2019 (2) TMI 1603 - AAAR - GST

Classification of supply - setting up a project in the school - supply of goods and services including training - challenge to AAR Decision - Applicability of Entry No. 72 of Notification No. 12/2017-Central Tax(Rate), dated 28.06.2017, read with Entry No. 72 of Notification bearing SRO No. 306/2017-Finance Department - services provided under the category of Information and Communication Technology (ICT) @ School Project Held that - The Appellant themselves have contended that the activities undertaken by the Appellant are under BOOT model basis and therefore, the ownership in the infrastructure developed by them would be transferred after the expiry of the contract period (i.e 5 years) This is also clearly provided in the agreement that the ownership of the entire hardware software, other equipment, etc. will be transferred at zero value at the end of the contract period Therefore, the stand taken by the Appellant is self-contradictory in as much as on one hand, they claim that the provision of service as operation or maintenance of self-owned equipment does not amount to supply of services to third party. But on the other hand, they claim that the ownership in the infrastructure developed by it would be transferred after the expiry of the contract period (i e 5 years). The said transfer of ownership is also unconditional. Moreover, under Schedule-II (1)(c) of the CGST Act, 2017/SGST it is clearly defined that any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods. It is also observed that the Appellant at para-13.3 of their Appeal, have clearly admitted that the funds for implementation of project are being provided by OMSM to OKCL, for further release to the Appellant. The Appellant has cited the agreement copy of OMSM and OKCL, where it is provided that if OKCL fails to discharge the obligation under the agreement, OMSM would discharge all the responsibilities. The agreement cited between OMSM and OKCL is not relevant to the present issue. The Appellant themselves have admitted that OKCL will release the money for the supplies made by the Appellant. The contention/pleading of the Appellant that they merely act as an implementing agency on behalf of OMSM, is factually not correct. The Advance Ruling passed by the Authority for Advance Ruling, Odisha, made under Section 98 of the Goods and Services Act, 2017 in RE M/S. IL FS EDUCATION AND TECHNOLOGY SERVICES LTD. 2018 (10) TMI 780 - AUTHORITY FOR ADVANCE RULING, ODISHA upheld.

Summary

Issues Involved:
1. Applicability of Entry No. 72 of Notification No. 12/2017-Central Tax(Rate) to the services provided under the ICT @ School Project.
2. Determination of whether the services provided are under a training program.
3. Clarification on whether the services are provided to the Government.
4. Assessment of whether the total expenditure is borne by the Government.
5. Consideration of the composite supply and supply of goods during the contract period.
6. Condonation of delay in filing the appeal.

Issue-wise Detailed Analysis:

1. Applicability of Entry No. 72 of Notification No. 12/2017-Central Tax(Rate):
The Appellant sought an advance ruling on whether the services provided under the ICT @ School Project qualify for GST exemption under Entry No. 72 of Notification No. 12/2017-Central Tax(Rate). This entry exempts services provided to the Central Government, State Government, or Union territory administration under any training program where the total expenditure is borne by the government.

2. Determination of Whether the Services Provided Are Under a Training Program:
The Appellant argued that their activities, including installation, commissioning, site maintenance, and operation, were naturally bundled with the principal supply being computer training. They emphasized that the infrastructure was developed to provide computer training to students and teachers, and the ICT project aimed to promote computer literacy. The Appellant contended that during the contract period, the infrastructure was owned by them, and maintenance activities were performed to ensure smooth training delivery.

3. Clarification on Whether the Services Are Provided to the Government:
The Appellant provided services to Odisha Knowledge Corporation Limited (OKCL), a body corporate. The AAR held that OKCL, being a corporate entity, does not qualify as the Government. The Appellant's argument that OKCL acted as an implementing agency on behalf of the Government was rejected. The AAR concluded that services provided to OKCL do not meet the primary requirement of being services provided to the Government.

4. Assessment of Whether the Total Expenditure Is Borne by the Government:
The Appellant contended that the expenditure for implementing the ICT project was borne by the Central and State Governments in a 75:25 ratio. However, the AAR noted that the payment responsibility was vested in OKCL, and thus, the condition that the total expenditure must be borne by the Government was not satisfied.

5. Consideration of the Composite Supply and Supply of Goods During the Contract Period:
The AAR observed that the supply undertaken by the Appellant was a composite supply, including goods and services that were not naturally bundled. The Appellant's claim that there was no supply of goods during the contract period was contradicted by their admission that the ownership of infrastructure would be transferred at the end of the contract period. The AAR held that the transfer of title in goods at a future date constitutes a supply of goods.

6. Condonation of Delay in Filing the Appeal:
The Appellant requested condonation of a 5-day delay in filing the appeal, citing technical factors and transit delays. The AAAR found the reasons satisfactory and allowed the condonation of delay.

Conclusion:
The AAAR upheld the AAR's ruling that the services provided by the Appellant to OKCL do not qualify for exemption under Entry No. 72 of Notification No. 12/2017-Central Tax(Rate). The appeal was rejected on the grounds that the services were not provided to the Government, and the total expenditure was not borne by the Government. The AAAR also noted that the supply included goods and services that were not naturally bundled, and the transfer of title in goods constitutes a supply of goods. The delay in filing the appeal was condoned.