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2023 (7) TMI 701 - AAR - GSTTaxable Supply or not - Payment made to the Government of Kerala - Reverse charge liability under Notification No. 13/2017 CT (Rate) dated 28-06.2017 - payment made to the Government of Kerala under Section 27A of The Kerala Conservation of Paddy Land and Wetland Act, 2018 for change of description of land from wetland to ordinary land in Government of Kerala village office records - permission for construction of office complex for the purpose of business. Contention of the applicant is that the activity being undertaken by the State Government as a public authority in relation to a function entrusted to a Panchayat under Article 243 G of the Constitution is neither a supply of goods nor a supply of service in terms of Notification No. 14/2017 CT (Rate) dated 28.06.2017. HELD THAT - The Kerala Conservation of Paddy Land and Wetland Act, 2018 is an act to conserve the paddyland and wetland and to restrict the conversion or reclamation thereof, in order to promote growth in the agricultural sector and to sustain the ecological system, in the State of Kerala. As per Section 2 (i) and (xviia) Of the said Act as amended by the Kerala Conservation of Paddy Land and Wetland (Amendment) Act, 2018; Change of nature of unnotified land means such act or series of acts whereby the nature of an unnotified land is changed or has been changed irreversibly and in such a manner that it cannot be reverted back to the original condition by ordinary means; and unnotified land means the lands within the area of jurisdiction of the Committee which have been included as paddy land or wetland in the basic tax register maintained in Village offices, but are not notified as paddy land or wetland under sub-section (4) of section 5 or where data bank has not been published under the provisions of clause (i) of sub-section (4) of section 5, the lands which are already been filled up on the date of commencement of this Act and axe not paddy land according to the report of the Kerala State Remote Sensing Centre and the Local Level Monitoring Committee or where the report of the Kerala State Remote Sensing Centre is not available, lands which are not paddy land according to the report of the Local Level Monitoring Committee. On a combined reading of the definitions and the provisions of Section 27A of the Act as extracted above, it is clear that the provision is about restrictions that may be imposed and the levy of fees and hence it is essentially an activity of permitting the use of unnotified land for residential, commercial or other purposes. The permission for conversion of unnotified land which has been included as paddy land or wetland in the basic tax register maintained in Village offices for residential, commercial or another use subject to conditions and levy of fees is primarily an activity in the interest/or for the benefit of the persons who are applying for such conversion. The fees charged by the State Government for permitting the conversion of unnotified land which have been included as paddy land or wetland in the basic tax register maintained in Village offices for residential, commercial or other users can only be considered a consideration/compensation charged for conferring such private benefit at the cost of the public good of conservation of paddy land and wetland. It is concluded that though the activity of allowing change of nature of the unnotified land subject to conditions and on payment of prescribed fees in terms of the provisions of Section 27A of the Kerala Conservation of Paddy Land and Wetland Act 2008 as inserted by the Kerala Conservation of Paddy Land and Wetland (Amendment) Act, 2018 is an activity undertaken by the State Government as a public authority the same cannot be considered to be an activity in relation to any function entrusted to a Panchayat under Article 243 G of the Constitution. Therefore, the activity cannot be treated as 'neither a supply of goods nor a supply of service' in terms of Notification No. 14/2017 Central Tax (Rate) dated 28.06.2017 as amended.
Issues Involved:
1. Whether the reverse charge liability under Notification No. 13/2017 CT (Rate) dated 28-06.2017 is attracted on the payment made to the Government of Kerala under Section 27A of The Kerala Conservation of Paddy Land and Wetland Act, 2018 for change of description of land from wetland to ordinary land in Government of Kerala village office records and permission for construction of office complex for the purpose of business. Summary: Issue 1: Reverse Charge Liability under Notification No. 13/2017 CT (Rate): The applicant, a Non-Banking Financial Company, sought an advance ruling on whether the reverse charge liability under Notification No. 13/2017 CT (Rate) dated 28-06.2017 is attracted on payments made to the Government of Kerala under Section 27A of The Kerala Conservation of Paddy Land and Wetland Act, 2018. The applicant argued that the payment for changing the land description from wetland to ordinary land should not attract GST liability as it falls under activities that are neither supply of goods nor services per Notification No. 14/2017 CT (Rate) dated 28.06.2017. The applicant contended that to determine GST liability, it must be examined whether there was a supply of service within the meaning of Section 7 of the CGST Act and whether there was any consideration for the service. They argued that the activities undertaken by the government in relation to a function entrusted to a Panchayat under Article 243G of the Constitution should not attract GST. Discussion and Findings: The Authority for Advance Ruling examined whether the activity in question satisfies the conditions of Notification No. 14/2017 CT (Rate) dated 28.06.2017. The Kerala Conservation of Paddy Land and Wetland Act, 2018 aims to conserve paddy land and wetland to promote agricultural growth and sustain the ecological system. Section 27A of the Act involves permitting the use of unnotified land for residential, commercial, or other purposes subject to conditions and fees. The Authority concluded that the activity of allowing the change of nature of unnotified land for residential or commercial purposes, subject to conditions and fees, is primarily for the benefit of the applicant and not an activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution. Therefore, it cannot be treated as 'neither a supply of goods nor a supply of service' under Notification No. 14/2017 CT (Rate). Ruling: The reverse charge liability under Notification No. 13/2017 CT (Rate) dated 28.06.2017 is attracted on the payment made to the Government of Kerala under Section 27A of the Kerala Conservation of Paddy Land and Wetland Act, 2018 for changing the description of land from wetland to ordinary land in Government of Kerala village office records and for permission for construction of an office complex for business purposes.
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