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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 ..... y provisions which elaborately provide who, on being elected, become members of the Municipal Boards, the District Board or the Zilla Parishad These Boards are basically independents bodies with very little or minimal of Government control and that too in the limited field. They formulate their own policies and implement those policies through the machinery provided under law. They have power to levy Panchayat, municipal or other local taxes and have also the power to realise those taxes through coercive processes, if they are not paid immediately on demand - an authority in order to be a local authority must be of like nature and character as a Municipal Committee, Zilla Parishad or a District Board - BWSSB does not satisfy this principle of statutory interpretation in as much as BWSSB is not a wholly independent entity but is largely controlled by the State Government - thus, BWSSB is not a local authority. The Appellant has also taken pains to emphasise that BWSSB has been registered with the Income Tax Department and the GST Department as a 'local authority'; that when both the departments have acknowledged the status of BWSSB as a local authority and accordingly gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 treatment or (iii) sewerage treatment or disposal and GST rate was at 12%. The entry Sl.No 3(iii) of the rate notification was further amended vide Notification No 31/2017 CT (Rate) dated 13-10-2017 to include the supplies of works contract to Central Government, Statement, Union territory, a local authority, a Governmental Authority or a Government Entity at the rate of 12%. This notification also defined the meaning of the terms Governmental Authority' and 'Government Entity'. The entry Sl.No 3(iii) was further amended vide Notification No 15/2021 CT (Rate) dated 18-11-2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 Notification No 31/2017 CT (Rate) dated 13-10-2017and the explanation to the notification defining Governmental Authority and Government Entity applied to it; that these terminologies have been deleted from the entry 3(iii) of Notf No 11/2017 CT (Rate) vide Notf No 15/2021 CT (Rate) dated 18-11-2021 and hence the explanation does not have any role to play while interpreting the rate of tax; that in order to determine the rate of tax, one has to see the definition of the term ' local authority' in totality as defined under the GST Act. He submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 relating to the rate of tax applicable on the supply made by the Appellant and the presence of BWSSB as recipient of the supply is not relevant to the issue; that even though the tax will ultimately be paid by BWSSB, they cannot be construed as an aggrieved party to the ruling given. Further, BWSSB was not a party to the proceedings before the lower Authority and the Bench does not think it fit to include them in the proceedings at this stage. 7.3. The Chartered Accountant submitted that BWSSB is registered under the Income Tax law as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant 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) dated 13-10-2017. The relevant entry 3(iii) of the rate notification is reproduced hereunder for reference: Sl.No Chapter, Section or Heading Description of service Rate (percent) 3 Heading 9954 (Construction service) (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 Central State Government, U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 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 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 legally entitled to, or entrusted by the Central Government or any State Government with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 legal existence as a corporate body; (ii) it must not be a mere governmental agency but a legally independent entity; (iii) it must function in a defined area and must ordinarily be elected wholly or partly, directly or indirectly by the inhabitants of the area; (iv)it must enjoy a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 Government every year a statement of estimated capital and revenue receipts and expenditure for the ensuing year and the same will be tabled before both the Houses of the State Legislature for discussion. The State Government may advance loans to the Board on terms and cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;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 Government. The fund that BWSSB raises on its own by way of rates, fees, rentals, charges, taxes, etc is only to meet its operational expenses. Although the State Government may make subventions to the Board in terms of Section 19 of the BWSSB Act, the same are in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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 and does not have any precedent value. 18. The Appellant has also taken pains to emphasise that BWSSB has been registered with the Income Tax Department and the GST Department as a 'local authority'; that when both the departments have acknowle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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