicant contended that if THDCIL is treated as a Government Entity, it would be exempt from paying GST under RCM on legal services provided by advocates, as per Entry No. 45 of Notification No. 12/2017-CT(R). However, since the applicant does not qualify as a Government Entity, the provisions of Entry No. 45 are not applicable. Consequently, THDCIL is not exempt from paying GST under RCM for legal services. Conclusion: 1. THDCIL is not a Government Entity: The equity or control of the Government is less than the stipulated 90%, and hence THDCIL cannot be categorized and considered as a "Governmental Entity" in terms of Notification No. 11/2017-Central Tax (Rate) as amended by Notification No. 31/2017-Central Tax (Rate). 2. GST Exemption on Legal Services: Since THDCIL is not a "Governmental Entity," the provisions of Entry No. 45 of the Notification No. 12/2017-CT(R) are not applicable, and THDCIL is not exempt from paying GST under RCM for legal services provided by advocates.
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