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2023 (3) TMI 1249 - AAR - GSTScope of supply - Limited Liability Partnership providing security services - whether an LLP can be considered as Body corporate under the provisions of the GST Act, 2017 or not? - applicability of forward charge mechanism or reverse charge mechanism - Applicability of notification no. 29/2018 dated 31.12.2018 - HELD THAT - The scope of the applicability of the said notification is that the RCM is relevant only when the security services are provided to a registered person and only when the supplier of services is any person other than a body corporate. E.g. if a proprietary concern or a partnership firm provides security services to a registered person then RCM is applicable but if a private Ltd. Company provides such services the same will attract forward charge instead of RCM. An LLP is a viewed as an alternate corporate business model that involves the integration of the advantages of a limited liability company with the flexibility of a partnership. It allows its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement. From the LLP Act, 2008 the main features inter alia are that the LLP shall be a body corporate and a legal entity separate from its partners. Any two or more person, associated for carrying on a lawful business with a view to profit, may by subscribing their names to an incorporation document and filling the same with the registrar, form-a Limited Liability Partnership. It will have perpetual succession. Even if the partners opt to leave, the LLP persists. It can enter into the contracts and own property in its own capacity. It is a separate legal entity having to bear the full liability for its assets which makes it possible for partners' liability to be limited to their agreed contribution to the LLP. An LLP is an Body Corporate for the purpose of Companies Act, 2013 and the same would apply to the term body corporate for the purpose of the notification no. 13/2017-CGST(Rate) dated 28.06.2017 and as amended on 31.12.2018 vide notification no. 29/2018. In consequence the Reverse Charge Mechanism would not be applicable in the present case. Moreover, the legislative intention behind the application of RCM is on those supplies in which the Government/executive do not have control over the supplier or who are working in the unorganized sector. So, the RCM is made applicable for any person other than body corporate by the said notification. Thus, an LLP is a body corporate and so excluded from the entry no. 14 of the notification no. 13/2017 dated 28.06.2017 and notification no. 29/2018 dated 31.12.2018. The applicant is required to charge applicable tax on the security services supplied by him as per section 9(1) of the CGST/HGST Act, 2017 read with the relevant provision of IGST Act, 2017.
Issues Involved:
1. Applicant's eligibility for seeking an advance ruling. 2. Whether services provided by the applicant LLP are covered by entry 14 of Notification No. 13/2017-CT(Rate) dated 28.06.2017 and liable for tax under reverse charge mechanism. Issue-wise Detailed Analysis: 1. Applicant's Eligibility for Seeking an Advance Ruling: The applicant must satisfy conditions under the Central Goods and Services Tax Act, 2017 (CGST Act, 2017) and Haryana Goods and Services Tax Act, 2017 (HGST Act, 2017). The provisions of both Acts are pari materia. Sections 97(2) of the CGST Act, 2017 allow Advance Ruling on the applicability of notifications issued under the Act. As per Section 98(2), if the issue is pending or decided in any proceedings under the Act, the application may be rejected after providing an opportunity to be heard. The applicant declared that the issue is neither pending nor decided in any proceedings, and the applicable fees have been paid, making them eligible for an Advance Ruling. 2. Whether Services Provided by the Applicant LLP are Covered by Entry 14 of Notification No. 13/2017-CT(Rate) Dated 28.06.2017 and Liable for Tax Under Reverse Charge Mechanism: The applicant, a Limited Liability Partnership (LLP), provides security services. The query is whether an LLP is considered a "Body Corporate" under GST provisions. If so, the LLP should charge tax on security services under the forward charge mechanism, not the reverse charge mechanism (RCM). Applicant's Interpretation: The applicant argued that under Section 2(98) of the CGST Act, the liability to pay tax under RCM falls on the recipient of services from a non-body corporate. They cited Notification No. 13/2017-CT(Rate) and its amendment by Notification No. 29/2018, which specifies that RCM applies to security services provided by any person other than a body corporate to a registered person. They contended that an LLP should be considered a body corporate, thus not subject to RCM. Legal Definitions and Analysis: - Body Corporate: Defined under Section 2(11) of the Companies Act, 2013, includes LLPs. - LLP Act, 2008: Section 2(1)(d) and Section 3 describe an LLP as a body corporate with a separate legal entity and perpetual succession. - Notification No. 13/2017-CT(Rate): Explanation (e) considers LLPs as partnership firms, but entry 14 refers to "body corporate." Authority's Findings: The authority examined whether an LLP is a body corporate under GST. They noted that the GST Act does not define "Body Corporate," but the term in Notification No. 13/2017-CT(Rate) aligns with the Companies Act, 2013. The authority concluded that LLPs are body corporates, thus not covered by entry 14 of the notification. Consequently, LLPs must charge tax on security services under the forward charge mechanism, not RCM. Conclusion: An LLP is a body corporate and excluded from entry 14 of Notification No. 13/2017-CT(Rate). Therefore, the applicant must charge applicable tax on security services under the forward charge mechanism. Ruling: Question: Whether services (Security services) provided by the applicant LLP are covered by entry 14 of Notification No. 13/2017-CT(Rate) dated 28.06.2017 and liable for tax under reverse charge mechanism? Answer: No. The services provided by the applicant LLP are not covered under entry 14 of the notification, and the reverse charge mechanism is not applicable.
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