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2019 (3) TMI 1120 - AAR - GSTFinancial Institution or not - input tax credit - Whether NDDB can be considered as financial institution for the purpose of availing credit to the extent of fifty percent of input tax credit, as prescribed in Section 17 of CGST Act, 2017? - Held that - The objectives of NDDB include promoting dairy and other agriculture based industries and to fulfill its objectives NDDB undertakes the activities in the form of technical or administrative assistance and financial assistance. Further, NDDB Act, 1987 is found to have specifically authorized NDDB to undertake the activity of financing including lending and borrowing money for diverse purpose. According to Section 16 of the NDDB Act the applicant provides finance/lends money solely to dairy co-operatives in a similar manner as is done by a banking company or a financial institution in general parlance. Section 17(4) of the CGST Act, 2017 says that a banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the provisions of section 17(2), or avail of, every month, an amount equal to 50% of the eligible input tax credit on inputs, capital goods and input services in that month - It would be seen that as per the activities performed by the applicant, NDDB can be considered as a financial institution as they seem to be satisfying the requirement as provided in Section 45-I(C) of the RBI Act. Besides, NDDB is also declared as a public of financial institution under the company Act vide Notification No. SO 219 (E) dated 23.02.2004. Thus, NDDB can be considered as financial institution for the purpose of availing credit to the extent of fifty percent of input tax credit, as prescribed in Section 17 of CGST Act.
Issues:
1. Whether NDDB can be considered as a financial institution for availing credit under Section 17 of the CGST Act, 2017? Analysis: 1. The applicant, a statutory body under the NDDB Act, engages in financing activities, including lending and borrowing money for various purposes as authorized by the Act. The applicant provides financial assistance such as term loans, short term loans, and working capital assistance, similar to a banking company or financial institution. NDDB has been declared a Public Financial Institution under the Companies Act, 1956. 2. The Central Goods and Services Tax, Vadodara, opined that NDDB may be considered a Financial Institution as per the RBI Act, enabling them to avail fifty percent of eligible input tax credit under Section 17 of the CGST Act, 2017. 3. The Authority heard submissions from the applicant and reviewed the comments provided by the department. NDDB's activities align with financing operations akin to a financial institution, providing loans and financial assistance to dairy cooperatives. 4. The NDDB Act authorizes NDDB to engage in financing activities, providing financial assistance to dairy cooperatives, and lending money against security of movable or immovable property. The applicant's activities resemble those of a financial institution, raising the question of their eligibility for input tax credit under the CGST Act. 5. Section 17(4) of the CGST Act allows banking companies or financial institutions to avail fifty percent of eligible input tax credit monthly. The definition of 'financial institution' under the IGST Act refers to Section 45-I of the RBI Act, which includes institutions engaged in financing activities. 6. NDDB's financing activities align with the definition of a financial institution under the RBI Act, making them eligible for input tax credit benefits under the CGST Act. Additionally, NDDB is recognized as a 'public financial institution' under the Companies Act, further supporting their classification as a financial institution. 7. The Authority rules that NDDB is to be considered a 'Financial Institution' for the purpose of availing input tax credit under Section 17(4) of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017.
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