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TMI Blog2023 (2) TMI 877X X X X Extracts X X X X X X X X Extracts X X X X ..... ka, Bangalore 560064 (herein after referred to as Appellant) against the Advance Ruling order No. KAR ADRG 23/2022 dated 12th August 2022. Brief Facts of the case: 3. The Appellant is a Company which is engaged in construction commissioning and maintenance of entire work for water supply projects/sewerage projects/facilities. The Appellant has been awarded a contract by M/s Bangalore Water Supply & Swerage Board (hereinafter referred to as 'BWSSB' in short) to execute the work of Rehabilitation/Remodeling/Replacement of 400-100 mm dia sewer line in V-Valley. GST Rate Notification No 11/2017 CT (Rate) dated 28-06-2017 prescribed a rate of 18% on composite supply of works contract as defined in clause 119 of Section 2 of the CGST Act. This was subsequently amended vide Notification No 20/2017 CT (Rate) dated 22-08-2017 wherein entry Sl.No 3(iii) was applicable to composite supply of works contract when 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 pipeline, conduit or plant for (i) water supply, (ii) water treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dundant. 6. Aggrieved by the ruling given by the AAR, the Appellant has filed this appeal on the following grounds. 6.1. The Appellant submitted that BWSSB holds PAN under Income Tax and GSTIN under GST which have been issued by the Departments classifying the entity as a local authority; that BWSSB is an autonomous body formed by the State Legislature under BWSSB Act on 10-09-1964 for water supply and sewage disposal. As per the definition of 'Local Authority' given in Section 2(69) of the CGST Act any other authority legally entitled or entrusted by the State Government with the control or management of a municipal or local fund qualifies as a local authority; that a person which has already been held to be a 'local authority' under the GST law cannot be conferred with a different constitution for different purposes. 6.2. They submitted that the lower Authority in order to answer the queries raised in the application have gone on to determine the Constitution of BWSSB based on the old provisions of law; that the terms 'Governmental Authority' and 'Government Entity' were part of the entry 3(iii) of Notification No 11/2017 CT (Rate) as amended by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v 2021 read with Notf No 22/2021 CT (Rate) dated 31st Dec 2021, restricted the concessional rate of 12% only to works contract supplied to Central Govt, State Govt, Union Territory or a local authority; that the Appellant had approached the advance ruling authority seeking a ruling whether they were covered by the Notf No 15/2021 CT (Rate) read with Notf No 22/2021 CT (Rate) with effect from 1st Jan 2022. He stated that the lower Authority held that the Appellant is not eligible for the concessional rate of 12% GST on the works contract service supplied to BWSSB in as much as BWSSB is not a local authority but a Governmental Authority. Aggrieved by the said decision, the Appellant is in appeal. 7.2. The Chartered Accountant requested the Bench for permission to invite the representatives of BWSSB for the hearing since the issue whether BWSSB is a local authority or not and whether tax at 18% is chargeable on the service supplied by the Appellant to BWSSB is of interest to the Appellant's client since the tax is ultimately to be paid by BWSSB to the Appellant. Hence, he requested for permission to allow BWSSB to be part of the proceedings. The Bench responded that the issue was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... WSSB is empowered by the Act to manage a local fund and is answerable to the State Govt, it qualifies as a local authority. Consequently, the supply made by the Appellant to BWSSB is liable to tax at 12% GST in terms of Notf No 15/2021 CT (Rate) dated 18-11-2021 read with Notf No. 22/2021 CT (Rate) dated 31-12-2021. DISCUSSIONS AND FINDINGS 8. We have gone through the records of the case and taken into consideration the submissions made by the Appellant in the grounds of appeal as well as during the personal hearing. The Appellant has sought for condonation of delay of 20 days in filing the present appeal. Given that the appeal has been filed within the condonable period, the delay in filing the appeal is hereby condoned in exercise of the power vested in terms of the proviso to Section 100(2) of the CGST Act. 9. Coming to the issue at hand, briefly stated, the facts are that the Appellant is a supplier of works contract service to BWSSB as per the contract dated 21-12-2017. They were paying GST at concessional rate of 12% on the supply made to BWSSB by virtue of the entry 3(iii) of rate Notification No 11/2017 CT (Rate) dated 28-06-2017 as amended by Notf No 31/2017 CT (Rate) d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant to BWSSB with effect from 1st January 2022; that the applicable rate of tax will be 18% in terms of entry Sl.No 3(xii) of the rate Notification No 11/2017 CT (Rate) dated 28-06-2017. Aggrieved by this ruling, the Appellant is before us in appeal. 10. The argument of the Appellant is that BWSSB is classified as a 'local authority' by both the Income Tax and the GST Departments who have granted a PAN and GST registration respectively by treating BWSSB as a local authority; that they cannot be termed as a Governmental Authority for the purpose of determining the rate of tax. Therefore, the short point for determination by us is whether BWSSB, to whom the Appellant supplies the works contract services, qualifies as a 'local authority' in which case, the Appellant will not be covered by the amendment notification No 15/2017 CT (Rate) dated 18-11-2021 and the Appellant can continue to supply the service to BWSSB at the concessional rate of 12% in terms of entry Sl.No 3(iii) even after 1st January 2022. For this let us examine the definition of a 'local authority' as defined in Section 2(69) of the CGST Act.- "Local Authority'' means - (a) a "Panc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposits, taxes and other charges from time to time in order to provide sufficient revenue,- (a) to cover operating expenses, taxes, interest payments and to provide for adequate maintenance and depreciation, contribution to pension fund including all expenses incurred during the year; (b) to meet repayment of loans and other borrowings; (c) to finance year to year improvement; and (d) to provide for such other purposes beneficial to the promotion of water supply and disposal of sewage in the Bangalore Metropolitan area as the Board may determine. 12. Coming to the definition of 'local authority' as reproduced above, the question that arises is whether BWSSB can be considered as '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' as mentioned in clause (c) of the definition at Section 2(69) of the CGST Act? The Supreme Court in its landmark decision dated 7th Feb 1981 in the case of Union of India vs R.C Jain has laid down the following distinctive attributes and characteristics of a 'local authority':- * (i) It must have separate lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the State Government:- * The Chairman and members of the BWSSB Board are appointed by the State Government. * If the Board fails to carry out its functions, or refuses or fails to follow the directions issued by the State Government under Section 89, the State Government may remove the Chairman and the members of the Board and appoint a Chairman and members in their places. * The Board may appoint a Chief Administrative Officer cum Secretary, Engineer in Chief, Chief Engineers, Additional Chief Engineers, Executive Engineers with the prior approval of the State Government. * The Board has the authority to prepare schemes for the supply of water for domestic purposes within the Bangalore Metropolitan Area and for the proper sewerage and disposal of sewage of the Bangalore Metropolitan Area. However, a scheme costing less than Rs 10 crore with Government grant or loan as source of funds will be carried out only after approval of the Government Administrative Department. Further, a scheme costing more than Rs 10 crores irrespective of source of funding will be carried out only with the approval of the State Government Cabinet. * The Board shall submit to the State Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t must not be imported into another. Thus, although the expression 'local fund' is defined in the Karnataka Financial Code, 1958, following the rule of interpretation laid down by the Supreme Court, we refrain from borrowing the definition of the term 'local fund' from any other statute. We find that as per the BWSSB Act, there is no fund entrusted to it by the State Government. Section 16 of the BWSSB Act provides that the Board shall, for carrying on its operations, levy rates, fees, rentals, prorate charges, deposits, taxes and other charges and shall vary the same in order to provide sufficient revenue (a) to cover operating expenses, taxes, interest payments and to provide adequate maintenance and depreciation contribution to pension fund including all expenses incurred during the year; (b) to meet repayment of loans and other borrowings; (c) to finance year to year improvement; and (d) to provide for such other purposes beneficial to the promotion of water supply and disposal of sewage in the Bangalore Metropolitan area as the Board may determine. BWSSB raises its own funds to carry out its operations and there is no local fund entrusted to it by the State Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y that BWSSB is not a local authority. 17. The Appellant has relied on the advance ruling given by the West Bengal Authority for Advance Ruling in the case of Newtown Kolkata Development Authority (NKDA) wherein it was held that NKDA is a statutory authority established to carry out municipal functions and that it operates a local fund and hence is a local authority. We have gone through the said ruling and find that the West Bengal Authority for advance ruling has not taken note of the Apex Court decision in R.C Jain case supra while passing their ruling. Further, the said ruling has been rendered by drawing reference to definition of 'local fund' as given in the West Bengal Treasury Rules. We find that the West Bengal Treasury Rules and the BWSSB Act are not pari materia statutes. Further, by following the rule of interpretation laid down by the Supreme Court in R.C Jain case we are not inclined to look into other statutes to define the expression 'local fund'. As such the said West Bengal advance ruling in the case of NKDA does not have persuasive value in this case. In any case, an advance ruling is binding only on the applicant and the jurisdictional officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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