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TMI Blog2021 (4) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... e institute or to hold the inquiries into affairs of the institute and to report them in such manner as he directs and that on the basis of the report, the visitor shall take such actions and issue such directions as he may consider necessary, which shall be binding on the Applicant. The applicant has explained some of the sections of the NID Act as under: (1) Section 10 of the NID Act provides that a Governing Council ('Council') shall be an authority of the institution. Moreover, as per Section 11 of the NID Act, Council would comprise of a chairperson who would be nominated by the President of India. Apart from chairperson, the Council also shall have such number of members, who are nominated by Central Government, State Government or visitor / President or Senate of NID. Further, the Director of the Applicant would also be appointed by Central Government as per Section 18 of NID Act. (2) In order to enable the NID to function effectively, Section 22 of the NID Act provides that the Central Government, after due appropriation made by Parliament, would pay to the institution such sum of money as it may deem fit, in each financial year. This means that NID is receiving substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn is one of the functions of Article 243W of COI and services received by them in relation to/pertaining to education service should be eligible for exemption from payment of GST; that in light of above discussion, if the applicant decides to avail security services from individual or partnership firm, the liability to pay tax rests with the applicant as per Notification #13/2017- CT (Rate), as amended from time to time. The applicant has further stated that apart from the above, they make payment to service providers located outside India for access of e-books or e-database, which are used for the educational purpose. For such services, the liability to pay tax rests with the Applicant as per Notification #10/2017 - IGST (Rate), as amended from time to time, as import of services for which sample copy of invoices have been submitted by the applicant for ready reference. The applicant have also stated that they have obtained registration as tax deductor under Section 24 of CGST Act, 2017. 4. Considering the above facts, the applicant has asked the following questions seeking Advance Ruling on the same: (i) Whether NID would qualify as 'Governmental Authority' as defined under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Department for Promotion of Industry and Internal Trade (DPIIT) of Ministry of Commerce & Industry, Government of India. Further, the Director, Chairman or Governing Council are appointed by Government and in a way, Government has 100% participation by way of control in NID. They have submitted a copy of annual report for FY 2018-19 for reference. The applicant has stated that for analyzing the question being the subject matter, it would be relevant to refer to the definition of the Governmental Authority as given under Section 2(16) of IGST Act, which has been reproduced hereunder: "Governmental authority" means an authority or a board or any other body,- (i) Set up by an Act of Parliament or a State Legislature; or (ii) Established by any Government, with ninety per cent or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution; 7. The applicant has further stated that words used in the definition of Governmental Authority is 'or' between clause (i) &clause (ii). This means that the condition of 90% or more participation by way of equity or control, to carry out any function entruste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 90% or more participation by way of equity or control to carry out any function entrusted to a municipality under Article 243W of the Constitution to be eligible for exemption. The Authority set up by an Act of Parliament or State Legislature is not and cannot be made subject to the condition of 90% or more participation by way of equity or control to carry out any function entrusted to a municipality under Article 243W of the Constitution." 8. The applicant has further submitted that they believe that fulfilling the condition prescribed in clause (i) of definition of 'Governmental Authority' is sufficient enough to classify any body as a Governmental Authority i.e. when the body is set up by an Act of Parliament, it would be classified as a 'Governmental Authority' for GST perspective and that they were not required to comply with conditions of 90% of control and functions entrusted under Article 243W. The applicant has stated that notwithstanding above, even if the applicant is also required to comply with the conditions of 90% control, they have made a reference to Circular no 76/50/2018-GST dated December 31, 2018 in respect of a similar query wherein the question before CBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that ruling and facts in hand are similar as NDDB was an institution set up by an Act of Parliament viz. National Dairy Development Board Act, 1987, the Government has substantial control over the operations of NDDB, the Board of Directors would be nominated by the Central Government, the auditors of NDDB would be appointed in consultation with Central Government and the audited accounts would be laid before Parliament by the Central Government. The applicant has further stated that in such a scenario, the Authorities for Advance Ruling upheld that NDDB would be considered as Governmental Authority if they fulfil the condition of ninety percent or more participation by way of equity or control to carry out functions entrusted to a municipality under Article 243W of COI. 9. The applicant has submitted that considering above ruling, the applicant observes that when the organization is set up by an Act of Parliament or established by the Government with the condition of 90% or more participation by way of equity or control then the same would be considered as Governmental Authority provided it carries out the functions entrusted to a municipality under Article 243W of COI; that, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 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, parking lots, bus stops and public conveniences. 18. Regulation of slaughter houses and tanneries." 10. The applicant has submitted that on conjoint reading of statement of objectives, Article 243W and Twelfth Schedule, it is vital to understand that the COI wishes to enable the Urban Local bodies perform effectively as vibrant democratic units of self - government which means that Urban Local bodies or to say Municipalities should be providing educational services including higher and technical education to perform as self-government; that in order to understand what kind of functions may be entrusted to a Municipality, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aged/ stated in above provisions including Article 243W with respect to higher education; that the law intends to cover all type of education including higher & technical education to be covered within the function of Municipality; that the activities of NID are for the promotion of educational aspect and the main and primary objective of NID is promotion of quality and excellence in education, research and training in all discipline relating to Design and matters connected therewith and incidental thereto; that to achieve this objective, NID would develop courses leading to graduate and post graduate degrees, doctoral; that apart from this, NID would also hold examinations and grant degrees, diplomas, other academic distinctions or titles. 12. The applicant has further submitted that in view of the above facts, they are of the view that providing education would squarely be considered as function of municipality; that it is important to note that the line item above states promotion of educational aspect whereas NID is a premier and internationally acclaimed institute in the field of design education and hence, the wider scope of above line item would clearly include the activiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce depending on the context; that it is also held that the expression "in relation to" has been interpreted to the words of wisest amplitude; that they also wish to rely on judgement of State Waqf Board Vs. Abdul Azeer sahib as reported in AIR 1968 Mad 79, wherein it was held that, "in relation to" are words of comprehensiveness which might both have a direct significance as well as an indirect significance, depending on the context. They are not words of restrictive content and ought not to be so construed."; that the term 'in relation to' is very wide and the intention of the legislature is to encompass all those services which are provided so as to enable the organization to perform function entrusted in Article 243W of COI; that in the present case, they believe all those services which are directly used for providing education service or those service without which it is difficult to provide education service such as security services would be included within the term 'in relation to' and accordingly, would be covered within pure service as envisaged in the exemption Notification. 15. The applicant has submitted that apart from above, they wish to place reliance on the recent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that they are supplying pure services to Municipal Corporation and eligible for exemption under Sl. No.3 of Notification No. 12/2017- CT (rate) and the GST TDS provisions would not be applicable to this transaction. The contention of the applicant was upheld by the authorities who upheld that the services provided by applicant is eligible for exemption. The applicant also wants to rely upon the judgement of the Andhra Pradesh Authority for Advance Ruling in the case of Amaravathi Metro Rail Corporation Limited vide order # AAR/AP/07(GST)/2018 dated July 02, 2018 whereby it was held that the applicant being controlled by the Government of Andhra Pradesh squarely falls under the definition of Governmental Authority. Further, it was pronounced that various consultancy services procured by them such as preparation of detailed project reports, transaction advisors etc. comes within the purview of the functions of the Municipality under article 243W read with twelfth schedule to the COI. 17. The applicant has submitted that additionally, on the basis of its public domain research, they understand that the Additional Commissioner of State Tax (Establishment / Vigilance), Gujarat State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g knowledge from people with different kind of perspective to a similar question/problem; that database provides a lot of data/information to students that helps them in undertaking various kind of researches; that the education sector has also become very competitive and in order to remain ahead of the other institutions, NID is required to provide the highest quality of education to its students; that granting them access to such e-books and database enhances the knowledge of their students, thereby achieving the very objective of promoting quality and excellence in the area of education; that the service so procured by NID in form of access to e-books and e-database would be considered as services in relation to one of the functions of Municipality i.e. education and therefore, they believe that this would qualify to be exempted services whereby the applicant would not be liable to pay tax under reverse charge mechanism; that in a nutshell, the applicant is certain that services under question such as security services and subscription to e-books/database referred above would be considered as services by way of activity in relation to functions entrusted under Article 243W of CO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o both the items (i) and (ii) of clause (a) of the said notification; that in other words, the provisions of section 51 of the CGST Act are applicable only to such authority or a board or any other body set up by an Act of parliament or a State legislature or established by any Government in which fifty one per cent or more participation by way of equity or control is with the Government; that even in such scenario, the important question that arises is whether NID fulfils condition mentioned in clause (a) in notification No. 50/2018-Central Tax dated 13.09.2018. On conjoint reading of above, the applicant wishes to know whether NID is liable to be registered as a deductor under GST. DISCUSSION & FINDINGS: 20. We have considered the submissions made by the applicant in their application for advance ruling as well as the arguments/discussions made by their representative Shri Hardik Shah at the time of personal hearing. We have also considered the issues involved on which Advance Ruling is sought by the applicant. 21. At the outset, we would like to state that the provisions of both the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017 are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the definition of 'Governmental Authority' or otherwise, we will be required to refer to the definition of 'Governmental Authority as appearing in the IGST Act, 2017. On going through the various sections of the IGST Act, 2017, we find that the definition of 'Governmental Authority' has been provided in the Explanation to Section-2(16) of the said Act and reads as under: 2(16) "non-taxable online recipient" means any Government, local authority, governmental authority, an individual or any other person not registered and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory. Explanation.--For the purposes of this clause, the expression "governmental authority" means an authority or a board or any other body,-- (i) set up by an Act of Parliament or a State Legislature; or (ii) established by any Government, with ninety per cent. or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution; Further, in Notification No.39/2017-Integrated Tax(Rate) d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrol by Government in NID. (3) In order to examine as to whether NID has been established to carry out any function entrusted to a municipality under Article 243W of the Constitution or to a Panchayat under Article 243G of the Constitution, we will be required to refer to the list of functions entrusted to a municipality under Article 243W of the Constitution of India and to a Panchayat under Article 243G of the Constitution of India. (a) The list of functions entrusted to a municipality under 243W of the Constitution of India are as under: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Constitution and (ii) the other, appearing at Sr.No.17 of the list of functions entrusted to a Panchayat under Article 243G of the Constitution of India. Hence we conclude that NID has been established to carry out functions entrusted to a municipality under Article 243W of the Constitution and Panchayat under Article 243G of the Constitution. Hence, the third condition is also fulfilled. 23.2 In view of the above, since the applicant has already fulfilled the conditions of being formed by an Act of Parliament and being established to carry out the function entrusted to a municipality under Article 243W of the Constitution and to a Panchayat under Article 243G of the Constitution, we conclude that the applicant will fall under the definition of Governmental Authority if it also fulfils the condition namely ' ninety percent or more participation of Government by way of equity or control.' 24. The next question asked by the applicant seeking Advance Ruling is whether NID is liable to pay GST on procurement of (a)security services received from any person other than body corporate as per Notification No.13/2017-central Tax Rate (b)access to e-books/e-database from service provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. Hence, three conditions are required to be satisfied for a service to be covered under subject entry of the notification which is as below: (1) It must be pure service not involving any supply of goods. (2) It must be provided to the Central Government or State Government or Union Territory or Local Authority or a Governmental Authority or a Government Entity. (3) It must be an activity in relation to any function entrusted to a (i) Panchayat under Article 243G of the Constitution; or (ii) Municipality under Article 243W of the Constitution. 24.2 So, the first condition to be discussed is as to what is meant by pure service? Since 'pure service' has not been defined under GST, the same can be construed in general terms as any supply which is either deemed as services under Schedule II of CGST Act or which are not covered under the definition of goods shall be categorized as pure services. However, as per the notification, works contract services or other composite supplies involving supply of any goods are not covered in Sr.No.3 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... electronic commerce operator who is required to collect tax at source under section 52; (x) every electronic commerce operator; (xi) every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered person; and (xii) such other person or class of persons as may be notified by the Government on the recommendations of the Council. 25.1 We have gone through the provisions of the aforementioned section. Since the applicant has asked as to whether they need to be registered as a tax deductor under the provisions of Section 24 of the CGST Act, we need to refer to entry no. (vi) which pertains to persons who are required to deduct tax under section 51, whether or not separately registered under this Act. Since, a specific mention has been made to Section-51, we feel the need to refer to Section 51 of the CGST Act, 2017 also. Section-51 of the CGST Act, 2017 reads as under: 51. (1) Notwithstanding anything to the contrary contained in this Act, the Government may mandate,-- (a) a department or establishment of the Central Government or State Government; or (b) local authority; or (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipation of Government by way of equity or control, to carry out any function'. We therefore conclude that the applicant will have to be registered as a tax deductor under the provisions of Section 24 of the CGST Act read with Section 51 of the Act, if they fulfil the condition of 'fifty-one percent, or more participation of Government by way of equity or control, to carry out any function'. 26. We have also observed that the applicant has cited many judgements of Advance Ruling Authorities to support their contention. In this context, we have to emphasise here that decisions of Advance Ruling Authorities cannot be relied upon by the applicant, since, as per the provisions of Section 103 of the CGST Act, 2017, the Advance Ruling pronounced by the Advance Ruling Authority or the Appellate Authority shall be binding only on the applicant who had sought it in respect of any matter referred to in sub-section(2) of Section 97 for Advance Ruling and the concerned officer or the jurisdictional officer in respect of the applicant. 27. In light of the foregoing, we rule, as under - R U L I N G Question-1: Whether NID would qualify as 'Governmental Authority' as defined under the Integrat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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