2018 (11) TMI 487 - AAR - GST

Liability of GST - Supply of goods and/or services - e-procurement Transaction Fee collected on behalf of IT E&C department results - Exemption from GST Held that - As per the information filed by the applicant, it is observed that the applicant is acting as fund-manager. The applicant was directed by ITE&C Department, to open an account for collection of Transaction Fee relating to e-Procurement platform. Further, the applicant can not act independently for the utilization of funds without the approval of the ITE &C Department. Hence, the fund utilization, shall be in accordance & with the permission and approval of the ITE&C department only. The applicant will be paid service charges @ 5% on e-procurement corpus fund and e-procurement Transaction Fee towards services rendered by the applicant, for which they are paying tax as an independent entity for the services rendered to ITE&C. Hence, the transaction fee collected on account of ITE&C Department, as custodian will not attract the liability under the provisions of law. Ruling - It is Supply as defined in SGST Act,2017 and CGST Act, 2017. The liability does not arise due to the amounts so collected is for services rendered by State Government i.e., ITE&C Department as per the entry no 6 of notification 12/2017-Central tax (Rate), dated 28th June 2017.

Summary

Issues:
1. Whether e-procurement Transaction Fee collected on behalf of IT E&C department results in supply of goods or services or both within the meaning of Supply as defined by law.
2. Whether Tax liability arises on e-procurement Transaction Fee collected on behalf of ITE&C department.

Analysis:
Issue 1:
The applicant, engaged in supply of services, sought clarification on whether the e-procurement Transaction Fee collected for the IT E&C department constitutes a supply of goods or services. The applicant was directed to open separate accounts for this purpose and manage the funds as per the instructions of the ITE&C Department. The Authority observed that the applicant acts as a fund-manager and cannot utilize the funds independently without ITE&C Department's approval. As per G.O.Ms.No.17, the applicant is entitled to service charges for managing the funds, and this collection does not attract liability under the law, as it is for services rendered to ITE&C Department.

Issue 2:
Regarding the Tax liability on the e-procurement Transaction Fee collected, the Authority noted that the applicant collected GST at 18% for certain transactions. However, this collection, not legally permitted, could lead to forfeiture under specific provisions. The Authority clarified that the issue of remittance of tax collected does not fall under its jurisdiction and directed the applicant to obtain the procedure for remittance from the relevant authorities. The liability does not arise on the Transaction Fee collected for services rendered by the State Government, as per the relevant notification.

The ruling by the Authority states that the e-procurement Transaction Fee collected on behalf of the ITE&C department qualifies as a 'Supply' under the SGST Act, 2017 and CGST Act, 2017. However, regarding Tax liability, it is clarified that no liability arises on the Transaction Fee collected for services rendered by the State Government, as per the specific notification. The applicant is directed to follow the procedure for remittance of GST collected and manage the funds as per the guidelines provided by the ITE&C Department.