CA Manoj Nahata 
1. Whether the execution of the civil works of Hydro Electric project awarded by State Electricity Board Ltd would fall under Sl.No.3 (iii) (b) or 3(vi) of Notification No.11/2017 Central Tax (Rate) dated 28.06.2017attracting GST at the rate of 12%?
Held: No.
In the case of R.S Development & Constructions India (P) Ltd.-AAR Kerala, the applicant was awarded the work of execution of civil works of Pazhassi Sagar Small Hydro Electric Project. As per the work order, the work involves construction of intake structure, leading channel, tunnel, power house, tail race, civil works of switch yard, access roads and other allied works, fabrication and erection of steel liners and specials from tunnel portal to power house, trash rack, intake gate, draft tube gate and hoisting arrangements. The applicant sought an advance ruling on the taxability of the above said services.
The applicant stated that Kerala State Electricity Board Ltd is created by Section 131 of the Electricity Act, 2003 (Central Act \36 of 2003). It is fully owned by the Government of Kerala. The salient features of the National Electricity Policy, 2005 and Electricity Tariff Policy proved that such works are predominantly for the purpose of socio economic development of the country, which is one of the functions entrusted to a Municipality under Article 243W of the Constitution read with 12th Schedule. Rural electrification is specified in Schedule XI of Article 243G. Therefore, Kerala State Electricity Board Ltd is a Governmental authority as defined in Para 2(zf) of Notification No.12/2017 Central Tax (Rate) dated 28.06.2017.The predominant nature of supply is construction of part of Dam i.e., construction of various structures of dam like tunnels etc. The above said supply fulfills all the condition mentioned in Sl. No.3(vi) of the Notification No.11/2017 CT-(Rate) dated 28.06.2017.
The Authority noted that in terms of the above mentioned notification, where the services are provided to a Government Entity, then such services should have been procured by the said Government entity in relation to work entrusted to it by the Central Government, State Government, Union Territory or Local Authority as the case may be. Also it is evident that the Kerala State Electricity Board Ltd. is a Government Company incorporated under the Companies Act, 1956 with 90 per cent or more participation by way of equity or control of the Government of Kerala to carry out the business of generation, transmission and distribution of electricity in the State of Kerala and is a “State Transmission Utility” within the meaning of Section 2 (67) of the Electricity Act, 2003. Hence, Kerala State Electricity Board Ltd could not be considered as constituted or established by the Government of Kerala to carry out any function entrusted to a municipality under article 243W or a panchayat under article 243G of the Constitution. Therefore, Kerala State Electricity Board Ltd will not come under the definition of “Governmental Authority” under Para 2(zf) of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. However, Kerala State Electricity Board Ltd squarely falls under the definition of “Government Entity” under Para 2 (zfa) of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017.Hence, the supply of above said services by the applicant do not attract concessional rate of 12%.
2. Whether consideration received by a school from participant schools for participation of their students and staff in a conference would be exempted under GST in terms of Notification No.12/2017?
Held: Taxable
In case of M/s Emrald Heights International School–AAR Madhya Pradesh, the applicant is a school which is owned and run under Emerald Heights School Samiti, which is a society registered under M.P Societies Act, 1971. The school is engaged in providing world class education to its students upto Higher Secondary only. Among various other organizations, the school is a member of an association namely Round Square which is a charitable organization registered in England. As the applicant is a member of the association, it intended to hold one educational conference in India. This conference would bring together various students and teachers of other member schools of the Association. The applicant intends to cover the charges of the conference from the member schools of the Association. An advance ruling is sought by the applicant regarding the taxability of such recovery of expenses of conference from the member schools.
The applicant contended that in terms of entry no.66 of the Notification No.12/2017-C. T (Rate), services provided by an educational institution to its students, faculty and staff are exempt under GST Law. Also services provided to an educational institution for transportation of students, catering and other specified services are exempt under GST. Further, being a 12AA registered educational institute under Income Tax Act, 1961, the applicant is entitled to exemptions under GST.
The Authority stated that supply of all services to an educational institution is not exempt under GST. It further stated that the activities of holding educational conference cannot be treated as services provided by an educational institution to its students, faculty and staffs. It cannot be contended that supply of catering services to an educational institution should be exempt from tax, even if such catering services are for organizing educational conference. Otherwise, supply of catering services to an educational institution for non-exempted activities will also become eligible for exemption, which is not the intention of the legislation.
Hence, the consideration received by a school from participant schools for participation of their students and staff in a conference would be taxable under GST.
3. Whether the supply of technical testing services carried out on goods supplied from customers located outside India would be treated as “zero-rated supply”?
Held: No.
In case of M/s. Syngenta Bioscience Pvt. Ltd.-AAR Goa, the applicant is engaged in providing the R&D services on the agrochemical products to group companies across the globe and also carries out the technical testing services on goods provided by customers located outside India. Such testing is carried out with the objective of providing a test report with the results to the overseas customers. The applicant provides the above said services from Goa. The applicant sought an advance ruling on whether the activity of technical testing services can be classified as zero rated supply?
The Authority stated that to qualify a service as export of service, it should fulfill the conditions prescribed u/s 2(6) of the IGST Act. The place of supply is determined u/s 13 of the IGST Act. The goods on which technical testing is carried out are made available to the applicant in India and are not exported back to the recipient. Hence, the exclusionary clause u/s 13 is not applicable to the applicant. Hence, the place of supply of such service will be the location of the supplier of service i.e. Goa. Since, the place of supply is in India, so the service provided by the applicant does not fall within the category of export of service in terms of 2(6) of the IGST Act. Accordingly, the applicant is liable to pay CGST & SGST on the above said services.
4. Whether the supply of spare parts/accessories and repair service can be considered as composite supply wherein the principal supply is repair service and hence the rate of tax for all the supplies, consisting of spare parts/accessories and repair service be taken as 18%?
Held: No
In the case of M/s. Vista Marine & Hydraulics-AAR Kerala, the applicant is engaged in the business of rendering repairing services of boats/vessels along with supply of spare parts and accessories. It had entered into a contract with Naval Ship Repair Yard for repairing of boats as per the rates mentioned in Repair Rate Contract on the basis of which necessary spare parts and accessories are also to be supplied by the applicant. Whenever, there is requirement for repair of the Volvo Penta Engine installed boats, the Naval Ship Yard raises a Repair Work Order as per the Repair Rate Contract. On completion of the work, the applicant raises invoice to the Naval Ship Yard indicating therein the value of spare parts/accessories and service charges separately as mentioned in the work order. The question raised by the applicant is whether the supply of spare parts/accessories and repair service can be considered as composite supply wherein the principal supply is repair service and hence the rate of GST applicable is the rate of repair service?
The Authority contended that from the analysis of the Repair Work Contract, it is clearly evident that the supply of spares/accessories and repair service are separately identifiable supplies for which the rates are quoted differently. The work orders are issued separately specifying the spares/accessories to be supplied and the services to be supplied. The applicant is also issuing invoices separately indicating the value of spares/accessories and the service charges. Further, in terms of the CBIC Circular No.47/21/2018-GST dated 08.06.2018, it is clarified that where a supply involves supply of both goods and services and the value of such goods and services supplied are shown separately, the goods and services would be liable to tax at the rates as applicable to such goods and services separately.
Hence, the supply of spare parts/accessories and repair service are distinct and separately identifiable supplies and cannot be considered as ‘composite supply’.
5. Whether goods purchased at one price and sold at a price lower than the original price and the difference amount being, reimbursed by way of commercial credit notes by vendor, attracts reversal of proportionate ITC on the differential portion for which credit note issued?
Held: No.
In the case of M/S Santhosh Distributors -AAR Kerala, the applicant is an authorized distributor of M/s. Castrol India Ltd. for the supply of Castrol brand industrial and automotive lubricants. The Principal Co.’s software is mandatory to all the distributors and only through that software any distributor could conduct further supply of the products. The principal Co. is issuing invoices at a price to its distributors supplying the goods. The distributors issue invoices based on the various rate scheme pre-fixed by the principal Co. While, the distributor generate invoice to the dealers through the software designed by the principal company, the invoice value of the products will be displayed only with the value after deducting discount as per the pre fixed rate scheme. The applicant is bound to supply the products at the value shown in invoice. Such discount/rebate is subsequently reimbursed by the principal company by way of commercial credit notes. The applicant is paying the tax at the invoice value issued by the principal co. and availing the ITC shown in the inward invoice received by the applicant from the principal co. The question on which advance ruling is sought by the applicant is that whether the applicant is liable to reverse the proportionate ITC on the difference amount which is later on reimbursed by way of commercial credit notes?
The Authority stated that the value of taxable supply is governed by the provisions of section-15 of the GST Act. The deduction of discounts from the value of taxable supply is subject to the conditions prescribed in section-15(3) ibid. In the case of the applicant, the supplier of goods i.e. the principal co. is issuing commercial credit notes for the reimbursement of the scheme discount provided by the applicant to the customers as per the instructions of the supplier. Since, the commercial credit notes issued by the principal co. do not satisfy the conditions specified in section-15(3) of the GST Act, the principal co. is not eligible to reduce the original tax liability. As the supplier is not reducing the original tax liability, the applicant will be eligible to avail credit tax paid as per the invoice of the principal co. Hence, the applicant will not be liable to reverse the ITC on the difference amount reimbursed by way of commercial credit notes.
Note: The similar matter was also litigated under VAT regime in different States. However, the instant ruing is more or less in the similar line to the earlier orders passed under the State VAT law.
6. Whether resale of food & bakery products falls under restaurant services?
Held: No
In the case of M/s Square One Homemade Treats – AAR Kerala, the applicant is engaged in the business of reselling food products like cakes, baked items such as cookies, brownies, ready to eat homemade packed food, ready to eat snacks, hot and cold beverages through dispensing machine. All the food items sold are pre-packed and no cooking is done at the premises. In the bakery premises, the applicant has provided table for customers who would like to eat food items procured from the counter.
The applicant sought an advance ruling on whether the resale of food & bakery products falls under restaurant services or not?
The applicant added that they are purchasing and selling food products procured from other dealers. They have no kitchen facility to cook food at their premises. If the customers intend to eat food items at the shop, necessary facilities have been provided.
The Authority examined the matter in detail. It stated that a restaurant or an eatery, is a business that prepares and serves food and drinks to customers. Further, cooked packed foods are served from the counter and facility is given to customers to have it from the premises. The applicant is not having kitchen facility to cook food at the premises. Mere sitting facility provided by the applicant does not qualify it to be considered as a restaurant service provider.
Hence, resale of food & bakery products does not fall under restaurant services.
7. Whether commission agent, providing services in relation to sale or purchase of agricultural produce, is liable to obtain registration and is liable for tax under reverse charge mechanism on services provided in sale of raw cotton vide Notification No. 121/ST-2, dated 14-11-2017 as mended from time to time?
Held: Not liable for Exempted products but in case of Taxable Goods it is needed where the aggregate turnover exceeds the threshold limit of `20 lakhs during the financial year.
In the case of M/s. Bhaktawar Mal Kamra & Sons-AAR Haryana, the applicant is engaged in business of Commission agents wherein they are engaged in business of providing services to the farmers for selling the agricultural produce to various buyers being the traders, manufacturers or stockiest. The goods are also purchased by Government under various welfare schemes e.g., Paddy and/or wheat. The commission agents, having registrations under APMC Act, are pure agents who conduct the auction of agricultural produce on behalf of farmer. The consideration for goods is auction price and the consideration of services like cleaning, weighment is at agreed price. The commission agent collects the payment from the buyer on behalf of the farmer and remits the same to the farmer.
The applicant contended that it is only supplying the services and delivery of goods is naturally bundled with provision of service which make this case as Composite supply and services of agent being predominant service is exempt and hence supply of such goods is tax free as far as commission agent is concerned due to services being exempt. The farmers had been exempt from the levy of tax on agricultural produce. Thus neither the farmer and nor the commission agent is liable to collect and pay tax. It also added that the Agriculturist supplies goods through commission agent and not supplying goods to commission agent. The recipient here means the buyer of goods and not the supplier of goods. The supplier is defined in Section 2(105) so as to include agent who is supplying the goods on the behalf of farmer and is to be treated as supplier and not the recipient and both the definitions i.e., of supplier and recipient are mutually exclusive, as the supplier needs to collect the consideration from the recipient on the behalf of supplier. Once the agent had fallen in-steps of supplier he is collecting the payment from recipient on behalf of the supplier. Further the definition of recipient makes person liable to pay consideration. The word ‘consideration’ is meant as any payment made in respect of supply of goods and for supply there is need to two people and one man cannot supply the goods to himself so as to treat him as recipient of the goods. The consideration is payable by the person who had taken the supply of goods and not by the person who had caused the supply of goods on the behalf of the farmer who had been exempted from the tax vide Section 23(l)(b). If the supply is to be considered as made by the commission agent, then there would have been no need of exempting the farmer. The law applicable on farmer will also be applicable on commission agent as per the concept of pure agent. Further for any two transactions – there is need of supplier and recipient.
The Authority stated that the services provided by commission agents so far as these related to sale or purchase of agricultural produce provided by commission agents are exempted under Notification No. 12/2017-C. T(Rate).Besides, the agricultural produce exempted from GST, the applicant was also providing services for sale and purchase of Raw Cotton. Since, the Government,’ vide Notification No. 43/2017-Central Tax (Rate), dated 14-11-2017.had inserted Entry 4A in Notification No. 4/2017-Central Tax (Rate), dated 28-6-2017 to include raw cotton on which tax became payable under reverse charge mechanism by the recipient of supply, i.e., any registered person. It is in view of this amendment that the applicant wants a clarity on the issue whether they can be considered as recipient of supply for the purpose of paying tax on reverse charge on supply of raw cotton by way of providing their services for sale and purchase of goods (raw cotton in this case) between the farmer and the registered purchasers. To understand the controversy, it is important to note the nature of transactions facilitated by the commission agents. In the above case, a commission agent (Kachha Arhatia) under the APMC Act makes supplies on behalf of an agriculturist. Further, as per provisions of clause (b) of sub-section (1) of Section 23 of the CGST/HGST Act, 2017 an agriculturist who supplies produce out of cultivation of land is not liable for registration and therefore, cannot be regarded as Taxable Person’ in terms of clause (vii) of Section 24 of the CGST/HGST Act, 2017. Thus, a commission agent who is making supplies on behalf of such agriculturist, who is not a taxable person, is not liable for compulsory registration under clause (vii) of Section 24 of the Act ibid. However, vide Notification No. 12/2017-Central Tax (Rate), dated 24-6-2017 and the corresponding notification under the State Tax the services by the commission agents for sale or purchase of agricultural produce has been exempted. The term ‘agricultural produce’ has further been defined at clause 1(d) appended to the said notification. Therefore, the ‘Services’ provided by the commission agent for sale or purchase of such defined agricultural produce is exempted. Such commission agents, even when they qualify as agents under Schedule-I, are not liable to be registered according to sub-clause (a) of sub-section (1) of Section 23, if the supply of agricultural produce, and/or other goods or services supplied by them are not liable to tax or are wholly exempt under GST. However, in cases where the supply of agricultural produce is not exempted and liable to tax, such commission agents shall be liable for registration if the aggregate turnover, in terms of Section 2(6) of the CGST/HGST Act, 2017, in a financial year exceeds 20 lakh rupees as per Section 22(1) of the said Act. If the said agent becomes liable for registration u/s 22 of the GST Act, then he shall also become liable to pay tax on supply of raw cotton by an agriculturist on reverse charge basis being a registered person.
8. Whether diagnostic services provided to hospitals are exempt?
Held: Yes
In the case of M/s Matrix Imaging Solutions (I) Pvt. Ltd.-AAR Karnataka, the applicant is engaged in the business of providing healthcare services and cater to the government hospitals only on PPP model for a limited contract period. The applicant had been allotted the contract of providing diagnostic services in the Government hospitals through a tender selection process. The applicant sought an advance ruling on the taxability of the above said services.
The applicant added that all the expenditure related to the services are borne by the applicant itself and the applicant receives the bills for the same by the vendors. It pays the expenses with GST. Also it does not take any services which comes under the ambit of Reverse Charge Mechanism(RCM).
The Authority stated that the patients are liable to pay charges to the hospital and the applicant has nothing to do with that. The applicant only scrutinizes whether the payment is done or not and once the payment is done to the hospital, it carries out the diagnostic services to the patients. The service is thus, provided to the contractee hospital and not to the patients. The consideration is also payable by the contractee hospital to the applicant and hence the contractee hospital is the recipient of services by virtue of section-2(93) of the GST Act. Further, the applicant is setting up infrastructure for laboratory and other diagnostic requirements in the hospital itself and the services are provided in the hospital premises. The services are squarely covered with the meaning of ‘health care services’ as defined in the Notification No.12/2017-CT(Rate) dated 28.06.2017. Since, the applicant is offering diagnostic services, they would be covered within the definition of ‘clinical establishment’ for the purpose of the above said notification.
Hence, the diagnostic services provided by the applicant to hospitals are exempt under GST.
