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TMI Blog2024 (7) TMI 1236X X X X Extracts X X X X X X X X Extracts X X X X ..... e obstacles suffered in difficult situation and mainly concentrates on the indirect welfare of the people who depends on the applicant Company - That the grant sanctioned by the FAO of UN is a gratuitous grant under the projects of the said UN organization and it has to be utilised according to the budget lines specified in the agreement within the time lines specified. The said budget lines were determined based on the proposal submitted by the applicant Company to the FAO of UN. From the perusal of the provisions of the CGST Act, 2017 regarding Scope of Supply and the submissions made by the applicant regarding the activities to be undertaken by the applicant as mandated by the grant providing organization we find that there is no supply of Goods or services to the grant providing organization, and hence the we are of the opinion that the activities undertaken by the applicant in lieu of receipt of the Grant from FAO is not covered under the meaning of 'scope of supply'. On perusal of the description of the investment as mentioned in the Grant Agreement it is found that the purpose of the investment is .to help the applicant company overcome the losses due to lack of capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tamil Nadu Goods and Services Tax Act are in pari materia and have the same provisions in like matter and differ from each other only on few specific provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Services Tax Act, 2017 would also mean a reference to the same provisions under the Tamil Nadu Goods and Services Tax Act, 2017. 2. The applicant submitted a copy of challan dated 17-10-2023 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. The online application form for advance ruling dated 17.10.2023 was physically received on 06.11.2023 as mandated under Rule 107A. 3.1. M/s. Last Forest Enterprises Private Limited (hereinafter referred to as Applicant ) is a Private Limited Company incorporated under the erstwhile Companies Act, 1956 and its Registered Office and Principal place of Business situated at No. 41/111E, Groves Hill Road, Kotagiri, The Nilgiris, Tamil Nadu - 643217. 3.2. The applicant is engaged in the business of wholesale and retail trade of various Tribal, Non-timber Forest, Organic, Natural and Agro Foods, Human ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltural productivity and food security, and to better the living standards of rural populations. It also has an aim to defeat hunger and improve nutrition and food security with the help of international efforts. 3.9. The FAO of UN is a specified international organisation declared by the Government of India in pursuance of section 3 of the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947). 3.10 The applicant had suffered the major losses by way of lack of capital, slowing down and stopping of cash flows and collapsing the distribution and marketing network due to Corona Pandemic Lockdowns in India and worldwide. 3.11 In order to re-imagining of running the green enterprise units of the Applicant in a sustained manner, the applicant Company was in urgent need of investments and hence, it had approached the FAO of UN for funding. Accordingly, the FAO of UN has sanctioned the USD 24,893/- by way of grant to the applicant Company for re-imagining, manage cash flow shortages and to overcome all other marketing obstacles they faced during the Pandemic Lockdowns. 3.12. The grant sanctioned by the FAO of UN is a gratuitous grant under the projects of the said UN organizatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt receipt from the Food and Agriculture Organisation does not amount to the term Supply'' as defined under Section 7 of the CGST Act, 2017 and stated Section 7 of the CGST Act, 2017 and Schedule I Schedule II to the CGST Act, 2017 in support of their claim. 3.17 The applicant further stated that as per the Oxford Advanced Learner's Dictionary, Supply as a verb is defined as to make available for use or to provide something to someone and in the Cambridge dictionary as to provide something that is wanted or needed . Whereas, in the transaction between the applicant and the FAO of UN, nothing will be supplied to the FAO of UN for the grant given by them. It is purely a gratuitous grant from the overseas UN linked autonomous and Non-Profit Organisation for the use of the applicant to overcome the obstacles suffered in difficult situation and mainly concentrates on the indirect welfare of the people who depends on the applicant Company. Hence, the said transaction is out of the meaning provided in the Section 7 of the CGST Act and the normal parlance of the word Supply used in the dictionaries. 3.18 The applicant further submits that there must be an exchange of considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied. Section 2 (105) - Supplier of Goods or Services (105) supplier in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied, 3.21 The applicant submitted that in the instant case, the FAO of UN, the grantor organisation nothing will be received from the applicant Company in lieu of grant provided to it as stated under Section 2 (93) of the CGST Act to constitute the FAO of UN as the recipient of Service. Similarly, the applicant Company will not supply anything to the grantor institution to bring it within the meaning of Supplier as defined in Section 2 (105) of the Act. Hence, the absence of supplier and the recipient relationship between the parties involved in the transaction, the grant from the FAO of UN will not constitute a Supply within the meaning of Section 7 of the CGST Act. 3.22 The applicant further submits that to constitute a Supply , there must be a furtherance of busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 of the CGST Act, 2017; SI.No. Ingredients to constitute supply Application in the facts of the said case 1 Supply of goods or services. Supply of anything other than goods or services does not attract GST Here, nothing is supplied to the FAO of UN in lieu of grant provided by them. The receipt of grant from the FAO of UN is an aid to overcome the financial obstacles of the applicant and to strengthen its market base. 2 Supply should be made for a consideration The receipt of grant is an assistance to the applicant and not for an exchange of consideration to the FAO of UN in lieu of Grant. 3 Supply should be made in the course or furtherance of business The grant is an assistance to the applicant and not for the purpose of furtherance of business. Further the furtherance of business is not applicable in the said case as the FAO of UN is a NPO and autonomous organisation linked to the United Organisations. 4 Supply should be made by a taxable person The applicant does not supply anything to the FAO of UN in lieu of grant. 5 Supply should be a taxable supply There is no supply in lieu of receipt of grant. 6 Supply should be made within the taxable territory Not applicable as there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er-State trade or commerce when the supplier is located in India and the place of supply is outside India and that as per Section 2 (23) of the IGST Act, zero-rated supply' shall have the meaning assigned to it in Section 16 of the IGST Act. Section 16 of the IGST Act, defines zero-rated supply as under;- 16. (1) zero rated supply means any of the following supplies of goods or services or both, namely:- (a) export of goods or services or both; or (b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit. (2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply. (3) A registered person making zero-rated supply shall be eligible to claim refund under either of the following options, namely (a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit, or (b) he may supply goods or servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e utilised for the purpose for which it was sanctioned as per the budget lines specified by the grantor. However, the grant received or will be received from the FAO of UN, an overseas organisation is in convertible Foreign Exchange. Hence, the said grant shall be eligible to classify as an Export of Service and qualify for Zero-rated Supply within the meaning of Section 16 of the IGST Act, 2017. 3.34. The applicant further questioned that if the answers to the above questions are negative, whether the applicant is liable to pay GST under the head IGST (Integrated Goods and Services Tax) or under the head CGST (Central Goods and Services Tax) and TNGST (Tamil Nadu Goods and Services Tax) for the receipt of grant from the FAO of UN and what rate? 3.35 In this regard the applicant submitted that as in the absence of exchange of consideration between the applicant and the FAO of UN in lieu of grant provided by the FAO of UN and no place of supply involved in the said transaction, whether the place of supply is assumed to be based on the location of the recipient of grant ic., within the state of Tamil Nadu (applicant's state) or is assumed to be as an interstate supply in lieu of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of law in India. 1 Provisions set out in the Schedule have been extended with certain modifications to the following organisations by various notifications (1) International Civil Aviation Organisation. (2) World Health Organisation. (3) International Labour Organisation. (4) Food and Agriculture Organisation of the United Nations. (5) United Nations Educational, Scientific and Cultural Organisation. (6) International Monetary Fund. (7) International Bank of Reconstruction and Development (8) Universal Postal Union. (9) International Telecommunication Union. (10) World Meteorological Organisation, (11) Permanent Central Opium Board. 4.0 The applicant is under the administrative control of Central Tax Authorities. The concerned authorities of the Centre and State were 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. 5.1 The concerned Central authority vide letter GEXCOM/TECH/GST/4363/2023-TECH dated 05.01.2024, stated that;- Upon perusal of the Grant agreement, it is seen that the FAO is providing grant to the applicant on completion of certain predefin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce ruling application and also the submissions made during the personal hearing. 7.2 The Applicant is before us seeking Advance ruling on the following questions;- 1. Whether the grant from the Food and Agriculture Organisation of UN is a supply or not in accordance with the provisions of the GST Act? 2. If the said grant is treated as supply, whether the receipt of the said grant is eligible to classify under the Export of Service as Zero rated supply under Section 16 of the Integrated Goods and Services Tax Act, 2017 or not? 3. If the answers to the above questions are negative, whether the applicant is liable to pay GST under IGST (Integrated Goods and Services Tax) or under CGST (Central Goods and Services Tax) and TNGST (Tamil Nadu Goods and Services Tax) for the receipt of grant from the FAO of UN and what rate? 4. If the grant provided by Food and Agriculture Organisation of UN is treated as taxable supply and liable to GST, whether the Food and Agriculture Organisation of United Nations is eligible to claim a refund of GST paid on grant provided to applicant in India under Section 55 of the CGST Act, 2017 or not? 7.3. We find that the applicant is a private limited company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Food and Agriculture Organisation of UN is towards any supply or not in accordance with the provisions of the GST Act. 7.6 The provisions regarding Levy and collection is provided under section 9 of the CGST Act, 2017, and Section 5 of the IGST Act, 2017. The extracts of the relevant provisions are reproduced below;- Section 9 of the CGST Act, 2017 (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 1 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. (2) .. Section 5 of the IGST Act, 2017 (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the Central Goods and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , shall be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of6[sub-sections (1), (1A) and (2)], the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as - (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods. 7.8 On perusal of the above provision of scope of levy provided under the CGST Act, 2017 it can be seen that the scope of supply is an inclusive one and is not a specific one making the scope of supply much more broad-based. So long as an activity is made for a consideration and is in the course or furtherance of business, it shall be a supply unless specifically excluded. We find that the GST flyer issued by the Central Board of Indirect Taxes and Customs pertaining to Meaning and Scope of Supply' provides as follows;- The term, supply has been inclusively defined in the Act. The meaning and scope of supply under GST can be understood in terms of following six parameters, which can be adopted to characterize a transaction as supply: 1. Supply of goods or services. Supply of anything other than goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te in exhibitions (Al.2) Complete quality assurance training (Phase 2) Purchase products and packaging material (Phase 2) Implement PGS wild certification Phase 21 7.11 Further, the said grant will focus on two product categories: beeswax and coffee, having high market potential due to its quality and versatility, and as part of the MPPI and Slow Food Coffee Coalition, respectively. The key activities will include:- i. Strengthen the LFE's branding, marketing and sales, and operations unit, through strategic communication and marketing of beeswax products and coffee, focusing on local and discerning customers; ii. Streamline the production capacity and quality of products of the tribal FPO (APPCL), to ensure consistent supply to the market, by LFE; iii. Facilitate environmental, economic and social well-being through implementation of market-based value systems such as Fair Trade and PGS certifications. 7.12 Hence from the perusal of the provisions of the CGST Act, 2017 regarding Scope of Supply and the submissions made by the applicant regarding the activities to be undertaken by the applicant as mandated by the grant providing organization we find that there is no supply of G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mondo (the Resource Partner ) and the grant agreement is titled as For the project: Strengthening Conservation, Enterprise Livelihoods in the Nilgiri Biosphere Reserve: Focus on Beeswax products and Coffee. 7.17 Further we also find that under the heading Description of the Investment the following is mentioned;- LAST FOREST ENTERPRISES PVT LTD (LFE) is a social business enterprise that works as a market intermediary and caters to the entire supply chain of procurement, quality check, brand, organic, fair trade, and indigenous products such as honey, a range of beeswax products and coffee among others, in one the unique biosphere reserves in India: Nilgiri biosphere reserve. Following the pandemic lockdown, LFE suffered major losses due to lack of capital, slowing down and stopping of cash flows, and collapsing of the distribution network due to similar situations elsewhere. Urgent investments are required for strategic re-imagining of running these green enterprise units, in a sustained manner. Therefore, the propose of the investment is to strengthen the local green enterprise for sustained livelihood of vulnerable communities, and contribute to positive environmental outcomes, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST law. 7.20. Since the answer to Question No. 1 raised by the applicant is answered in the affirmative we find that Questions 2, 3 4 need not be answered as they cease to exist. Also, we find that the Question No. 4 has been raised on behalf of the FAO. in this regard, the relevant provisions of Section 95 (a) and Section 103 (a) of the CGST Act, 2017 are reproduced below;- Section 95. Definitions. (a) advance ruling means a decision provided by the Authority or the Appellate Authority [or the National 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 [or of section 101CI, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant; Section 103- Applicability of advance Ruling (1) The advance ruling pronounced by the Authority or the Appellate Authority under this Chapter shall be binding only- (a) on the applicant who had sought it in respect of any matter referred to in sub-section (2) of section 97 for advance ruling; (b) on the concerned officer or the jurisdictional officer in respect of the applicant. 7.21 On perusal of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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