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TMI Blog2021 (4) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 in the General Board meeting to begin transport services. The main purpose of the transport service was to avoid the population density in city area and thereby to provide affordable means of transportation facility for the citizens staying far from the main city area. The profit motive was not there at all at any stage. 4. The applicant submitted that until the year 1950, the transport department was considered as a section of Municipality. However, in the year 1950 a separate transport fund created and accordingly, separate accounts of AMTS service were started to be maintained. The first AMTS estimate Budget-'B' was presented in the General Meeting of Municipal Corporation by transport committee through standing committee in Dec. 1950. 5. Since the creation of a separate transport fund, AMTS is managed by Transport Manager under transport committee and Municipal Corporation in accordance with the powers derived from the Gujarat Provincial Municipal Corporations Act, 1949 (hereafter referred as 'GPMC Act'). 6. The applicant submitted that "Local authority" as per GPMC Act means the Corporation of a City, a municipality for a municipal borough, a nagar panchayat, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Applicant submitted that they believe that they would merit the category of Local Authority since it is managed by the Municipal Corporation under GPMC Act. Moreover, the Applicant believes that their activity of providing transportation services is covered under either of the following functions of Article 243W of COI: * Provision of urban amenities and facilities such as parks, gardens, playgrounds;- * Public amenities including street lighting, parking lots, bus stops and public conveniences; And the services received by them in relation to / pertaining to transportation services should be eligible for exemption from payment of GST. 12. Accordingly, the applicant sought the Advance Ruling on the following question: Part A- Whether AMTS would be qualified as 'Local Authority' as defined under the Central Goods and Services Tax Act, 2017? Part B -Whether AMTS is liable to pay GST on procurement of security services received from any person other than body corporate under reverse charge mechanism, considering the exemption granted in Sl. No. 3 of Notification No. 12/2017 - Central Tax (Rate) or Sl. No. 3 of Notification No. 09/2017 - IGST (Rate)? Part C -Whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrol or management of a municipal or local fund; (d) A Cantonment Board as defined in section 3 of the Cantonment Act,. 2006; (e) A Regional Council or a District Council constituted under the Sixth Schedule to the Constitution; (f) A Development Board constituted under article 371 of the Constitution; or (g) A Regional Council constituted under article 371A of the Constitution 16. As per GPMC Act, "Local authority" means the Corporation of a City or a municipality for a municipal borough. Further, "Local Authorities" has been defined under Local Authorities Loans Act, 1914 as any person legally entitled to the control or management of any local or municipal fund, or legally entitled to impose any cess, rate, duty or tax within any local area. 17. The 'local fund' used in the above definition has been defined under Gujarat Treasury Rules, as (i) revenue administered by bodies which by law or rule having the force of law come under the control of Government, whether in regard to the proceedings generally, or to specific matter such as sanctioning of their budgets, sanction to the creation or filling up of particular appointments, the encashment of leave, pensi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India vs. R.C.Jain (supra), it is decided that an entity would be considered as a "local authority" only if the following tests are satisfied : Sr.No. Condition Whether conditions is fulfilled? 1. Separate Legal existence Yes. The first and foremost test that any entity should satisfy to be considered as local authority is that it should have a separate legal entity. The applicant has a separate legal entity and it would continue to exist irrespective of continuity of its members or directors. 2. Functions in a defined area Yes. The entity must function in a defined area and must ordinarily be elected wholly or partly, directly or indirectly by the inhabitants of the area. In the given case, AMTS is functioning in the municipal limit of Ahmedabad and the ultimate control of AMTS rests with the AMC which is elected by the residents of Ahmedabad. 3. Power to raise funds Yes. The entity must have power to raise funds in the furtherance of its activities and the fulfillment of the projects entrusted to it by levying taxes, rates, charges, fees etc. all of which may be in addition to the moneys provided by Government. What is essential is that the control and management ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates local bodies have become weak and ineffective on account of a variety of reasons, including the failure to hold regular elections, prolonged supersession and inadequate devolution, of powers and functions. As a result, Urban Local Bodies are not able to perform effectively as vibrant democratic units of self-government." 30. Article 243W of COI entrusts the Powers, authority and responsibilities of Municipalities and provision of the same has been reproduced below for easy reference: Subject to the provisions of this Constitution, the Legislature of a State may, by law, endow (a) the Municipalities with such powers and authority as may be necessary to enable them to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Municipalities, subject to such conditions as may be specified therein, with respect to (i) Preparation of plans for economic development and social justice; (ii) Performance of functions and the implementation of schemes as may be entrusted to them including those in relation to the matters listed in the Twelfth Schedule; 31. The Applicant reproduces the matters that are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... function entrusted to them. An extract of the Section 91 of GMA is reproduced hereunder: In the sphere of public works, (a) giving relief to, and establishing and maintaining relief works in time of famine or scarcity for, destitute persons within the limits of the municipal borough; (b) constructing, establishing or maintaining, public parks, gardens, libraries, museums, lunatic asylums, halls, offices, shops, markets dharmashalas, rest-houses, places of entertainment and homes for the disabled and destitute and other public buildings: (c) the construction, maintenance, management, organization or purchase of telephone lines, or for guaranteeing the payment of interest on money expended for the construction of a telephone line subject to the previous sanction of the Development Commissioner when the line extends beyond the limits of the municipal borough; (d) the construction, purchase, organization, maintenance, extension and management of mechanically propelled transport facilities for the conveyance of the public; (e) laying out, whether in areas previously built upon or not, new public streets and acquiring the land for that purpose, and the land required for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficult to provide passenger transport 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. 40. Apart from above, the Applicant place reliance on the recent Advance Ruling in the case of A. B. Enterprise vide order # GUJ/GAAR/R/2020/18 wherein the Applicant is engaged in supplying manpower for security and housekeeping to the Central Government, State Government and Local Authority. It is upheld in the AAR that these pure services would be eligible for exemption from payment of tax subject to the condition that the services provided to these entities mentioned above are provided by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution of India or in relation to any function entrusted to a Municipality under Article 243W of the Constitution of India. Though the AAR is conditional, but the analysis of certain work order clearly suggests that if the service recipient i.e. Central Government, State Government, Local authority is involved in any functions as per Article 243G or 243W, then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly of manpower for security service would be eligible for exemption from payment of tax. Therefore, same would be eligible for exemption and the Applicant would not be liable to make payment of tax under reverse charge mechanism. Part C -Whether AMTS is required to pay GST on advertisement services or the service recipient of AMTS is required pay GST under reverse charge mechanism considering Notification No. 13/2017-Central tax (Rate) dated 28-06-2017? 45. The Applicant submitted that they are also providing advertising services wherein the clients / recipients wanted to advertise their products or services on various parts of buses. For such advertisement, AMTS would recover certain amount and AMTS would issue invoice levying GST on such amount of advertisement charges. 46. From perusal of Notification No.13/2017 - Central Tax (Rate), the Applicant understands that services supplied by local authority to business entity is covered within reverse charge mechanism i.e. the business entity would be required to pay tax. The relevant clause of Notification No. 13/2017 - Central tax (Rate) dated 28-06-2017is reproduced hereunder: Sl.No. Category of Supply of Service Supplier of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ruling as well as the arguments/discussions made by their representative. We have also considered the issues involved on which Advance Ruling is sought by the applicant. 53. 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 the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the GGST Act. 54. The facts of the case is that Ahmedabad Municipal Transport Service is engaged in rendering passenger transportation services and runs public buses in the city of Ahmedabad within the limits of Municipal Corporation. In the year 1950 a separate transport fund created and accordingly, separate accounts of AMTS service were started to be maintained. The first AMTS estimate Budget-'B' was presented in the General Meeting of Municipal Corporation by transport committee through standing committee in Dec. 1950. Since the creation of a separate transport fund, AMTS is managed by Transport Manager under transport committee and Municipal Corporation in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the test of 'like nature'. As the words 'other authority' came after the words 'Municipal Committee', 'District Board' or 'Body of Port Commissioners', it took color from these earlier words. The purpose and object are, therefore, to cover those bodies, which are discharging municipal functions but are not covered by the definition of municipalities as required to be constituted under Art. 243Q of the Constitution [refer to the Apex Court judgment dated 12-10-2018 on Urban Improvement Trust (Case No. CA 10577 of 2018)]. 60. It appears from the objects and reasons for formation of Transport undertaking within the Ahmedabad Municipal Corporation it intends to provide transport service within the city limit of Ahmedabad. Transport Service is an amenities provided to the citizen of the Ahmedabad city within the municipality limit and such public amenities are listed under the Twelfth Schedule and entrusted to a Municipality under Art. 243W of the Constitution. As per Article 243W of 12th Schedule of the Constitution the functions entrusted to the municipality are as under. (a) Urban planning including town planning. (b) Regulation of land use and construction of building. (c) P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 62. The GST Act does not define a local fund. Section 2 of the Local Authorities Loans Act, 1914, defines a local authority as a person legally entitled to control or management of any local or municipal fund, or legally entitled to impose any cess, rate, duty or tax within any local area, and 'funds' used with reference to such a local authority includes any local or municipal funds. Local fund is defined under Gujarat Treasury rules, as (i) revenue administered by bodies which by law or rule having the force of law come under the control of Government, whether in regard to the proceedings generally, or to specific matter such as sanctioning of their budgets, sanction to the creation or filling up of particular appointments, the encashment of leave, pension or similar rules, (ii) The revenues of anybody which may be specially notified by Government as such. 63. The applicant submitted that in the year 1950 a separate transport fund created and accordingly, separate accounts of AMTS service were started to be maintained. The first AMTS estimate Budget-'B' was presented in the General Meeting of Municipal Corporation by transport committee through standing committee in Dec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istration & funding of AMTS 66. From the perusal of the above discussion it can be construed that "Ahmedabad Municipal Transport Service" is a transport undertaking of "Ahmedabad Municipal Corporation" which is formed in terms of the provision of GPMC Act. Accordingly, Transport Manager under transport committee was appointed as per the provision of GPMC Act. The fund of the AMTS is managed by Transport manager through transport Committee under the supervision of AMC. In view of the above the Applicant i.e. AMTS is an extended arm of the Municipal Corporation which is governed by GPMC Act and does the activities as per the functions entrusted to Municipal Corporation. 67. The above discussion establishes that Ahmedabad Municipal Transport Service (AMTS), is a statutory authority discharging municipal functions (although not a municipality as required to be constituted under Art. 243Q of the Constitution), is legally entitled to and entrusted by the State Government with the control or management of a local fund as defined in Gujarat Treasury. In view of the above discussion we hold that Ahmedabad Municipal Transport Service (AMTS) can be termed as a local authority under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bling the organization to perform defined functions would also be covered as a reason of usage of words 'in relation to'. To substantiate this, we refer to the judgement of Doypack Systems (P.) Ltd. vs. UOI as reported in 1988 (36) E.LT. 201 (S.C.) wherein it was held that, the expression "in relation to" (so also "pertaining to"), is a very broad expression which pre- supposes another subject matter. These are words of comprehensiveness which might both have a direct significance as well as an indirect significance depending on the context. It also held that the expression "in relation to" has been interpreted to the words of wisest amplitude. The term "relating to" expands the scope of the entry. The terms have been interpreted by the Supreme Court in the case of CCE V/s Rajasthan State Chemical Works 1999 (55) ELT 444 (SC) and Union of India V/s Ahmedabad Electricity Co. Ltd. 2003 (158) ELT 3(SC), wherein it has been held that such words widen and expand the scope, meaning and content of expressions. 71. Thus, from above, it can be stated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(69) of CGST Act, 2017 as discuss in above Para's is not liable for payment of GST under Reverse Charge Mechanism on receipt of Security Service. 73. Now we take up the third question that whether the applicant is required to pay GST on advertisement services or the service recipient of AMTS is required pay GST under reverse charge mechanism considering Notification No. 13/2017-Central tax (Rate) dated 28-06-2017? 74. We find that the applicant is also providing advertising services wherein the clients / recipients wanted to advertise their products or services on various parts of buses. For such advertisement, AMTS recover certain amount and issue invoice levying GST on such amount of advertisement charges. 75. The applicant i.e. AMTS is considered as "local authority" in terms of Section 2(69) of CGST Act, 2017 as discussed in the aforementioned para. Therefore, in terms of Sl. No. 5 of Notification No. 13/2017-CT (Rate) dated 28.06.2017, Services supplied by the Central Government, State Government, Union territory or local authority to a business entity located in taxable territory is liable to payment of GST under reverse charge mechanism. Sl. No. 5 of Notification No. 13/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of one per cent. from the payment made or credited to the supplier (hereafter in this section referred to as "the deductee") of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees: Govt. of India vide Notification No. 33/2017-Ct dated 15.07.2018 and Not. No. 50/2018-CT dated 13.09.2018 has specified the category of person under clause (a), (b) and (c) of sub-section (1) of section 51 of the said Act and the persons specified below under clause (d) of sub-section (1) of section 51 of the said Act,, namely: (a) 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 51% or more participation by way of equity or control, to carry out any function; (b) Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860); (c) Public sector undertakings The Central Government vide Notification No. 50/2018-CT (Rate) dated13.09.2018 hereby appoints the 1st day of October, 2018, as the date on which the provisions of section 51 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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