9911796707
TMI Blog2023 (8) TMI 1298X X X X Extracts X X X X X X X X Extracts X X X X ..... es), it is observed that when the principal supply of raw water is exempted, recovery of interest or penalty for delayed payment of water charges and Reconnection charges are not liable to tax, as clarified in Para No. 9 of circular No. 178/10/2022 - GST dt. 03.08.2022, issued by the Department of Revenue. Whether the Maintenance charges for usage of common facilities are liable to be taxed under the prevailing GST Laws? - HELD THAT:- In as much as the Applicant has not submitted any documents as required in the Rule/definition of pure agent discussed above, i.e any document such as agreement entered into with the Allotee(s) to act as Pure agent, to incur expenditure or costs, in the course of supply of goods or any other document in support of their claim; the charges collected cannot be treated as reimbursable even if it is only a reimbursement of actual cost - as per provision of Section 7(1) (a), the activity of collecting Maintenance charges for usage of common facilities, would fall in category of supply. A transaction which is incidental or ancillary to sub-clause (a) falls under the scope of sub-clause (b) of Section 2(17) of CGST Act, 2017. The provisions of sections 7(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to tax, as clarified in Para No. 9 of Circular No. 178/10/2022 - GST dt. 03.08.2022, issued by the Department of Revenue. Maintenance charges for usage of common facilities and Participatory Infrastructure Development Scheme (PIDP), the value of supply shall include interest or late fee or penalty for delayed payment of any consideration for any supply. In as much as the principal supply i.e maintenance service and PIDP are taxable, interest and penalty collected towards rendering such services will also form part of the value of supply and liable to be tax appropriately in consonance with the principal supply. Whether the Penalty for delay in execution of the project and delay in execution of lease deed are liable to be taxed under the prevailing GST Laws? - HELD THAT:- Since the main supply i.e the upfront fee collected is exempted as per entry no. 41 of Notification No. 12/2017- CT (Rate) dt. 28.06.2017, penalty for delay in execution of the project and delay in execution of lease deed are not liable to be taxed under the prevailing GST Laws. X X X X Extracts X X X X X X X X Extracts X X X X ..... er the interest collected towards delayed payment for Upfront lease premium and Differential lease premium are liable to be taxed under the prevailing GST Laws. 5. Whether the interest for delayed payment of consideration for the points mentioned in Sr.No.01 to 03, as above, are liable to be taxed under the GST Laws. 6. Whether the Penalty for delay in execution of the project and delay in execution of lease deed are liable to be taxed under the prevailing GST Laws. 1.2 The applicant has 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 is an institution formed as a State Industrial Development Corporation (SIDC) by the Government of Tamilnadu. It is providing the assistance to promote the objective of the State by identifying, developing, maintain Industrial area across the State of Tamilnadu and is in the business of developing Industrial Complexes/Industrial Parks/Industrial Growth Centers by acquiring lands across the State under the "Acquisition of Land of the Industrial Purpose Act, 1997/any other act as applicable for land acquisition purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtain dedicated water connection. The consumption of the same shall be charged based on the meter installed at the Allottee(s) premises. In this regard, following charge shall be collected: * Water charge as per Meter Consumption Reading. * Interest for delay in payment obligations. * Reconnection charges. 6. Maintenance charges The Allottee(s) shall be required to make payment for the common amenities and facilities (road, street, drainage, electricity, etc) as per the prevailing policy. If the payment to the above is delayed, the Allottee(s) shall be required to pay the dues along with the interest as per prevailing policy on such delayed payment. 7. Participatory Infrastructure Development Scheme (PIDP): As per the scheme, the Applicant shall support upgradation of the existing infrastructure at the request of the Allottee(s). The Applicant will undertake the infrastructure development as per the request received from the Allottee(s) or Association of Allottee(s). However, the total project cost shall be borne by Applicant and the Allottee(s) collectively. Further, the Applicant shall divide the cost incurred based on the agreed ration and raise demand on agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Circular No. 52/26/2018 dt. 09.08.2018 which has clarified that as per S.No. 99 of Notification CT(Rate) dt. 28.06.2017 by virtue of which water [other than aerated, mineral, purified, distilled, medicinal, ionic, battery, de-mineralized and water sold in sealed container] falling under HS code 2201 attracts NIL rate of GST. viii. Therefore, supply of drinking water for public purposes, if not supplied in a sealed container, is exempt from GST." II. Maintenance cost for usage of common facilities:- i. The Applicant collects maintenance cost for the usage of common basic infrastructure facilities from Allottee(s) such as road, streetlights, drainage, avenue plants, etc., as per the prevailing policy. ii. The above said cost is collected based on the actual cost incurred by the Applicant on behalf of Allottee(s) for maintaining the Industrial parks in a usable condition. There are no separate value-added services rendered by the Applicant on its own to become a taxable service. iii. Considering the above explanation, the Applicant is of the view that the cost collected is only a reimbursement of actual cost towards maintaining the industrial parks in a usable condition and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17, which exempts supply of services specified in the notification from CGST to upfront amount (initial deposit) collected by granting long term (thirty years or more) lease of Industrial plots, provided by the State Government Industrial Development Corporation or Undertaking to Industrial units, under entry no 41 for the Heading 9972 is Nil. vii. The Applicant also refers to the term 'consideration' as defined under Section 2(31) of CGST Act. viii. Based on the above, the Applicant infers that the differential lease premium shall not be taxable, since the amount collected from the allottee is also upfront premium for the transfer of remaining leasehold rights (which is more than 30 years of lease term). ix. Considering the above, the Applicant during the course of business levies interest for the delayed payment of contractual obligation (i.e interest on Differential lease premium and interest collected towards delayed payment for upfront lease premium) to ensure effective collection of outstanding dues, which, the Applicant infers, is not taxable as the main supply is exempted vide Entry no.41 of Notification No. 12/2017-CT(Rate) dt. 28.06.2017. x. Further, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpted from the preview of GST Laws. 4.1 The applicant, after consent, was given an opportunity to be virtually heard on 12.01.2023. The applicant through authorized representative (AR) Shri Rishi Haran of the applicant appeared before the authority and reiterated the submissions. The AR explained about the maintenance charges for common facilities and Participatory Infrastructure Development charges (PIDP) and proportionate recovery of the same from allottee(s). The AR agreed to submit copy of invoices issued to allottee for recovery of maintenance charges and PIDP charges along with the copy of invoices issued by vendors to SIPCOT for providing such services. 4.2 Applicant submitted invoices called during PH by mail along with some additional submission. 5.1 The applicant is under the administrative control of Central Tax. The said jurisdictional authority was addressed to report if there are any pending proceedings against the applicant on the issues raised by the applicant in the ARA application and for comments on the issues raised. The said authority has stated that there are no pending proceedings against the applicant on the issues raised by the applicant in the ARA appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase premium and Differential lease premium charges which is exempted as per SI.No. 41 of Notification No. 12/2017-CT(Rate) dt. 28.06.2017. With regard to interest for delayed payment on supply of raw water the same is exempted as the main supply is exempted as discussed above. However, interest on delayed payment of maintenance charges for usage of common facilities and PIDP charges are taxable accordingly as the main supply are taxable. v. With regard to penalty for delay in execution of the project and delay in execution of lease deed, the same are exempted as the same is included in the value of supply as defined in Section 15(2) of the CGST Act, 2017. 5.2 The concerned State Tax Officer has not submitted any report with regard to any pending proceedings in the against the applicant nor any comments. 6. The submissions made by the applicant in the advance ruling application as well as the additional submissions made during the personal hearing, have been carefully examined. The applicant filed advance ruling application under the category viz. (i) applicability of notification issued under the provisions of the Act, (ii) determination of the liability to pay tax on service, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in payment obligations (Water Charges), it is observed that when the principal supply of raw water is exempted, recovery of interest or penalty for delayed payment of water charges and Reconnection charges are not liable to tax, as clarified in Para No. 9 of circular No. 178/10/2022 - GST dt. 03.08.2022, issued by the Department of Revenue. II) Whether the Maintenance charges for usage of common facilities are liable to be taxed under the prevailing GST Laws. a) The Applicant collects certain charges towards maintenance of common basic infrastructure facilities from Allottee(s) such as road, streetlights, drainage, common buildings, avenue plants, etc., as per the prevailing policy. b) Further, the Applicant has stated that the above cost is collected based on the actual cost incurred by them on behalf of the Allottee(s) for maintaining the industrial park in usable condition and that no separate value added services rendered by the applicant on its own to become a taxable service. That the cost collected is only a reimbursement of actual cost towards maintaining the Industrial park in a usable condition and hence shall not be liable to tax under GST laws. c) The view expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scope of sub-clause (b) of Section 2(17) of CGST Act, 2017. The provisions of sections 7(1)(a) of CGST Act, 2017 read with clause (b) of section 2(17) of CGST Act, 2017 indicates that the activities of the appellant would fall under the definition of supply hence chargeable to GST. g) In this regard, it is observed that there may be transfer of property in goods and/or services in the course of maintenance of the aforesaid amenities/ buildings which is made against a consideration. Therefore, these activities fall under the scope of supply envisaged under Section 7 of the GST Act and hence liable for GST @ 18% under SAC 995429 vide SI. No. 3 of Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017. III) Whether the Participatory Infrastructure Development Scheme (PIDP) charges are liable to be taxed under the prevailing GST Laws? a) As per explanation given by the Applicant, they undertake the infrastructure works such as upgradation of roads, drains, street-lights and others on a request received from the Allottee(s) or Association of Allottee(s) and that the total project cost shall be borne by the Applicant and the Allottee(s) collectively and that the demand is ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erm (thirty years, or more) lease of industrial plots, provided by the State Government Industrial Development Corporations or Undertakings or by any other entity having 20 percent, or more ownership of Central Government, State Government, Union territory to the industrial units or the developers in any industrial or financial business area is exempted as per entry No.41 of the Notification No 12/2017-Central Tax (Rate), dated 28.06.2017. b) When the principal supply itself is exempted, the interest collected towards delayed payment for Upfront lease premium and Differential lease premium are not liable to be taxed under GST Act, as clarified in Para No. 7.1.6 of Circular No. 178/10/2022 - GST dt.03.08.2022, issued by the Department of Revenue. V) Whether the interest for delayed payment of consideration for the points mentioned in Sr. No. 01 to 03, as above, are liable to be taxed under the GST Laws. a) With respect of SI.No. 1, as discussed at para 7(1) (c), when the principal supply of raw water is exempted, recovery of interest or penalty for delayed payment of water charges and reconnection charges are not liable to tax, as clarified in Para No. 9 of Circular No. 178/10/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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