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TMI Blog2021 (1) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... poration are directly appointed by the State Government i.e. the Government of Gujarat. It can also be seen from the website of the applicant that the Managing Director as well as the Joint Managing Director are officers from the cadre of Indian Administrative Service(IAS) whereas the Executive Director is an officer belonging to the cadre of Gujarat Administrative Service (GAS). Also, on going through the various sections of the GID Act mentioned hereinabove, it appears that the said Corporation is totally governed by the State Government and functions just like any other Department of the State Government i.e. State of Gujarat. Further, on perusal of the Audit Report and Annual Accounts of Gujarat Industrial Development Corporation for the financial year 2013-14(available online), it is specifically mentioned therein at Point No.4(Related Party Disclosure) that Gujarat Industrial Development Corporation is a wholly owned corporation of Government of Gujarat. Hence it is a state controlled enterprise as defined in Para-9 of Accounting Standard AS 18 Related Party Disclosure issued by the Institute of Chartered Accountants of India. Thus no disclosure is required, keeping the spiri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be covered under item(d) above which provides that any service, other than services covered under entries (a) to (c) above, provided to business entities would be exempted from GST. It is seen that the services supplied/provided by the applicant is to the various industries located in the Industrial area. All the industries as we know, are undoubtedly business entities i.e. entities built or created for the purpose of carrying on business only with the motive of earning profit and are covered under the definition of business as defined in Section2(17) of the CGST Act, 2017 - in view of the item(d) of Entry No.6 of Notification No.12/2017-Central Tax(Rate) dated 28.06.2017 (as amended from time to time) no exemption will be available to the applicant - it can be concluded that the various activities carried out by the Applicant to the plot holders in terms of provisions of GIDC Act, 1962 and charges collected for the same as may be notified from time to time amounts to supply under Section 7 of the Central Goods and Services Act, 2017 and are liable to tax under GST. X X X X Extracts X X X X X X X X Extracts X X X X ..... sustained water supply, drainage etc. within the industrial areas or estates. Further, the maintenance and upgradation of the existing infrastructure is also a primary responsibility of the Applicant, in view of section 37(1) of the Act. 3. The applicant has submitted that Section 14(a) of the Act, empowers the applicant to acquire and hold such property, both movable and immovable as the applicant may deem necessary for the performance of any of its activities, and to lease, sell, exchange or otherwise transfer any property held by it on such conditions as may be deemed proper by the applicant. Further, section 14(d) of the Act, empowers the applicant to make available buildings on hire or sale to industrialists or persons intending to start industrial undertakings or commercial establishments or both the industrial undertakings and commercial establishments; that the applicant and plot holder have lessor - lessee relationship and annual rent is collected by the applicant from the plot holders; that the lease agreement between the applicant and allottees is generally for 99 years (long term lease);that various financial institutions provide finance on the plots considering the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rried out by the Applicant to the plot holders in terms of provisions of GIDC Act, 1962 and charges collected for the same as may be notified from time to time amounts to supply under Section 7 of the Central Goods and Services Act, 2017 ('CGST Act')?" 5. The applicant's statement containing their interpretation of law and/or facts, as the case may be, in respect of the Question on which Advance Ruling is sought is as under: In order to file an application in relation to supply of goods or services before the Authority of Advance Ruling, the applicant must satisfy the conditions prescribed under the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as 'IGST Act'), Central Goods and Services Tax Act, 2017 (hereinafter referred to as 'CGST Act') and Gujarat Goods and Services Tax Act, 2017 (hereinafter referred to as 'GGST Act'). (i) Section 95 to 106 of the CGST Act, 2017 enunciated under Chapter XVII cover Advance Ruling and its appeals. The definitions and questions on which advance ruling is sought is provided under section 95 and 97 respectively. The relevant sections are extracted below: Section 95. Definitions: In this Chapter, unless the context othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices or both; (d) admissibility of input tax credit of tax paid or deemed to have been paid; (e) determination of the liability to pay tax on any goods or services or both; (f) whether applicant is required to be registered; (g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term; (iii) From the afore-mentioned provisions of the CGST Act and GGST Act relating to Advance Ruling, it can be concluded that in respect of determination of whether particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term is eligible to seek an advance ruling. The Applicant, as stated earlier, whether the facilities provided by the Applicant to the plot holders in terms of provisions of GID Act, 1962 amounts to supply under Section 7 of CGST, 2017, forms the subject matter of the present application. It is therefore the submission of the Applicant that in the present case the Applicant satisfies the criterion required for filing the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more states). The prime requisite under Section 7(1)(a) is that all forms of supply of goods or services or both mentioned in the section should be in the course or furtherance of business. To qualify any act as supply under Section 7(1)(a) of CGST Act, 2017, the phrase 'in the course or furtherance of business' needs to be satisfied. In other words, if the activity is not in course or furtherance of business then the said activity would not be supply under the Act and therefore it would not be subject to levy of CGST and/or GGST. The phrase in the course of furtherance of business is not defined in the Act, however, term 'business' is defined under Section 2(17) of the CGST Act, 2017 which reads as under:- "(17) "business" includes-- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch includes promotion and assistance in the rapid and orderly establishment; growth and development of Industries in the State of Gujarat; development of land on its own account or for the State Government for the purpose of facilitating the location of industries and commercial centers; financial assistance by loans to industries to move their factories into industrial estates or areas and undertaking schemes for providing units and commercial establishments with such structures as may be necessary for their orderly establishment, growth and development. Thus, the GIDC has been established for managing and developing the industrial areas and estates, in order to increase the number of industries established in State of Gujarat. (vii) Section 14 of the GID Act, lists out the general powers entrusted to the Applicant, which includes provision of amenities and common facilities in industrial estates, commercial centres and industrial areas and construction and maintenance of buildings, amenities and common facilities. The amenities include road, supply of water or electricity, street lighting, drainage, sewerage, conservancy and such other convenience as the State Government may sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... properties or activities or in regard to any proposed work or scheme as the State Government may from time to time require. Further, section 45(2) of the Act requires the Applicant to furnish an annual report on its working as soon as may be after the end of financial year in the form and manner prescribed by the State Government. (xiii) Moreover, section 46 of the Act empowers the State Government to withdraw any particular industrial area, estate or part thereof from the jurisdiction of the Applicant. If, the State Government is satisfied that in respect of any particular industrial estate or area, the purpose for which the Applicant was established has been substantially achieved, so as to render the continued existence of such industrial estate or area under the Applicant unnecessary. (xiv) Section 48 of the Act empowers the State Government to dissolve the Applicant, if the State Government is satisfied that the purposes for which the Applicant was established under the Act, has been substantially achieved. The provisions contained in the Act, makes it clear that the State Government of Gujarat controls the function of the Applicant either directly or indirectly. The estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is established by the Act for carrying out the purposes" of the Act. The purposes of the Act are development of industries in the State. The Corporation consists of nominees of the State Government, State Electricity Board and the Housing Board. The functions and powers of the Corporation indicate that the Corporation is acting as a wing of the State Government in establishing industrial estates and developing industrial areas, acquiring property for those purposes, constructing buildings, allotting buildings, factory sheds to industrialists or industrial undertakings. It is obvious that the Corporation will receive moneys for disposal of land, buildings and other properties and also that the Corporation would receive rents and profits in appropriate cases. Receipts of these moneys arise not out of any business or trade but out of sole purpose of establishment, growth and development of industries. 18. The Corporation has to provide amenities and facilities in industrial estates and industrial areas. Amenities of road, electricity, sewerage and other facilities in industrial estates and industrial areas are within the programme of work of the Corporation. The fund of the Cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State is carrying out the objects of the Act with the Corporation as an agent in setting up industries in the State. The Act aims at building an industrial town and the Corporation carries out the objects of the Act. The hard core of a trading Corporation is its commercial character. Commerce connotes transactions of purchase and sale of commodities, dealing in goods. The forms of business transactions may be varied but the real character is buying and selling. The true character of the Corporation in the present case is to act as an architectural agent of the development and growth of industrial towns by establishing and developing industrial estates and industrial areas. We are of opinion that the Corporation is not a trading one." (xvi) The function performed by Applicant under GIDC Act is similar to role performed by MIDC under MIDC Act. It is submitted that the Applicant also develops the infrastructure like roads, sustained water supply, drainage etc. within the industrial areas or estates. Further, the maintenance and upgradation of the existing infrastructure is also a primary responsibility of the Applicant, in view of section 37(1) of the Act. (xvii) The Applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ….A short question which is posed for consideration of this Court is whether the activities carried out by the assessee can be said to be in the nature of trade, commerce or business for a Cess or fee, or for any other consideration and/or carrying on any activities in the nature of trade, commerce or business so as to attract proviso to Section 2 [15] of the Act and to deny the exemption claimed under Section 11 of the I.T Act ? 14.As per the statement and object of GID Act, 1962, it has been enacted for securing the orderly establishment and organization of industries in industrial areas and industrial estates in the State of Gujarat and for the purpose of establishing commercial centres in connection with the establishment and organization of such industries and for that purpose, to establish an Industrial Development Corporation, and for purposes connected with the aforesaid matters. 15.It cannot be said that the activities carried out by the assessee can be said to be for "advancement of any other object of general public utility". Considering the object and purpose for which the assessee has been established under the provisions of the Act and the activities carrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that Stand of the Revenue that Tribunal should not have relied on those decisions is without any substance. Principle laid down by a decision of the Sales tax & income tax decisions applicable to Central Excise cases. (xxi) On this ground, the ratio laid down by the Hon'ble Supreme Court in case of MIDC and Hon'ble High Court in Applicant's own case under Income Tax rulings is applicable in the Applicant's case to decide whether the amount collected from the plot holders is towards trade, commerce or similar activities. (xxii) Furthermore, in the case of CCE v. Maharashtra Industrial Development Corporation reported at 2017-TIOL-2629-HC-MUM-ST, the Hon'ble High Court of Bombay decided on the issue whether service charges recovered by the MIDC from plot holders for providing various services to them and the activity of providing service attracts service tax liability under the category of management, maintenance or repair service as defined under clause 64 of Section 65 of the said Act. The Hon'ble High Court placed reliance upon circular dated 18th December 2006 bearing No.89/7/2006. Clauses 2 and 3 of the said circular read thus: "2. The issue has been examined. The Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, it is the statutory obligation of the MIDC to provide amenities as defined in clause (a) of Section 2 of the MID Act to the industrial estates established by it. Thus, it is the statutory obligation of MIDC to provide and maintain amenities in its Industrial estates such as roads, water supply, street lighting, drainage, etc. Thus, we find that the activities for which the demand was made are part of the statutory functions of the MIDC under MID Act. As stated earlier, the demand is in respect of service charges collected from plot holders for providing them various facilities including maintenance, management and repairs. As provided in the circular dated 18th December, 2006, for providing amenities to the plot holders, the service fees or service charges collected by MIDC are obviously in the nature of compulsory levy which is used by MIDC in discharging statutory obligations under Section 14. We find that even in the Order-in-Original, there is no finding of fact recorded that the service rendered for which service tax was sought to be levied was not in the nature of statutory obligation. 13.Therefore, we find no error in the view taken by the Appellate Tribunal. No subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incidental benefits 2. likely to happen as a result or concomitant Ancillary 1. Of secondary importance; subordinate 2. Auxiliary or accessory: an ancillary pump. (xxvii) The Hon'ble Supreme Court of India in the case of CST v Sai Publication Fund [2002] 258 ITR 70/122 Taxman 437 in which the Supreme Court interpreting the word "business" under section 2(5A) of the Bombay Sales Tax Act, 1959 had clearly laid out that where main activity is not 'business', the connected incidental or ancillary activities of sales carried out in furtherance of and to accomplish their main objects would not, normally, amount to business, unless an independent intention to conduct 'business' in these connected, incidental or ancillary activities is established by the revenue. Hon'ble Supreme Court held as under:- "… No doubt, the definition of "business": given in Section 2(5-A) of the Act even without profit motive is wide enough to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture and any transaction in connection with or incidental or ancillary to the commencement or closure of such trade, commerce, manufacture, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t have been considered as business. To carry out any function entrusted to a municipality under Article 243W of the Constitution. Hence, clause (i) of Section 2(17) is also not applicable in the facts of present case. The said activities are exempted by virtue of Entry No. 4 of the Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017 The Applicant submit that its activities are otherwise exempted by virtue of Sr. No. 4 of the Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017 (as amended from time to time.) For ease of reference, the said entry is extracted below: Government of India Ministry of Finance (Department of Revenue) Notification No. 12/2017- Central Tax (Rate) New Delhi, the 28th June,2017. G.S.R. 691(E) .- In exercise of the powers conferred by 49[,sub-section (3) and sub-section (4) of section 9, sub-section (1) of section 11,sub-section (5) of section 15 and section 148,] of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts the intra-State supply of services of description as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d) (xxxii) Further, Schedule XII of the Constitution of India, lists out the following functions to be performed by the municipalities: TWELFTH SCHEDULE (Article 243W) 1. Urban planning including town planning. 2. Regulation of land-use and construction of buildings. 3. Planning for economic and social development. 4. Roads and bridges. 5. Water supply for domestic, industrial and commercial purposes. 6. Public health, sanitation, conservancy and solid waste management. 7. Fire services. 8. Urban forestry, protection of the environment and promotion of ecological aspects. 9. Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded. 10. Slum improvement and upgradation. 11. Urban poverty alleviation. 12. Provision of urban amenities and facilities such as parks, gardens, playgrounds. 13. Promotion of cultural, educational and aesthetic aspects. 14. Burials and burial grounds; cremations, cremation grounds and electric crematoriums. 15. Cattle pounds; prevention of cruelty to animals. 16. Vital statistics including registration of births and deaths. 17. Public amenities including street lighting, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries and other buildings and makes them available for any industries or class of industries. Section 13 of the Gujarat Act enumerates the function of the Corporation and they contain, inter alia, "to promote and assist in the rapid and orderly establishment, growth and development of industries in the State of Gujarat". 11. We have no doubt that a proper planning is absolutely necessary for creation of an industrial area. Inside roads, Sub-roads, buildings, sanitation, parks and other amenities have also to be provided in a planned industrial area as per the modern concept of any industrial complex. Even educational institutions may have to be provided in such complex. Therefore, development of industrial area would have its direct impact on the development or improvement of that part of the city or town or village where such area is located. Delinking industrial area from the scope of development of any area is, thus, without any practical sense. 12. In this context a reference to Maharashtra Industrial Development Act, 1962, which is almost analogous to the Gujarat Act, is of some use. While examining issues relating to the validity of the Maharashtra Act a Division Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutes also, (vide State of Tamil Nadu v. M.K. Kandaswami [1976] 1 SCR 38. This Court has reiterated the said principle in Calcutta Jute Manufacturing Co: 1997 (93) ELT 657 (SC). 16. The position is, therefore, clear that authorities constituted by law for facilitating all kinds of development of cities, towns and villages for public purposes shall not be subjected to the liability to pay income-tax. The Division Bench of the High Court seems to have interpreted the exemption clause too rigidly and narrowly which resulted in the anomaly of bringing authorities like appellant Corporation within the tentacles of income-tax liability while the authorities dealing with housing schemes which provide houses to private individuals would stand outside the taxing sphere. 17. In the result, we allow these appeals, set aside the judgment under challenge. The answer to the question will, therefore, be in favour of the assessee and against the Revenue. (underlining supplied) (xxxv) Section 14 of the Act, lists out the general powers entrusted to the Applicant, which includes provision of amenities and common facilities in industrial estates, commercial centres and industrial areas and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitution of India". Thus, as a result of this amendment in the Gujarat Municipalities Act, an industrial area under the Gujarat Industrial Development Act, which is notified under Section 16 of the Gujarat Industrial Development Act would become a notified area under the new section 264A of the Gujarat Municipalities Act and would mean an industrial township area under the proviso to Clause (1) of Article 243Q of the Constitution of India. 16. The contention is based on a misconception about the relationship of the provisions of Parts IX and IXA of the Constitution with any legislation pertaining to industrial development. The Gujarat Industrial Development Act operates in a totally different sphere from Parts IX and IXA of the Constitution as well as the Gujarat Panchayats Act, 1961 and the Gujarat Municipalities Act, 1962 - the latter being provisions dealing with local self Government while the former being an Act for industrial development, and orderly establishment and organisation of industries in a State. The industrial areas which have been notified under Section 16 of the Gujarat Industrial Development Act on 7.9.1993 were notified as industrial areas under the Gujarat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... area under the Gujarat Municipalities Act loses all force. 18. It is next contended that the proviso to Clause (1) of Article 243Q applies only to urban areas. It does not apply to a transitional area. Since the industrial areas in question have been subsequently notified as transitional areas they cannot be equated with industrial townships. This contention also cannot be accepted. Article 243Q deals with constitution of municipalities. Municipality is defined under Article 243P(e) to mean "an institution of self-government constituted under Article 243Q. Article 243Q constitutes three types of municipalities - (a) a Nagar Panchayat (b) a Municipal Council and (c) a Municipal Corporation. The proviso to Article 243Q deals with all three types of municipalities constituted under Clause (1). It provides that a municipality under Clause (1) may not be constituted in certain circumstances. This would refer to any of the three types of municipalities. Although the proviso refers to such urban area or part thereof, this "urban" area also covers a transitional area, in transition from rural to urban. It is because this area is also in the process of turning into an urban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out by the Applicants is not falling within the definition of business as explained under. For ease of reference Section 2(17) of CGST Act, 2017 is reproduced below: (17) "business" includes - (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) admission, for a consideration, of persons to any premises; (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; [(h) activities of a race club including by way of totalisator or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore CESTAT Bangalore and before the Advance Ruling Authorities is identical and therefore, the ratio of the decision referred supra is having great persuasive value in the present case. Further, in number of cases, the authorities have held that so far as taxation of services under GST is concerned there is no change in law. Therefore, the principles laid down in service tax cases are applicable to case of services under GST as well. 9. The applicant has submitted that in the case of Karnataka Industrial Area Development Board reported in 2020 (6) TMI 227 - CESTAT Bangalore it is observed as under: 7.2. The true character / scope and intent of the Act is to be ascertained with reference to the purposes and the provisions of the Act. The Act is one to make a special provision for securing orderly establishment of industrial areas and industrial estates in the State of Karnataka and for that purpose, to establish the board. A careful reading of the aforesaid provisions of KIAD Act and KIADB Regulations would clearly go to show that the appellant is a State undertaking and creature of a statute to exercise the power of 'eminent domain'. The appellant is engaged in discharging sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of social nature as per the directive principles of the State Government policy. Here it is pertinent to reproduce the observation of the Tribunal in paras 7, 11, 12, 13, 15, 16, 17, 20: - Further it is seen that the above said case has been upheld by the Apex Court as reported in 2018(18) GSTL J215 (SC). 8. In view of our discussion above, we are of the considered opinion that the appellant is a statutory body discharging the statutory function as per the statute KIAD Act, 1966 and hence are not liable to pay service tax in view of the ratios of the various decisions cited supra. Since we have held that appellant is not liable to pay the service tax at all, we do not consider it appropriate to discuss the demand of service tax on individual services allegedly rendered by the appellant on which the learned Commissioner has confirmed the demand. In the result, by following the ratios of the Hon'ble Apex Court in the case of Shri Ramtanu Housing Co-operative Society Ltd., Hon'ble Bombay High Court in the case of MIDC and the Tribunal's decision in the case of Employee Provident Fund Organisation (upheld by Apex Court) cited supra, we set aside the impugned order by allowing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer can be gathered by necessary implication from the other provisions of the Act." (at page 461) The Court went on to say : "Though under the partnership law a firm is not a legal entity but only consists of individual partners for the time being, for tax law, income-tax as well as sales-tax, it is a legal entity. If that be so, on dissolution, the firm ceases to be a legal entity. Thereafter, on principle, unless there is a statutory provision permitting the assessment of a dissolved firm, there is no longer any scope for assessing the firm which ceased to have a legal existence. As in the present case, admittedly, the firm was dissolved before the order of assessment was made, the said order was bad." (at page 462) The Court went on to consider various High Court decisions and ultimately concluded as follows :- "Strong reliance was placed upon two judgments of this Court. This Court in C.A. Abraham v. Income-tax Officer, Kottayam, speaking through Shah, J., held that S. 44 of the Income-tax Act set up a machinery for assessing the tax liability of firms which have discontinued their business. This was followed by this Court again in Commissioner of Income-tax, Madras v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imilar provisions of the GGST Act. 14. As per the submission of the applicant, they were established under the provisions of Gujarat Industrial Development Act, 1962 (hereinafter referred as 'the Act') by the State Government of Gujarat for the purpose of securing orderly establishment and organisation of industries in industrial areas and industrial estates in the State of Gujarat and establishing commercial centers in connection with the establishment and organisation of such industries and the GID Act and Gujarat Industrial Development Rules, 1962 (hereinafter referred as the 'said Rules') govern the functioning of the Applicant; that after the establishment of the Applicant, various areas in Gujarat where industries were clustered were declared as GIDC zones and new industrial zones were also created and plots of land were allotted to willing industries (hereinafter referred to as "plot holders" or "allottees") on very economical terms so that overall industrial development could take place in a structured and planned manner and the Applicant also develops and provides infrastructure facilities like roads, sustained water supply, drainage etc. within the industrial areas or es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er deposits, Interest sundries * Income Related Expenditure - Service Charges (Maintenance and Repair Expenditure for Roads, Buildings, Street Lights etc), Water charges (maintenance expenditure on water supply), NA Charges Income The applicant has also stated that they have been recognized as a Charitable Institution under Section 12AA of the Income Tax Act, 1962 and this Advance Ruling application seeks determination of the issue that whether facilities provided by the applicant to the plot holders in terms of provisions of GIDC Act, 1962 amounts to supply under Section 7 of the Central Goods and Services Act, 2017. The applicant has the following question seeking Advance Ruling on the same: "Whether various activities carried out by the Applicant to the plot holders in terms of provisions of GIDC Act, 1962 and charges collected for the same as may be notified from time to time amounts to supply under Section 7 of the Central Goods and Services Act, 2017 ('CGST Act')?" 15. We also find that the applicant has referred to Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 which grants conditional/unconditional exemption to various types of services falling under vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation has come into existence by virtue of Gujarat Industrial Development Act, 1962 of the Government of Gujarat (Gujarat Act No.XXIII of 1962). Some of the important Sections of the said Act read as under: Section-1: (1) This Act shall be called the Gujarat Industrial Development Act, 1962. (2) It extends to the whole of the State of Gujarat. (3) It shall come into force at once. Section-3: (1) For the purpose of securing and assisting in the rapid and orderly establishment and organization of industries in industrial areas and industrial estates in the State of Gujarat (and for the purpose of establishing commercial centres in connection with the establishment and organization of such industries), there shall be established by the State Government by notification in the Official Gazette, a corporation by the name of Gujarat Industrial Development Corporation. Section-4: (1) The Corporation shall consist of the following (twelve) (Directors), that is to say- (a) (Three) official (Directors) nominated by the State Government of whom one shall be the Financial Adviser to the Corporation; (b) One(Director) nominated by the State Electricity Board constituted und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Indian Administrative Service(IAS) whereas the Executive Director is an officer belonging to the cadre of Gujarat Administrative Service (GAS). Also, on going through the various sections of the GID Act mentioned hereinabove, it appears that the said Corporation is totally governed by the State Government and functions just like any other Department of the State Government i.e. State of Gujarat. Further, on perusal of the Audit Report and Annual Accounts of Gujarat Industrial Development Corporation for the financial year 2013-14(available online), it is specifically mentioned therein at Point No.4(Related Party Disclosure) that "Gujarat Industrial Development Corporation is a wholly owned corporation of Government of Gujarat. Hence it is a state controlled enterprise as defined in 'Para-9' of Accounting Standard AS 18 "Related Party Disclosure" issued by the Institute of Chartered Accountants of India. Thus no disclosure is required, keeping the spirit of the accounting standard in mind." It can therefore, be seen from the above, that Gujarat Industrial Development Corporation is nothing but a wing of the State Government i.e. the Government of Gujarat which has come into exi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and powers of the Corporation indicate that the Corporation is acting as a wing of the State Government in establishing industrial estates and developing industrial areas, acquiring property ....... industries. 18. The Corporation has to provide amenities and facilities in industrial estates and industrial areas. Amenities of road, electricity, sewerage and other facilities in industrial estates and industrial areas are within the programme of work of the Corporation. The fund ....... A budget is prepared showing the estimated receipts and expenditure. The accounts of the Corporation are audited by an auditor appointed by the State Government. These provisions in regard to the finance of the Corporation indicate the real role of the Corporation, viz., the agency of the Government in carrying out the purpose and object of the Act which is the development of industries. If in the ultimate analysis there is excess of income over expenditure that will not establish the trading character of the Corporation. There are various departments of the Government which may have excess of income over expenditure. 15.5. As can be seen from the facts of the aforementioned judgements, a refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agency of the Government in carrying out the purpose and object of the Act which is the development of industries. If in the ultimate analysis there is excess of income over expenditure that will not establish the trading character of the Corporation. There are various departments of the Government which may have excess of income over expenditure. In this portion of the judgement, it is specifically mentioned that the corporation is the agency of the Government in carrying out the purpose and object of the Act which is the development of industries. The Corporation has also been compared to just another department of the Government. Since, the function performed by Gujarat Industrial Development Corporation under Gujarat Industrial Development Act is similar to the role performed by Maharashtra Industrial Development Corporation under Maharashtra Industrial Development Act, the ratio laid down in the aforementioned judgements is squarely applicable to the applicant in the instant case. In view of the above, It can be construed that the said Corporation being a wing of the Government of Gujarat and an agency of the Government in carrying out the purpose and object of developmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds/services provided by the applicant are covered in sub-sections 1 and 1(A) above, since as per their submission itself, they are involved in sale, transfer, rental, lease, etc. and are earning income from provision/supply of various services/goods as listed in para-14 above. However, the second part of the said provision specifically states that the aforementioned supply of goods and services should be made or agreed to be made for a consideration by a person in the course or furtherance of business. It can therefore be seen from the above that supply would include supply of goods or services or both in all the forms, made by a person in course or furtherance of business for consideration. Thus, the primary requirement under Section 7(1)(a) is that all forms of supply of goods or services or both mentioned in the section should be in the course or furtherance of business and to qualify to be supply under Section 7(1)(a) of CGST Act, 2017, the said phrase 'in the course or furtherance of business' will have to be satisfied. Although the phrase 'in the course of furtherance of business' is not defined in the Act, the term 'business' has been defined under Section 2(17) of the CGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... includes any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities'. As discussed earlier, Gujarat Industrial Development Corporation falls under the category of State Government and is hence a public authority. Hence the functions that they are engaged in are undoubtedly undertaken as public authorities only. Therefore, the clause (i) of Section 2(17) covers the activities of the applicant and the said clause read with sub-sections(1) and 1(A) of Section 7 of the CGST Act, 2017 would indicate that the activities of the applicant would definitely amount to supply. However, at the same time, there is another provision under Sub-section(2) of Section 7 under the 'Scope of Supply' which states as under: (2) Notwithstanding anything contained in sub-section (1),-- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatistics including registration of births and deaths. 17. Public amenities including street lighting, parking lots, bus stops and public conveniences. 18. Regulation of slaughter houses and tanneries. 16.4 As per the submission of the applicant, Gujarat Industrial Development Corporation was established under the provisions of Gujarat Industrial Development Act, 1962 by the State Government of Gujarat for the purpose of securing orderly establishment and organisation of industries in industrial areas and industrial estates in the State of Gujarat and establishing commercial centres in connection with the establishment and organisation of such industries and the GID Act and Gujarat Industrial Development Rules, 1962 govern the functioning of the Applicant. However, on going through the aforementioned list of functions entrusted to the municipality, we find that none of the entries pertain to the establishment or development of industries. As per the submission of the applicant, the activity carried out by them pertains to planning for economic development. It is observed that Sr.No.3 of the list states 'Planning for economic and social development'. However, on going through t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion that unless and until there is a specific entry pertaining to the establishment or development of industries in the aforementioned list, it cannot, by any stretch of imagination, be construed that the applicant is a Corporation that has been established to carry out activities in relation to functions entrusted to the municipalities under Article 243W of the Constitution of India merely on the grounds that establishment, organisation and development of industries would lead to economic development and would thus be covered under the aforementioned Entry No.3 of the list. In view of the above facts, we conclude that the applicant namely Gujarat Industrial Development Corporation is not eligible for the exemption mentioned at Entry No.4 of Notification No.12/2017-Central Tax(Rate) dated 28.06.2017(as amended from time to time). 16.5 Although, it has been concluded that the applicant is not eligible for the exemption mentioned at Entry No.4 of Notification No.12/2017-Central Tax(Rate) dated 28.06.2017(as amended from time to time), we would like to once again refer to Notification No.12/2017-Central Tax(Rate) dated 28.06.2017 which grants conditional/unconditional exemption to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded that the various activities carried out by the Applicant to the plot holders in terms of provisions of GIDC Act, 1962 and charges collected for the same as may be notified from time to time amounts to supply under Section 7 of the Central Goods and Services Act, 2017 ('CGST Act') and are liable to tax under GST. 18. We also find that the applicant has given a lengthy submission highlighting the various functions carried out by them under various sections of the Gujarat Industrial Development Act, 1962 which has given us an in depth view of the functioning of the corporation. However, the reference to various sections of the aforesaid Act does not appear to have helped their cause. We also find that they have relied upon various judgements in support of their contention wherein the main aspect appears to be that entities like Maharashtra Industrial Development Corporation or Gujarat Industrial Development Corporation etc. or similar Government entities are statutory corporations discharging their sovereign function and are therefore not involved in Business, trade, commerce etc. and hence their activities are not taxable. However, these judgements are all pertaining to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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