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TMI Blog2023 (7) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicant is neither a supplied nor a recipient. Whether the amount which would be paid by the students to the educational institution proposed to be jointly operated by the applicant and Choice Estates and Constructions Pvt Ltd by way of the proposed joint venture would be liable to GST? - Whether Choice Estates and Constructions Pvt Ltd. s share in revenue from the educational institution would be liable to GST? - HELD THAT:- These questions are not at all in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. Hence as per the definition of Advance Ruling, these questions are not qualified to be included in the application for Advance Ruling. Whether the applicant s share in revenue from the educational institution would be liable to GST? - HELD THAT:- The person supplying the goods or services or both is the supplier and supply is a broader term which inter alia includes the transaction by a constituent to the person termed by such constituents. And also, as per the explanation to the clause (aa) of Section 7 (1), such person and its constituents shall be deemed to be two separate persons and the suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the provisions of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act) and the Kerala State Goods and Services Tax Act, 2017 (hereinafter referred to as KSGST Act) are same except for certain provisions. Accordingly, a reference made hereinafter to the provisions of the CGST Act, Rules and the notifications issued there under shall include a reference to the corresponding provisions of the KSGST Act, Rules and the notifications issued there under. 3. M/s. Choice Estates and Constructions Pvt. Ltd. (hereinafter referred to as CECPL ) is a private limited company engaged in the business of construction, development and maintenance of infrastructure. CECPL is the owner of property consisting of land and building situated in Thiruvalla, Kerala, India (hereinafter referred to as the Property ). 4. The applicant proposes to enter into a joint venture agreement with CECPL, with the intention to combine the individual expertise of the applicant and CECPL for the joint operation of an educational institution on the Property. 5. As per the proposed terms of the joint venture, each of the parties, i.e., the applicant and CECPL shall be individual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e repayable by CECPL to the applicant upon expiry or termination of the proposed agreement, whichever is earlier. 5.10. The applicant and CECPL shall work towards the common objective of successfully operating the educational institution and in furtherance of mutual benefit and interest. 6. In light of the evolving provisions of GST, the applicant has certain queries regarding the implication of GST under the CGST Act, 2017 and Kerala SGST Act, 2017 on the joint venture arrangement proposed to be entered into with CECPL for the operation of an educational institution. 7. The applicant requested an advance ruling on the following: 1. Vis-a-viz the applicant, who would be the recipient of service in the proposed joint venture? 2. Vis-a-viz Choice Estates and Constructions Private Limited, who would be the recipient of service in the proposed joint venture? 3. Whether the amount which would be paid by the students to the educational institution proposed to be jointly operated by the applicant and Choice Estates and Constructions Pvt Ltd by way of the proposed joint venture would be liable to GST? 4. Whether the applicant s share in revenue from the educational i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recipient of service vis-a-viz the applicant and vis-a-viz CECPL in the instant case would be the student who is liable to pay such fee. 8.5. Regarding question 3, the proposed transaction involves the applicant and CECPL jointly operating an educational institution by which they would jointly render education service to the service recipient, who in the instant scenario would be the student enrolled in the educational institution. 8.6. The service in question would be a service rendered by an educational institution to the students enrolled with it, which for the purpose of determining GST liability is covered under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The relevant portion of the said notification is extracted below: SI. No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (Per cent) Condition Heading 9992 or Heading 9963 Services provided (a) by an educational institution to its students, faculty and staff; (aa) by an educational institut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udent and not suppliers of service / recipients of service inter se. 8.10. The revenue from operation of educational institution is nothing but the fees collected by the educational institution from the students enrolled in it. Further, amount so collected from the students would be exempt from GST by virtue of Entry 66 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. 8.11. In view of the above, it is the understanding of the applicant that the respective share of revenue drawn by the applicant and CECPL from the joint bank account maintained for the same, would not be liable to GST as the same is nothing but fee collected from students of the educational institution in consideration for rendering of education service, which in itself is not liable to GST. 8.12. The applicant places reliance on the ruling of the Hon ble Mumbai CESTAT in the case of B.G. Exploration Production India Ltd. Vs Commissioner of CGST Cex., Navi Mumbai [2021-VIL-507-CESTAT-MUM-ST] wherein under similar factual background, the Hon ble CESTAT has held that where the parties have come together by way of a joint venture where each co-venture has their own set of responsibilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of individuals, whether incorporated or not, in India or outside India; (g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government company as defined in clause (45) of section 2 of the Companies Act, 2013; (h) any body corporate incorporated by or under the laws of a country outside India; (i) a co-operative society registered under any law relating to co-operative societies; (j) a local authority; (k) Central Government or a State Government; (I) society as defined under the Societies Registration Act, 1860; (m) trust; and (n) every artificial juridical person, not falling within any of the above; 11.3. From the aforesaid provisions of Section 2(84), it may be seen that a Joint Venture would be covered under clause (f) of Section 2(84), as an association of persons or AOP, for short. 11.4. Meaning of the term Association of persons : 11.4.1. The meaning of the term Association of persons or AOP is to be discussed for a better comprehension. As per the Law Lexicon by P. Ramanatha Aiyer p.158, the term AOP has been defined as follows: - (i) An association of perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and participates in the business and management of the joint venture, and has a share in the profits/loss of the venture. In such a case, the land owner is not consumer and is the co-adventurer in the venture, a service provider, where the land owner himself is responsible for the construction as a co-adventurer in the venture. 11.5. From the aforesaid discussion, it may be seen that an association of persons means an association in which two or more persons join in a common purpose or common action. From the above judgments, it is evident that a volition is required to form an association of persons and not just sharing the assets and profits. On the other hand, once the entities come together with volition to achieve a profit out of a business enterprise, the said entity would be different from the constituent entities. The word person herein is very significant, as person may mean any entity as defined in Section 2(84) of the CGST Act. In other words, individuals, HUFs, companies or firms, etc may be members of such A.O.P. 11.6. From the submissions of the applicant, it is clear that the arrangement amongst the applicant and its counterpart are not independent of ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors but as entrepreneurs desirous to earn profits, the extent whereof may be contingent upon the success of the venture, rather than any fixed fees or consideration for any specific services. 12. Now coming to the scope of Advance, Ruling, Section 95 (a) of the CGST Act is reproduced below. Definition of Advance Ruling - In this Chapter, unless the context otherwise requires,- (a) advance ruling means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. 12.1. Now, it has to be noted that the applicant, in the case at hand, has stated that they require the ruling in their individual capacity of M/s The Choice Foundation, Kochi, a Society registered under the Travancore Cochin Literary, Scientific and Charitable Societies Registration Act, 1955. The applicant has stated that they offer their expert services and undertake the day-to-day administration and operation of the educational institution purely from an acade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which advance ruling is sought are concerned, they do not fall under the purview of any of the clauses of section 97 (2) of the CGST/KSGST Act, 2017. Moreover, in case of second question, the applicant is neither a supplied nor a recipient. 12.6. The third and fifth questions are not at all in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. Hence as per the definition of Advance Ruling, these questions are not qualified to be included in the application for Advance Ruling. 12.7. The fourth question; whether the applicant s share in revenue from the educational institution would be liable to GST? falls under the purview of clause (g) of sub-section (2) of Section 97 of the CGST/KSGST Act, 2017, i.e., whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term. 13. With regard to this, the following questions have to be answered. Who is the supplier? Who is the recipient? What is being supplied and what is the consideration? 14. As per section 2(105) of the CGST/KSG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal services to the students enrolled for which the students in turn pay the fees which is the revenue of the educational institution . To provide the education services by this educational institution, it mainly makes use of two input services, viz, a) the expertise and experience of the applicant, M/s. Choice Foundation, in academic operations, day to day administration and operation; b) infrastructural requirements satisfied by M/s. Choice Estates and Constructions Pvt. Ltd. 20. The students enrolled in the educational institution pays fees as consideration to the educational institution for the educational services provided to them. As per the applicant, this revenue is shared between him and CECPL, who being the providers of input services to the educational institution which being a separate person as discussed supra. Hence that part of the total revenue received by the educational institution, which is paid to the applicant is the consideration received by the applicant for the service they provide to the educational institution. Hence this transaction is taking place from one such person to another and hence it constitutes a supply under the CGST/KSGST Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furtherance of business. In the above clauses (a) to (b), consideration is another requirement for a transaction to qualify as a supply . As per Sub-section (31) of Section 2 of the CGST/KSGST Act, consideration in relation to the supply of goods or services or both includes- (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: 26. From the definition, consideration means the payment made in money or otherwise in response to supply of goods or services. Here the applicant provides an interest free refundable deposit to CECPL repayable by CECPL to the applicant upon expiry or termination of the proposed agreement, whichever is earlier. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ); (b) inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange or amongst banks and such dealers. Nil Nil 31. As per Rule 28 of the CGST/KSGST Rules, 2017, Value of supply of goods or services or both between distinct or related persons other than through an agent, be the open market value of such supply. In the open market, the consideration for services of extending deposits is normally Interest . Hence the exemption under the above entry in SI.No. 27 is pertinent to the supply made by the applicant also. 32. In the view of the foregoing observations and findings, the following rulings are issued: RULING Question 1. Vis-a-viz the applicant, who would be the recipient of service in the proposed joint venture? Ruling No ruling can be given since the question on which advance ruling is sought does not fall under the purview of any of the clauses of section 97 (2) of the CGST/KSGST Act, 2017. Question 2. Vis-a-viz Choice Estates and Constructions Private Limited, who would be the recipient of service in the proposed joint venture? Ruling No ruling ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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