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TMI Blog2020 (3) TMI 1042X X X X Extracts X X X X X X X X Extracts X X X X ..... 5, to establish 2000 MW solar park in Tumkur District of Karnataka. They obtained lands on lease basis from the farmers of 5 villages for a period of 28 years and sub-let the said lands to the Solar Power Developers (SPD) to install the solar panels for generation of solar power, for 28 years. 3. The said project is approved by the Ministry of New & Renewable Energy (MNRE) and as per its guidelines, after commissioning of solar projects by SPDs, an amount of Rs. 5,00,000/-per MW should be collected in 5 equal yearly installments of Rs. 1,00,000/- each by the Applicant, from SPDs, towards Local Area Development Fund, intended to rehabilitation of the affected area. The fund is kept in a separate account as Local Area Development Fund by SPPD i.e. the applicant. 4. A committee under the chairmanship of District Commissioner, Tumkur, in which the CEO of the applicant is a member convener, carries on the local area development works of the said 5 villages under village panchayats, as per the guidelines of MNRE, on utilisation of the said fund. The rehabilitation work would be in the nature of laying of metal roads, area drainage, schools, dispensaries, community centre, water suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 13/2017-Central Tax (Rate) ? 6.2 The authorised representative of the applicant also furnished the following written submissions: a) The applicant is a joint venture company of M/s. Solar Energy Corporation of India Limited (SECI), Government of India and M/s. Karnataka Renewable Energy Development Limited (KREDL), Government of Karnataka and hence is a Government Company as per Section 2(45) of the Companies Act 2013. b) The applicant acts as a Solar Power Park Developer (SPPD) under the guidelines of Ministry of New and Renewable Energy (MNRE), and involved in creation of infrastructure like internal evacuation scheme, Layout Roads, Street Lights, water etc., for evacuating power generated by SPDs (Solar Power Developer) under plug & play model. c) The solar park development is not carried out with an intent of profit making objective, but to facilitate the SPDs to establish solar power generating units and enable such supply of electricity for general public at reasonable cost. d) The MNRE mandates, through its direction, under its guidelines for SPPDs (applicant), as per its Rehabilitation and Resettlement Policy for Solar Parks, to collect the amounts towar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s any supply, in terms of Section 7 of the CGST Act 2017 and accordingly there can't be any levy of GST in terms of Section 9 of the CGST Act 2017. Further the amounts collected from SPDs should not be treated as part of the value of any of the services rendered by the applicant, as this doesn't have any correlation with other services rendered by the applicant. k) The activity of collection of amounts from SPDs towards LAD fund, even assumed to be a supply, though not accepting the same, without prejudice to the argument that the said activity is not a supply, the nature of activities, for which the committee has decided to utilize the fund, is covered under Article 243 G and Article 243 W of the Constitution of India, as the said activities get covered under SI.No.3 or 3A of the Notification No. 12/2017-CentraI Tax (Rate) as amended and hence are exempted. l) The committee, while deciding the activities, agreed to ensure that there should not be any duplication of work undertaken by any authorities, by calling for a meeting of all stakeholders including various Government Departments, MLAs, MPs before finalization of the activities. This proves that the activities undertake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lands to the SPDs, as per their requirement on the basis of solar power generating capacity, for 28 years to install the solar panels for generation of solar power. The applicant collects rent along with the applicable GST from the said SPDs. The applicant also required to collect an amount of Rs. 5,00,000/-- per MW capacity, from each SPD after commissioning of solar project, in five yearly installments of Rs each, under the guidelines of MNRE, towards Local Area Development Fund, intended to rehabilitation of the affected area. 7.5 The LAD fund so collected by the applicant is kept in a separate account by the applicant and interest, if any, earned on such amounts also added to the said fund. The LAD fund is used for development works of the said villages, under village panchayats, by the Committee formed by the Government of Karnataka, for the specific purpose of utilization of the said fund for local area development with the Additional Chief Secretary, Department, Government of Karnataka as President, the Deputy Commissioner, Tumkur District as a member and the CEO of the applicant as a co-convener, along with three more other members. In view of the above, the applicant sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts towards the LAD fund are paid by the SPDs to the applicant, though the usage of the same is decided by the Committee formed by the Government of Karnataka for local area development. The service of lease/rent, being provided by the applicant, is a single service and the consideration is payable under two different heads and if any one of these payments is not made, the applicant has the right of termination of the said lease agreement. Hence the amount collected by the applicant, from the SPDs, towards LAD fund forms the value of supply under Section 15 of the CGST Act 2017 and the usage of the said amount would only amount to application of the said amount and still would form the value of taxable services. Therefore, the said amount, so collected, is taxable along with rental income, under forward charge mechanism. 9. The second question is related to the classification of the service under which the collection of amounts towards LAD funds would fall, if said activity is treated as supply. The amounts collected by the applicant towards LAD fund form part of value of the rent/lease service, as discussed in the foregoing paras. The classification of the said activity is nothin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The transaction must be in the course or furtherance of business. 11.2 In the instant case, the applicant, collects and accounts the amounts collected towards Local Area Development, which form part of value of lease/rental services provided by the applicant to the SPDs. The said Committee merely decides the usage of said fund for the specific intended purpose and the applicant makes the payments accordingly. 11.3 It is observed in the instant case that the Committee merely gives direction to the applicant which is not a transaction involving a supply of goods or services or both, such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made. Further the committee is not in receipt of any consideration for the said directions and is not in the course or furtherance of business. Therefore the activity of giving direction by the Committee does not amount to in terms of Section 7 (I)(a) of the CGST Act 2017. Therefore utilization of the LAD fund amount under the direction of Committee, for the intended purposes does not involve in supply of any service by the Committee. Further, the Committee is formed under the orders of Government of Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X
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