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TMI Blog2022 (12) TMI 1324X X X X Extracts X X X X X X X X Extracts X X X X ..... and Sewerage Act, 1975 (hereinafter referred to as the UPWSS Act). It is a body corporate having perpetual succession and a common seal and capable of suing and being sued in its name. It has power to acquire, hold and dispose of the property - the definition of local authority in the CGST Act includes within its ambit 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. Thus, for the purpose of the GST Laws, any authority legally entitled to or entrusted by the Government with the control or management of a municipal or local fund qualifies as a local authority. The Apex court in the RC Jain case [ 1981 (2) TMI 200 - SUPREME COURT] has held that that the authority should be elected by the inhabitants of the area. As per Section 4 of the UPWSS Act, the UPJN shall consist of Chairman and members appointed by the state government. As such, the UPJN is not elected by the inhabitants of the area but the same is established by the state. Therefore, the said is not satisfied in the case of UPJN - In case of UPJN, there is no local fund entrusted by the Government with UPJN. A p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t services provided to UPJN by way of Entry 3(xii) of Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017. X X X X Extracts X X X X X X X X Extracts X X X X ..... otal GST at 18% (CGST - 9% + SGST -9%). (8) Notification No. 11/2017-Central Tax (Rate) dated 28th June, 2017 was subsequently amended vide Notification No. 20/2017-Central Tax (Rate) dated 22nd August. 2017; whereby in Serial No. 3 of the fable therein item (iii) was inserted viz -"(iii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied to the Government, a local authority or a Governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,- (a)...., (b) canal, dam or other irrigation works; (c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal." to be taxed at 6% under CGST Act; thereby implying total GST at 12% (CGST 6% + SGST - 6%). (9) Subsequently Notification No. 31/2017 dated 13th October, 2017 was issued to amend Serial No. 3(iii) viz - "Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity". Further, this Notification also clarified the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory or a local authority" thereby deleting the words - a Governmental Authority or a Government Entity. 6. The applicant has submitted their interpretation of law as under- (1) The Contractee's of the Applicant in question are holding PAN AAALU0256C. 4th character in PAN denotes the Status of the PAN holder and as the 4th character in the case under consideration is "L" it denotes Local Authority. (2) Further, the Contractee's of the Applicant in question are holding GSTIN 09AAALU0256C320 and the Registration Certificate as issued by the GST Department classifies the Contractee under Local Authority. (3) As the Contractee's of the Applicant are classified as Local Authority as per the GST Authorities, they are of the opinion that- (a) The said transaction is covered by Notification. No. 15/2021 Central Tax (Rate) dated 18th November, 2021 r/w. Notification No. 22/2021- Central Tax (Rate), dated 31st December, 2021; which after amendment now reads as "(iii) Composite supply of works contract as defined in clause (119) of Section 2 of the Central Goods and Services Tax Act, 2017, supplied to Central Government, State Government, Union territor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve gone through the submissions made by the applicant and have examined the explanation submitted by them. The applicant has ticked following issues in column no. 13 of Form GST ARA-01- (1) determination of the liability to pay tax on any goods or services or both. We find that the issue raised in the application is squarely covered under Section 97(2) of the CGST Act 2017. We therefore, admit the application for consideration on merits. 11. We observe that the questions on which advance ruling is sought by the applicant are as under- a. Whether the supply of Services by the Applicant to M/s. UTTAR PRADESH JAL NIGAM is covered by Notification No. 15/2021 Central Tax (Rate), dated 18th November, 2021 r/w. Notification No.22/2021- Central Tax (Rate), dated 31st December, 2021. b. If the supplies as per Question a are covered by Notification No.15/2021- Central Tax (Rate), dated 18th November. 2021. r/w. Notification No. 22/2021- Central Tax (Rate), dated 31st December, 2021. then what is the applicable rate of Tax under the Goods and Services Tax Act, 2017 on such Supplies made w.ef. 01-01-2022; and c. In case if the supplies as per Question a are not covered by the Notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 2 of the Central Goods and Services Tax Act; 2017, supplied to the Central Government, State Government, Union territory or a local authority, by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of - (a) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act. 1958 (24 of 1958); (b) canal, dam or other irrigation works; (c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal. 6 14. The questions raised by the applicant require examination as to whether the Uttar Pradesh Jal Nigam (hereinafter referred to as the UPJN) is local authority or not. The applicant have arrived at conclusion that UPJN is local authority on the basis of 4th character of PAN of UPJN being 'L' and the registration certificate of UPJN bearing constitution as 'local authority'. 15. Now we proceed to examine the constitution of UPJN. UPJN was created by the Government of Uttar Pradesh by enacting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the Sixth Schedule to the Constitution; (f) a Development Board constituted under article 371 8[and article 371J] of the Constitution; or (g) a Regional Council constituted under article 371A of the Constitution: 17. The definition of "local authority" in the CGST" Act includes within its ambit "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". Thus, for the purpose of the GST Laws, any authority legally entitled to or entrusted by the Government with the control or management of a municipal or local fund qualifies as a "local authority". 18. The definition of the 'local authority' is contained in Section 3(31) of the General Clauses Act, 1897 which is as under- "local authority" shall mean a municipal committee, district board, body of port Commissioners or other authority legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund; 19. Thus, it is seen that the term 'local authority' has been similarly worded in CGST Act, 2017 as well a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the furtherance of their activities and the fulfilment of their projects by levying taxes, rates, charges, or fees. This may be in addition to moneys provided by Government or obtained by borrowing or otherwise. What is essential is that control or management of the fund must vest in the authority. 20. The Apex Court in the case of Union of India and others v. R.C. Jain and others (supra) has laid down the following ingredients, which are required to be fulfilled cumulatively before an authority can be said to be a 'local authority', in the light of the definition of 'local authority' as given under Section 3(31) of the General Clauses Act.- (1) The authorities must have separate legal existence as corporate bodies. It must be legally independent entities. (2) The authority must function in a defined area and ordinarily, wholly or partly, directly or indirectly be elected by the inhabitants of the area. (3) The authority must enjoy a certain degree of autonomy, with freedom to decide for themselves questions of policy affecting the area administered by them. (4) The authority must be entrusted by Statute with such Governmental functions and duties as are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purposes of this Act, whether by the issues of bonds or stock or otherwise or making arrangements with bankers or other bodies or institutions approved by the State Government for this purpose. (5) As per section 46(3) of the UPWSS Act, stock issued by the Nigam under the section shall be issued, transferred, dealt with and redeemed in such manner as the State Government may, general or special order, direct. (6) As per Section 50 of the UPWSS Act. the UPJN is obliged to submit a statement of programme of its activities to the State Govt, before the commencement of financial year and may at any time during financial year. Further, the accounts of UPJN shall be audited by such auditor as the State Govt, may direct. Moreover, the accounts of the Nigam and a Jal Sansthan, as certified by the Auditor together with the audit report thereon shall be forwarded annually to the State Government and the Nigam respectively, who may issue such directions to the Nigam or the Jal Sansthan, as the case may be, as it may deem fit, and the Nigam or the Jal Sansthan shall comply with such directions. The State Government shall- a) cause the accounts of the Nigam together with the audit repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsection (3) of Section 3 of the 1975 Act. Virtually this broader principle has been upheld by the Hon'ble Supreme Court in the case of CIT Vs. U.P. Forest Corporation, 230 ITR 945 (supra) while declining to treat it 'local authority' under the Act. The provisions contained in the Section 10 (20) of the Income Tax Act, shall prevail over and above the U.P. Water Supply and Sewerage Act, 1975. 76. After a close scrutiny of 1975 Act. the law settled by Hon'ble Supreme Court in the cases of Valjibhai Muljibhai Soneji (supra), R.C. Jain (supra). Commissioner of Income Tax. Vs. U.P. Forest Corporation (supra). Agricultural Produce Market Committee, Narela, Delhi (supra), read with Part IX and IXA of the Constitution and Section 3 (31) of General Clauses Act, the U.P. Jal Nigam does not seem to be the 'local authority' under Section 10 (20) of the Income Tax Ad, 1961 even prior to Finance Act, 2002. The word, "local authority" has been defined in the Section 3 (31) of the General Clauses Act, 1897, an old Central Act, which has been interpreted by the Hon'ble Supreme court by catena of judgments (supra). Order dated 22.09,2011 delivered by Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m is not a local authority, the question formulated for opinion as to whether U.P. Jal Nigam is Local Authority or not does not arise. Let the papers be placed before Hon'ble Division Bench for passing appropriate order. " In view of the opinion expressed by Hon'ble Third Judge, no further order is required. The appeal decided accordingly. 23. Although, the aforesaid order in Income Tax Appeal No. 128/2008 denying UP Jal Nigam the status of local authority is in respect of dispute of Income Tax,, the same is applicable to instant case as the order of the Hon'ble High Court has been passed after analyzing the definition of 'local authority' contained in General Clauses Act. It has already been discussed that the term 'local authority' has been similarly worded in CGST Act, 2017 as well as General Clauses Act, 1897. 24. Further, the relevant clarification contained in Service Tax Educational Guide published in erstwhile tax regime is reproduced below- "2.4.9 Are all local bodies constituted by a State or Central Law local authorities? No. The definition of 'local authority' is very specific as explained in point no 2.4.8 above and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authority must be established to carry out any function entrusted to a Municipality under article 243 W of the Constitution has also been fulfilled in the present case. Thus, the UPJN is a governmental authority in our view. 29. As such, by way of Notification No. 22/2021-Central Tax (Rate) dated 31.12.2021, the lower rate of tax of 12% provided by Entry 3(iii) of Notification No.11/2017- Central Tax (Rate) dated June 28, 2017, was restricted to works contract supplied to Central Government, State Government, Union territory and a local authority only with effect from 01.01.2022. As the UPJN does not qualify as a 'local authority' and it qualifies as a governmental authority, tax rate of 18% is applicable on the works contract services provided to UPJN by way of Entry 3(xii) of Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017. The said Entry 3(xii) of the Notification No. 11/2017 reads as follows: Description of Service Rate (percent) "(xii) Construction services other than (i). (ia), (ib), (ic). (id), (ie), (if), (iii), (iv), (v), (va), (vi), (vii), (viii), (ix), (x) and (xi) above." 9 30. Further, the Notification No. 11/2017- Central ..... X X X X Extracts X X X X X X X X Extracts X X X X
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