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TMI Blog2020 (10) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... dgetary allocation constitutes a supply? - HELD THAT:- In the instant case, the applicant is a society registered under Societies Registration Act, 1860 and hence is a 'person' as per Section 2(84) of CGST/TNGST Act - In the instant case, the applicant was formed as a society by the State government for procuring and supplying textbooks and other items. The applicant is supplying the kits for a consideration which includes cost of the goods plus various administrative charges which is claimed by the applicant. Therefore, the supply of educational aids such as school bags, footwear, geometry box, wooden colour pencils, crayons, woollen sweater by the applicant to the State government for a consideration is a 'supply of goods' in the course of its business as per Section 7 of the Act - the supply of educational kit as above is a 'Supply' and the same is squarely covered as supply of goods specified under Sl.No. 150 of Notification no. 2/2017-C.T. (Rate) dated 28.06.2017 as amended by Notification No.35/2017-C.T. (Rate) dated 13th October 2017 and hence is an exempted supply. As such a supply is exempt. Whether Tamil Nadu Text Book and Educational Services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment are held to be exempted, the valuation to be adopted for taxation purposes do not arise and therefore not dealt with. Also, the applicant will not be eligible to avail any input tax paid on these procurements as credit, since the procurement is exclusively towards the exempt supply. Whether Tamil Nadu Text Book and Educational Services Corporation is eligible for exemption from payment of GST in respect of services it receive from printers engaged by them for printing of text books? - HELD THAT:- The ruling can be sought in relation to the supply of goods or services or both undertaken or proposed to be undertaken by the applicant - this question relates to receipt of service and not supply of service by the applicant, therefore the said question is not taken up for consideration for the reason that it is not covered under the purview of this Authority. Whether the Tamil Nadu Text Book and Educational Services Corporation is required to pay GST on Penalty and Liquidated damages levied by them on suppliers due to violation of the contract terms for supply and if so the rate at which such GST is payable? - HELD THAT:- In this case, the applicant has sought a ruling on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporation is entitled to avail of corresponding input tax Credit on the procurement made. 3) Whether the supply of Rain Coats, Ankle Boots and Socks to students without consideration to Government/Government Aided schools located in Hilly areas is a supply. 4) If the answer to the above is in the affirmative then is Tamil Nadu Text Book and Educational Services Corporation is entitled to discharge its tax liability on such outward supplies at Cost +10% and avail of corresponding Input Tat Credit on the procurement made. 5) Whether Tamil Nadu Text Book and Educational Services Corporation is eligible for exemption from payment of GST in respect of services it receive from printers engaged by them for printing of text books. 6) Whether the Tamil Nadu Text Book and Educational Services Corporation is required to pay GST on Penalty and Liquidated damages levied by them on suppliers due to violation of the contract terms for supply and if so the rate at which such GST is payable. The applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of ₹ 5,000/- each under sub-ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecommend the payment to be made to the applicant from the budgetary allocation made to the Education Department of the State Government in the State Budget and any amendments thereof which are placed before the State Assembly. After making the deduction towards administration charges from the total claim made by the Applicant, the monies are received directly into their nominated Bank Account from the state treasury. They do not avail of any Input Tax Credit on such supplies of school bags, footwear, geometry box, wooden colour pencils, crayons, woollen sweater which they receive from various Suppliers. The Applicant has submitted that by virtue of entry made in Serial No 150 in the Notification 2/2017 - Central Tax (Rate) dated 28th June 2017 and the corresponding notification under the Tamil Nadu state Goods and services Tax Act as amended by Notification No. 35/2017 - Central Tax (Rate) dated 13th October 2017 the supply is Exempt. 2.3 The Applicant has submitted that they procure raincoats, boots and socks based on the requirement as provided by the Education Department, Government of Tamil Nadu and provide these items to the Government schools located in Hilly areas. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to schools which is a social welfare measure and there is no commercial motive in the aforesaid supply to apply/attract invoking of the entry made in Item 2 of Schedule I of the CGST Act in the instant case. The Applicant has further submitted that when the object of the exemption notification vide entry No. 150 of Notification - 2/2017 was to exempt all supplies of goods made to the state Government where there is a consideration received, it is but only logical that the supply of Goods without consideration should also be put in the Same platform and get covered as such supplies are to the State Government and the value of the grant from the State Government is a sum equivalent to zero and hence the supplies are to be treated as an exempted supply. In case the above submissions do not find favour then the Applicant has submitted that they are entitled to avail Input Tax Credit for the Procurement of Raincoats/boots and socks and discharge the output tax liability on the basis of one hundred and ten percent of the Actual Cost of the acquisition of the Goods in accordance with Rule 30 of the Central Goods and Services Tax Rules and its corresponding rule under the State Goods and S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or non-Adherence to the quality parameters as set out for the items which are supplied.; mere levy of Penalty/Liquidated Damages cannot constitute a supply.; to attract the provisions of Section 7 of the Central Goods and Service Tax Act and its corresponding provision under Tamil Nadu Goods and Services Tax Act and to attract entry no. 5 (e) of Schedule II there has to be an Obligation and there has to be an agreement to either: Refrain from an act To tolerate an act To tolerate a situation To do an act The term obligation has not been defined in the Goods and Services Tax Act and hence one has to place reliance on the dictionary meaning which reads as under: As per the Black's law dictionary, the term Obligation has been defined as: A Legal or a moral duty to do or not do something. As per Wharton's law lexicon, the term Obligation has been defined as: An Act, which binds a person to some performance; or for the Performance of covenant etc. The intention of the contracting parties emanating from the Purchase order which has been issued and the conditions mentioned in the tender Documents clearly indicates t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and government aided schools under the State Government Education Policy, for which the applicant receive money from State Government which is nothing but a supply of goods wherein State Government is recipient In respect of Q 3 4 of the applicant, the applicant do not receive any money by way of subsidy nor from any other person for the supplies made to the specified persons. Since there is no consideration flowing out of the supply made, there will not be any GST. However, if the goods are supplied to a distinct person as mentioned u/s 25 the same will be treated as a supply and GST will be applicable, the valuation of which will be determined as per Rule 28 to 30 of the CGST Rules and will also be eligible to avail Input Tax subject to chapter V of CGST Act Q.5- Under the heading 9989 the rate of GST for printing of books is classified as 12% hence printing service will not be eligible for exemption Q.6- As per section 15 (2) (d), the value of supply includes-'interest or late fee or penalty for delayed payment of any consideration for any supply'.; in the given case, the applicant will have to pay GST on the liquidated damages/ penalty levied by the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record the Additional Grounds in respect of the aforesaid matter along with the submission which was made at the time of filing the appeal. Liquidated Damages are levied due to the Supplier supplying deficient goods or delaying the supply of goods; there is no obligation on their part to tolerate the deficiencies on which the Liquidated Damages or penalty is levied. In fact if they do not levy such Liquidated Damages/they will be said to be tolerating an act. The Education Guide which was issued by the CBEC at the time of introducing the new scheme of taxation under service Tax specifically discussed this issue in Para 2.3.1 of the said Education Guide which is reproduced below. Would imposition of a fine or a penalty for violation of a provision of law be a consideration for the activity of breaking the law making such activity a service'? To be a service, an activity has to be carried out for a consideration. Therefore fines and penalties which are legal consequences of a person's actions are not in the nature of consideration for an activity. Hence the legal consequences arising from delayed/deficient supply of goods which results in payment of penalty in term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017-18 given by the applicant that the income is mainly 'reimbursement' of cost of books, free kits. 8.1 The first and second question is regarding the supply of educational aids such as school bags, footwear, geometry box, wooden colour pencils, crayons, woollen sweater to government and government aided schools based on the State Government educational policy for which the consideration is paid to Tami Nadu Text Book and Educational Services Corporation by the State Government by means of a budgetary allocation. The applicant has stated that as per the requirements provided by the Education Department, Government of Tamil Nadu, the applicant floats tenders for procurement of the educational kit consisting of school bags, footwear, geometry box, wooden color pencils, crayons, woolen sweater and submit a claim to the Education Department of the State government for allocating monies for the cost of procurement of the educational kits. The applicant also claim incidental expenses towards procurement such as advertisement cost for floating tenders, field inspection expenses and other related costs and administration charges which is at 1% of the cost of procurement of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Supply of goods by a Government entity to Central Government, State Government. Union territory. local authority or any person specified by Central Government, State Government, Union territory or local authority, against consideration received from Central Government, State Government, Union territory or local authority in the form of grants ; (B) in the Explanation. after clause (iv), the following clause shall be inserted, namely:- (v) The phrase Government Entity shall mean an authority or a board or any other body including a society, trust, corporation, which is: (a) set up by an Act of Parliament or State Legislature; or (b) established by any Government, with 90 percent or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State government, Union territory or a local authority. . As per the above entry inserted effective from 13th October 2017, Supply of goods to State Government by a Government entity, for which the consideration is received in the form of grants stands exempted. In the case at hand, the applicant is a society establishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same are taken up for consideration as under. 10.2 The applicant has stated that they supply raincoats, boots and socks based on the requirement as provided by the Education Department, to the Government Schools located in hilly areas for which no consideration is paid to the applicant by the Department of School/Elementary Education. The applicant claims that these supplies for which no consideration is received separately from the government should also be covered under the exemption at Sl.No. 150 of Notification no. 2/2017-C.T. (Rate) dated 28.06.2017 as amended and therefore exempted from payment of GST. From the submissions made by the applicant it is seen that as per Order No. 204 dated 15.11.2016, it is ordered that based on the announcement of the Chief Minister during the allocation of grants for the year 2016-2017, decision to supply raincoat, boots and socks with expected expenses of ₹ 8 Crores stands announced, accordingly, sanction has been accorded to meet the expenses from the funds already available with the applicant and no separate sanction is accorded. It is evident that separate grant is not allocated but the funds of the applicant have been ordered to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... answered is Whether the Tamil Nadu Text Book and Educational Services Corporation is required to pay GST on Penalty and Liquidated damages levied by them on suppliers due to violation of the contract terms for supply and if so the rate at which such GST is payable. The applicant has stated that as per the Purchase Order issued by the applicant for purchase of the goods to be supplied to the Government, they levy penalties and liquidated damages on the Suppliers, for failure to adhere to the tender conditions which is on account of delay in supply as per the tender condition or non-adherence to the quality parameters as set out for the items which are supplied. In this case, the applicant has sought a ruling on a supply to be received by the applicant. However, as per Section 95 (a) of CGST/TNGST Act, the ruling can be sought in relation to the supply of goods or services or both undertaken or proposed to be undertaken by the applicant and not received by the applicant. Therefore, the said question is not taken up for consideration for the reason that it is not covered under the purview of this Authority. 13. In view of the above discussion, we rule as under: RULING ..... X X X X Extracts X X X X X X X X Extracts X X X X
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