2019 (12) TMI 49 - AAR - GST

Applicability of TDS under GST law - Whether the same is applicable to the Co-operative Society since it is Registered under Tamil Nadu Cooperative Society Act of 1975 and not under society registration act 1860? - HELD THAT - The applicant is an Apex society registered under Tamil Nadu Co-operative societies Act 1961 with head quarters at Kancheepuram. Director of Industries and Commerce has registered the same with a view to hold the weavers, Reelers and members in Sericulture Industry as provided in G.O.Ms. No 832 dated 31st May 1979. The capital structures of the applicant is to be raised from (1) members share capital contribution (2) Government Share Particulars and (3) loan from National Corporation of Development of Co-operative and the Governments Share Contribution will constitute 51% of the total share capital of the Federation. The applicant has sought advance ruling on the applicability of Notification No.33/2017(CT) dated 15.09.2017 relating to the Provisions of Tax Deduction at Source (TDS). In the case at hand, the applicant is an Apex co-operative society, applicant registered as Apex Society under the Tamil Nadu Co-operative Societies Act 1983. It is not a Society under the Societies Registration Act 1860. It was established by the Industries Department of Government of Tamil Nadu based on the G.O. of State Government of Tamilnadu to develop Co-operative silk twisters, reelers, etc. The G.O. specifies that the Government s share contribution will constitute 51% of the total share capital of the Federation - Section 33 of Tamil Nadu Co-operative Societies Act 1983 stipulates that the elected members have voting rights while the functional directors and the Co-Opted member do not have any voting right though they may participate in meetings. Therefore, it is seen that though the Managing Director is appointed by Government of Tamil Nadu and a few of the other Functional Directors are also employees of Government of Tamil Nadu, the control of the Board or management vests with elected members who are elected by the member silk cooperative societies. Hence, the Government of Tamil Nadu does not control the applicant. It is seen that the applicant was established by the Government of Tamil Nadu as a Cooperative Society registered as Apex Society under the Tamil Nadu Co-operative Societies Act 1983 but the equity ownership at present or in the past never beyond 51%, nor is it under the control of the Government as the management do not have any voting rights as stipulated in it s bye laws and by the Tamil Nadu Co-operative Societies Act 1983 - the applicant is not a person or category of person stipulated under Notification No. 33 / 2017-C.T. dated 15.09.2017 as amended and Notification No. II(2)/CTR/783(C-3)/2017 vide G.O. (Ms) No.107 dated 15.09.2017 as amended. TDS provisions are not applicable to the applicant.

Issues Involved:
1. Applicability of TDS provisions under GST Act to a Co-operative Society registered under the Tamil Nadu Cooperative Societies Act, 1983.
2. Interpretation of Notification No. 33/2017 (C.T) dated 15/09/2017 as amended by Notification No. 50/2018 dated 13.09.2018.

Detailed Analysis:

Issue 1: Applicability of TDS provisions under GST Act to a Co-operative Society registered under the Tamil Nadu Cooperative Societies Act, 1983

The applicant, a Co-operative Society registered under the Tamil Nadu Cooperative Societies Act, 1983, sought clarification on whether the TDS provisions under the GST Act are applicable to them. They argued that since they are not registered under the Societies Registration Act, 1860, and are not a statutory corporation or a state government undertaking, they should be exempt from TDS provisions.

The applicant detailed their operations, which include supporting sericulture activities by supplying silk to various cooperative societies and other entities. They highlighted that their transactions attract 5% GST and that they are exempt under Section 80P of the Income Tax Act.

Upon examination, it was found that the applicant is an Apex society registered under the Tamil Nadu Cooperative Societies Act, 1983, with the Director of Sericulture as the Functional Registrar. The society's capital structure includes contributions from members, government share, and loans from the National Corporation of Development of Co-operatives. The government’s share has never exceeded 51%, and currently stands at 30%.

Issue 2: Interpretation of Notification No. 33/2017 (C.T) dated 15/09/2017 as amended by Notification No. 50/2018 dated 13.09.2018

The applicant sought to understand the applicability of Notification No. 33/2017 (C.T) dated 15/09/2017, which was amended by Notification No. 50/2018 dated 13.09.2018. This notification specifies the persons required to deduct TDS under the GST Act, including:

1. Authorities or bodies set up by an Act of Parliament or State Legislature with 51% or more participation by way of equity or control.
2. Societies established by the Central or State Government under the Societies Registration Act, 1860.
3. Public sector undertakings.

The applicant argued that they do not fall under these categories as they are not established under the Societies Registration Act, 1860, and the government’s equity participation is below 51%. Furthermore, the control of the society rests with the elected members of the cooperative societies, not the government.

Upon review, it was concluded that the applicant, being a cooperative society under the Tamil Nadu Cooperative Societies Act, 1983, with less than 51% government equity and management control vested in elected members, does not meet the criteria specified in the notifications for TDS applicability.

Ruling:

Central Tax Notification No. 33/2017-C.T. dated 15.09.2017 as amended and State Tax Notification No. II(2)/CTR/783(C-3)/2017 vide G.O. (Ms) No. 107 dated 15.09.2017 as amended are not applicable to the applicant.

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