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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 ..... aning of the above section of the GST Act if the Applicant is legally entitled to or entrusted by the State Government with the control or management of a municipal or local fund. Thus, 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 2(69)(c) of the GST Act. Liability to pay GST on procurement of security services received from any person other than body corporate under reverse charge mechanism - exemption under Sl. No. 3 of N/N. 12/2017 - Central Tax (Rate) or Sl. No. 3 of N/N. 09/2017 - IGST (Rate) - HELD 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 Constitution Of India. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocal authority is compulsory required to take GST Registration for the purpose of deduction of TDS on the payments made to the supplier of taxable goods and/or services. Govt. of India vide Notification No. 50/2018-Ct dated 13.09.2018 has specified the category of person which includes local authority to whom TDS is to be deducted - the applicant being local authority is required to obtain registration as GST TDS deductor in terms of Section 51 of CGST Act, 2017. - GUJ/GAAR/R/13/2021 - - - Dated:- 27-1-2021 - SANJAY SAXENA AND MOHIT AGRAWAL MEMBER Present for the applicant : Hardik Shah, CA M/s. Ahmedabad Municipal Transport Service is registered under GST and having a GSTIN: 24AAALA1563C1ZV, has filed an application for Advance Ruling under Section 97 of CGST Act, 2017 and Section 97 of the GGST Act, 2017 in FORM GST ARA-01 discharging the fees of ₹ 5,000/- each under the CGST Act and the GGST Act. 2. M/s. Ahmedabad Municipal Transport Service (hereunder referred to as 'AMTS' or 'the Applicant') is engaged in rendering passenger transportation services and runs public buses in the city of Ahmedabad within the limits of Municipal Corporation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstructed, maintained, extended, managed or conducted by the Corporation for the purpose of providing mechanically propelled transport facilities, for the conveyance of the public and includes all moveable and immovable property and rights vested or vesting in the Corporation for the purposes of every such undertaking;' From the perusal of the above discussion in the GPMC Act, it can be construed that any undertaking managed by Municipal Corporation for the purpose of providing transport facilities for the conveyance of the public would be termed as a 'Transport Undertaking'. As AMTS is also being managed by Ahmedabad Municipal Corporation ('AMC'), the same would also qualify as a 'Transport Undertaking' as defined in the GPMC Act. Administration funding of AMTS 9. In nutshell, the Applicant 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. Implications under GST law 10. The applicant submitted that from perusal of GST law, the Applicant understands that Sl. No. 3 of Notification no. 12/2017 - Central Tax (Rate) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government Entity by way of any activity in relation to any function entrusted to a Panchayat under 243G of the constitution or in relation to any function entrusted to a Municipality under article 243W of the constitution. Nil Nil From perusal of above, the Applicant understands that in order to qualify for above referred exemption, it is essential to fulfill following conditions: The Applicant should merit category of Local Authority The services (procured) are by way of activity in relation to function entrusted to Municipality under Article 243W of' COI' Part A - Whether AMTS would be qualified as 'local authority' as defined under the Central Goods and Services Tax Act. 2017? Classification as Local Authority 14. On the basis of the information/details, as provided in the statement of facts, the Applicant submitted that they are managed by AMC under GPMC Act. 15. The Applicant submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... important functions of Corporation. Even, if this is loss making operation, Corporation through AMTS has continued the same activity. 19. AMTS is established and managed by AMC, which is a municipal corporation, and AMTS would render transportation service as is entrusted to a municipal corporation. 20. Considering above, the Applicant observes that when an organization is set up by an Act of Parliament or constituted as Municipality under Article 243Q of COI and legally entitled to control or manage any local fund, can be classified as local authority. 21. Further, the Applicant refer to the ruling of Advance Ruling Authority in the case of Newtown Kolkata Development Authority ('NKDA') vide order number 42/WBAAR/2019-20 dated 06-03-2020. The facts in the ruling is similar to the facts in hand. The copy of ruling is enclosed herewith as Annexure-B. 22. In the said ruling, NKDA is a statutory authority constituted under the New Town Kolkata Authority act, 2007 for providing various civic services and amenities within the local area of New Town, Kolkata. It provides civic facilities to the area like water supply, drainage, sewage, collection, removal and dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant enjoys certain degree of autonomy with freedom to decide for themselves questions of policy affecting the area administered by them 5. Entrusted by a statute with functions which are usually entrusted to Yes. The entity must be entrusted by Statute with such Governmental functions and duties as are usually entrusted to municipal bodies, such as those connected with providing amenities to the inhabitants of the locality. The applicant renders transportation services for local conveyance and it is squarely covered in the functions enlisted in Twelfth Schedule 26. The Applicant submitted that in view of the above, they satisfy the tests for Local Authority as decided in the aforesaid judgment. Accordingly, AMTS would be considered as 'Local authority' as per definition stipulated in Section 2(69)(c ) of CGST Act. Part B - Whether AMTS is liable to pay GST on procurement of security services from any person other than body corporate under reverse charge mechanism as per Notification no. 13/2017-Central tax (Rate) dated 28-06-2017, considering the exemption granted in Sl. no. 3 of Notification N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mic 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 up-gradation. 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. 32. The Applicant renders transportation services and believes that it is squarely covered in the following services specified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planting and maintaining road-side and other trees; (g) the construction, maintenance, repairs, purchase of any works for the supply of electrical energy or gas; (h) the construction of sanitary dwellings for the poorer classes; (i) providing accommodation for all classes of servants employed by the municipality 36. Considering the above discussions, the Applicant submitted that it is amply clear that rendering of transportation services is one of the functions of a Municipality. 37. Moreover, the Applicant submitted that the term 'in relation to' used in above exemption is very much wide enough to cover every kind of services that results in performance of the functions as mentioned in Article 243W of the COI either directly or indirectly. Even the services provided for enabling the organization to perform defined functions would also be covered as a reason of usage of words 'in relation to'. To substantiate this, the Applicant would like to 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 v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or exemption from payment of tax. 41. Moreover, the Applicant relied upon the Advance ruling in the case of Shri Jayesh Anilkumar Dalai vide order # GUJ / GAAR / R/08/2019 whereby the Applicant is engaged in providing consultancy services in the field of structural, architectural and project management consultancy to various Local Authorities, Urban Development Authorities and other Government departments which are entrusted with the functions mentioned under article 243G and 243W of COI. The Authorities have pronounced that the services of the Applicant would be considered as pure services and eligible for exemption on fulfilment of the below mentioned conditions: It excludes works contract service It excludes other composite supplies involving supply of any goods It is supply of services without involving any supply of goods 42. The Applicant submitted that in addition to above, advance ruling authorities have upheld eligibility of above such exemptions in below mentioned rulings: Rajasthan Authorities for Advance Rulings in the case of M/s PDCOR Limited, Jaipur(Raj) vide order no RAJ/AAR/2018-19/13 Dt. 25.08.2018 Goa Authorities for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Supply of Service Supplier of Service Recipient of Service Services supplied by the Central Government, State Government, Union territory or local authority to a business entity excluding, (1) renting of immovable property, and (2) services specified below- (i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers. Central Government, State Government, Union territory or local authority Any business entity located in the taxable territory. 47. The applicant submitted that considering above provision and discussion in Part A, they would merit classification of local authority and therefore, services supplied by AMTS would be subject to reverse charge mechanism whereby the service r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporation 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 accordance with the powers derived from the Gujarat Provincial Municipal Corporations Act, 1949. 55. The applicant submitted that the present application seeking Advance Ruling is in respect of the questions mentioned under Part A to Part- D. Accordingly, we take up the one by one question on which applicant sought the Advance Ruling. 56. The first issue is here to decide whether the applicant i.e. AMTS would be qualified as local authority as defined under the CGST Act, 2017. 57. To decide whether the AMTS is local authority or other-wise, we refer to definition of the Local Authority as given under Section 2(69) of CGST Act, which has been reproduced hereunder, Local authority means (a) A Panchayat as defined in clause (d) of article 243 of the Constitution; (b) A Municipality as defined in clause (e) of article 243P of the Constitution; (c) A Municipal Committee, a Zilla Parishad, a District Board, and any other authority legall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipality 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) Planning for economic and social development. (d) Roads and bridges. (e) Water supply for domestic, industrial and commercial purposes. (f) Public health, sanitation conservancy and solid waste Management. (g) Fire services. (h) Urban forestry, protection of the environment and promotion of ecological aspects. (i) Safeguarding the interests of the weaker sections of society, including the handicapped and mentally retarded. (j) Slum improvement and upgradation. (k) Urban poverty alleviation. (l) Provision of Urban amenities and facilities such as parks, gardens, playgrounds. (m) Promotion of Cultural, educational and aesthetic aspects. (n) Burials and burial grounds; cremations, cremation grounds and electric crematoriums. (o) Cattle grounds prevention of cruelty to animals. (p) Vital statistics including registration of births and deaths. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment 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. 1950. 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. AMTS was entrusted with a transport fund in which the transport manager would credit all the monies received through the conduct of transportation services and debit the fund towards expenses incurred by AMTS. 64. For better understand control management of AMTS as per GPMC Act, the following is reproduced hereunder for ease of understanding. Control management of AMTS 64.1. We find that the Section 4 of GPMC Act, 1949 defines, Municipal authorities charged with execution of the Act and same is produce here as under : 4. (1) The municipal authorities charged with carrying out the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 2(69)(c) of the GST Act. 68. Now we take up the Second question of the applicant which is regarding the 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). 69. To examine whether the AMTS is liable to pay GST under Reverse Charge Mechanism, we have to refer the Sl. No. 3 of Notification No. 12/2017-CT (Rate) dated 28.06.2017 which read as under : Sl.No. Chapter Description of Service Rate (Percent) Condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontext. 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 to enable the organization to perform function entrusted in Article 243W of Constitution Of India. In the instant case Security Service is necessary to provide the passenger transport service without any hurdle. The security of a transport undertaking is of utmost importance considering possibility of unfortunate events that may threaten the safety of Vehicles. The fact is that security is vital for safe-keep of undertaking and it can be ensured only by way of keeping enough security measures and procedures in place. Thus, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. 13/2017-CT (Rate) dated 28.06.2017 is read as under: S.No. Category of Supply of Services Supplier of service Recipient of Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the rate 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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