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TMI Blog2021 (8) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... .600 006. (hereinafter called the Applicant) are registered under GST with GSTIN.33AAATT3751D1ZT The applicant has sought Advance Ruling on: 1. Applicability of GST registration to Tamil Nadu Labour Welfare Board 2. Applicability of GST towards the rental income received by the board from Government and business entities. 3. Applicability of Reverse Charge Mechanism on for the rent on immovable properties received by the board from Government and business entities. The Applicant has submitted the copy of application in Form GST ARA - 01 and also submitted a copy of Challan evidencing payment of application fees of Rs. 5,000/ - each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017. 2.1 The applicant has stated that they have been constituted by the Government of Tamilnadu in the year 1972 by Tamilnadu Labour Welfare Fund Act 1972 (Act No.36 of 1972) enacted by the Legislature of the State of Tamil Nadu with a view to promote the welfare of the employees and their family/dependents with the Minister of Labour, Govt of Tamilnadu as the Chairman of the Board to administer the Tamilnadu Labour Welfare Fund and such other actions as assigned by or under the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Digital media. The applicant consented and the hearing for admission of the application was held on 19.02.2021. The Authorized representatives Shri. M.Ravi, Financial Advisor and Chief Accounts Officer and CA Prasanna R, Chartered Accountant appeared for the hearing virtually and reiterated their written submissions. They claimed that they are local Authorities. They were asked to furnish documents/ submissions to establish themselves as a 'Local Authority', Rent receipts, rental agreements in respect of which the ruling is sought. They undertook to furnish the above details in a week's time. 3.2 In pursuant to the Virtual Personal Hearing held on19.02.2021, the applicants submitted additional submissions vide their Letter No. E2/29880/2020-1 dated 26.02.2021, wherein apart from their earlier submissions, they stated as follows: * The Statutory Labour Welfare Board was formed with effect from 1.4.1975 with the Minister In-charge of Labour as Chairman, five representatives of employees, five representatives of employers, three members of State Legislative Assembly, four Official members and two Non-Official members. * The mission of the Board is to uplift the living ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business entities * Since they are a Local authority as defined under section 2(69) of the CGST Act, 2017 GST on services provided by them by way of renting of commercial properties to business entities are to be paid by the recipient of services under reverse charge mechanism. * Since they are a Local authority as defined under section 2(69) of the CGST Act,2017 GST on services provided by the applicant by way of renting of immovable properties to Government and other local authorities are exempted from GST as per notification No. 12/2017-C.T.(Rate). * From the above, it is clearly evident that the GST obligation is not cast on the applicant neither on the rent collected from business entities nor from Government and Local authorities. * To substantiate their view that the applicant is a Local authority, they have referred to the definition of Local Authority' under Section 2(69) of the CGST Act 2017 and has stated that o they are covered under any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund o Under Section 20 of the TN Labour Welfare Act, 1972, Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1972 provides that: (2) Without prejudice to the generality of the provisions of sub-section (1), the moneys in the Fund may be utilised by the Board to defray expenditure on the following, namely: -- (a) community and social education centres; (b) vocational training; (c) community necessities; (d) entertainment and other forms of recreation; (e) convalescent homes for tuberculosis patients; (f) holidays home in health resorts; (g) part-time employment for housewives of employees; (h) pre-schools; (i) nutritious food to children of employees; (j) employment opportunities to the disabled employees or the widows of the deceased employees; (k) cost of administering this Act including the salaries and allowances of the staff appointed for the purposes of this Act; and (1) such other objects as would, in the opinion of the Board, improve the standard of living and education and ameliorate the social conditions of labour: Provided that the Fund shall not be utilised in financing any measure which the employer is required under any law for the time being in force to carry out: Provided further that unpaid accumulations and fines shall be expended by the Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al panchayat, hence the applicant is a Local authority as defined under section 2(69) of CGST Act,2017 The applicant had submitted the following documents: (i) Copy of the TN Welfare Fund Act 1972 and rules framed thereunder (ii) Scheme of Tamil Nadu Welfare Board, (iii) Sample Rental Agreements (iv) List of Tenants with address (v) Sample rental receipts (vi) Copy of the AAR filed by the applicant (vii) CGST Rate Notification No.12/2017, 13/2017 and 3/2018 4.1 The State Jurisdictional Officer, Assistant Commissioner(ST), T.Nagar Assessment Circle, who has the administrative jurisdiction over the applicant has submitted that the Labour Welfare Board collect the money from member for the membership and expend the money for the Educational facilities for the children of the workers, Medical facilities for both private and public sector employers for facilitate medical facilities for their workers and their families, transport facilities to the workers for commuting to work. Hence, the Board is liable for GST on expenditure from the Fund for the workers. 5.1 The Central Jurisdictional authority vide letter C.No. GEXCOM/TECH/MISC/187/2021-Tech dated 19.02.2021 stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with 95(a) of the GST Act and hence are admitted. 7.1 From the Submissions, we find that the applicant is constituted by the Government of Tamilnadu in the year 1971 by an executive order of the Government (G.O.Ms No. 222 Labour Dept. dated 20.02.1971). The Tamilnadu Labour Welfare Fund Act 1972 was passed by the State and was given effect from 1.1.1973 and the statutory Board was formed effective 01.04.1975. The applicant has stated that as per the Tamilnadu Labour Welfare Fund Act 1972, and the Tamilnadu Labour Welfare Fund Rules 1973, * The fund is constituted by the Government * Any amount raised from other sources to augment the resources of the Board also is within the meaning of fund * The functions of the Board shall be the administration of the Fund and such other functions as may be assigned by or under the Act * The control and management of fund is vested with board * The Board may, with the approval of the Government, make grants from the Fund to any local authority or any other body in aid of any activity for the welfare of employees * The accounts are maintained and is audited by Local Fund Accounts Madras * Welfare schemes and activities carrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be imported into another. "It would be a new terror in the construction of Acts of Parliament if we were required to limit a word to an unnatural sense because in some Act which is not incorporated or referred to such an interpretation is given to it for the purposes of that Act alone" (per Loreburn L.C. in Macbeth v. Chislett. For the same reason we refrain from borrowing upon the definition of 'Local Authority' in enactments such as the Cattle Trespass Act 1871 etc. as the High Court has done. Let us, therefore, concentrate and confine our attention and enquiry to the definition of 'Local Authority' in Sec.3(3) of the General Clauses Act. A proper and careful scrutiny of the language of Sec.3(31) suggests that an authority in order to be a local Authority, must be of like nature and character as a Municipal Committee, District Board or Body of Port Commissioners, possessing, therefore, many, if not all, of the distinctive attributes and characteristics of a Municipal Committee, District Board, or Body of Port Commissioners, but, possessing one essential feature, namely, that it is legally entitled to or entrusted by the Government with, the control and managem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, from the above, it is evident that for an entity to be local authority the following are to be in affirmative: 1. The authorities must have separate legal existence as corporate bodies. 2. They must function in a defined area and must ordinarily, wholly or partly, directly or indirectly, be elected by the inhabitants of the area. 3. They must enjoy a certain degree of autonomy, with freedom to decide for themselves questions of policy affecting the area administered by them. 4. They 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, like health and education services, water and sewerage, town planning and development, roads, markets, transportation, social welfare services etc. etc. 5. They must have the power to raise funds for the furtherance of their activities and the fulfillment of their projects by levying taxes, rates, charges, or fees. 7.3 Applying the above tests to the case at hand, we find that * the applicant is a body corporate having perpetual succession and common seal, and shall, by the said name, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertinent to note that, Apex Court in the case of Commissioner of Income Tax Lucknow Vs. U.P, Forest Corporation. The Apex Court, in this case while deciding whether U.P. Forest Corporation is a 'Local authority' as defined under the General Clauses Act, has followed the tests laid in the R.C.Jain's case mentioned supra and on the issue of the 'Fund' of the U.P. Forest Corporation, being called 'Local fund', has stated as follows: .............In the case of respondent Corporation, the Act does not enable it to levy any tax, cess or fee. It is the income from the sale of the forest produce which goes to augment its funds. It has no power under the Act of compulsory exaction such as taxes, fees, rates or charges. Like any commercial organisation it makes profit from sale of forest produce and it has been given the power to raise loans. Whereas municipal or local funds are required to be spent for providing civic amenities, there is no such obligation on the respondent to do so. Merely because Section 17 of the U.P. Forest Corporation Act states that the fund of the Corporation "shall be a local fund" would not make it a local fund as contemplated by Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l apply to services- (i) By the Department of Posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than the Central Government, State Government, Union territory; (ii) in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) of transport of goods or passengers. NIL NIL The above entry exempts services provided by Central / State Government/ Union territory/ local authority to another Central /State Government/Union territory /local authority. In the case at hand, it has been established in para 7 above, that the applicant is not a 'Local authority', therefore, the exemption provided in the entry No. 8 of Notification No. 12/2017-C.T(Rate) dated 28.06.2017 is not available to the applicant and the applicant is to discharge the tax liability on the services of renting of commercial properties to Central/State Government/Local Authority. 8.3 The entry No.7 of the Notification No.12/2017-C.T.(Rate) dated 28.06.2017 is as under: Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent) Condition 1 2 3 4 5 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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