CA Manoj Nahata 
1. Whether parking lot services provided by a contractor appointed by the Market Committee is exempt?
Held: Not
In the case of M/s Pushpa Rani Pabbi-AAR Punjab, the applicant has been appointed as a contractor for providing parking lot services at the place of the market committee (Mandi Board) at Jalandhar. The applicant has sought an advance ruling on the applicability of Notification No.12/2017 C.T (R) dated 28.06.2017 to the services provided by it on behalf of the market committee.
The applicant submitted that as per Notification No.12/2017, the services provided by the Govt. Authority by way of any activity in relation to any function entrusted to a municipality under Article 243W of the Constitution of India is nil rated. It further contended that the market committee is a “Government Authority” as per the definition provided in the clause 1(zf) of the notes appended to Notification No.12/2017 as it is established by the State Government and Article 243W of the constitution covers the parking lot services provided by the market committee. The applicant also contended that they have been appointed by the market committee to provide services of maintenance of parking lot services, so they are only an agent of the committee and it would be irrational to interpret that whenever a Govt. authority provides a service through its agent, the service becomes taxable. Hence, in view of the applicant, the services provided by it on behalf of the committee is exempt under GST.
The Authority provided that the first aspect to be examined is that whether the market committee is a Govt. Authority or not? The primary object of Punjab Mandi Board and market committees is to establish modern markets for efficient marketing of agricultural produce by providing modern facilities in the mandis. Market Committees are service rendering agencies and their main source of income is market fee. In view of the FAQ’s on “Government Services” issued by CBIC, the Mandi Boards do not fall under the definition of local authority and consequently, do not fall under the ambit of “Government Authority”. The same is in line with section-2(69) of the CGST Act,2017, Article 243Q and 243W of the Constitution of India.
The second aspect to be examined is that whether the service of maintenance of parking lot is a service entrusted to municipality under Article 243W of the Constitution. It is purely discretionary and optional on the part of Mandi Board depending on their business requirements. Also, the market committee is recovering the charges from the vehicles entering into the mandi. It has been consistently held that any statutory authority which works on business principals, the fees collected by it cannot be considered as statutory fee except where the fees collected is towards sovereign functions and deposited with Govt. In the instant case, the parking fees collected by the committee does not fall under the definition of sovereign functions.
Hence, the parking lot services provided by a contractor appointed by the Market Committee is taxable under GST.
2. What will be the nature of supply where a tender has been issued, for several works, in a consolidated manner but bid is filed with value of individual works and tender document categorically mentions individual works with specific remunerations for each work?
Held: Individual supply (not a Composite supply).
In case of M/s Kalyan Toll Infrastructure Ltd.–AAR Madhya Pradesh, the applicant has been awarded a contract under e-tender process for ‘Balance General Civil and Related Electrical and Mechanical Works Package for 2X660 MW Shree Singaji Thermal Project (SSTPP) Stage-II. It includes all civil, structural and architectural work of O & M service building, O&M building for services circle and other related services as per the tender document. The tender document, though a consolidated work order, has mentioned categorically the individual works to be carried out by the applicant with specific remunerations for each service. The applicant sought an advance ruling in respect of classification of such services.
The applicant stated that MPPGCL has been established by the M.P Govt. and 100% shareholding and control is being carried out by the M.P Govt. Therefore, the impugned supply is a composite supply which is being supplied to a Government entity i.e. M.P Power Generating Co. Ltd. and accordingly would merit for a concessional rate of 12% GST.
The Authority stated that though the tender document is a consolidated contract, it specifically mentions each service along with respective remuneration awarded for each service. So, it will not be correct to treat the individual supplies to be naturally bundled. Each such service is disjoint in character and cannot be termed as naturally bundled services provided in the ordinary course of business. It also stated that the issue of MPPGCL being a government entity have been dealt in detail in the Order passed by the same authority in the matter of M/s. Shreeji Infrastructure India Pvt. Ltd. In terms of the above order, it becomes clear that MPPGCL is a Government Entity for the purpose of the purpose of GST Act.
In view of the above discussions, it is held that the contract awarded to the applicant by MPPGCL cannot be termed as composite supply and thus entire work entitled to the applicant will not be entitled to the concessional rate of 12% under GST.
3. Whether expenses incurred by a company in order to comply with the requirements of Corporate Social Responsibility (CSR) under the Companies Act, 2013 qualify as being incurred in the course of business and eligible for ITC in terms of section-16 of the CGST Act, 2017?
Held: Yes
In case of M/s Dwarikesh Sugar Industries Limited -AAR Uttar Pradesh,the applicantis engaged into the business of manufacture and sale of sugar and allied products. In order to comply with Corporate Social Responsibility (CSR) in terms of section-135 of the Companies Act,2013, the applicant undertakes certain activities like-
a) Construction of school building, additional rooms, etc.
b) Free supply of furniture/fittings,
c) Free supply of electrical goods for use in school,
d) Other expenses such as provision of goods/ services to Registered Charitable Trust/ NGO’s
In order to undertake the above said services, the applicant procures various goods and services on which GST is charged by the supplier. The applicant has sought an advance ruling on whether expenses incurred by a company in order to comply with the provisions of CSR, qualify as being incurred in the course of business and whether eligible for ITC in terms of section-16 of the CGST Act, 2017?
The applicant submitted that the term “In the course of business” includes all activities which are incidental / ancillary to the business and which are incurred during the course of business. Any activity which needs to be incurred as a part of some process in a business is to be treated as “in the course of business”. A company incorporated under the Companies Act is compulsorily required to undertake CSR activities in order to run its business. As a result, it becomes an essential part of the business process and should be treated as “in the course of business”. Further, the definition of “business” under GST is wide. There is no requirement to establisha direct one to one linkagein order to avail ITC.
The Authority observed that the company is squarely covered under the provisions of section-135(1) and 135(5) of the Companies Act, 2013 and is mandatorily required to incur expense in CSR activities. The next aspect to be considered is whether the CSR activity is to be considered as “used or intended to be used in the course or furtherance of business”? In this respect, the Authority made a reference of judgement of Hon’ble CESTAT Mumbai, in the case of M/s Essel Propack Ltd. Vs Commissioner of CGST, Bhiwandi [2018(362) E.L.T.833(Tri-Mumbai)] wherein it has been observed that CSR is not only holistic approach but is integrating core business strategies of business. Also, CSR is not a charity but have a direct bearing on the manufacturing activity of the company. Hence, sustainability of company dependent on CSR without which company cannot operate smoothly for long period.
Another reference was made for the judgement of Hon’ble High Court of Karnataka in the case of M/s Commissioner of Central Excise, Bangalore Vs. Millipore India (P) Ltd.
In light of the above judgements, it becomes clear that the applicant is mandatorily required to undertake CSR activities in order to run its business and accordingly, it becomes an essential part of business. Therefore, the said CSR activities are to be treated as incurred in the course of business and accordingly eligible to avail ITC under section-16 of the CGST Act.
4. Whether recipient of security services registered as TDS deductor under GST is liable to pay tax under reverse charge?
Held: No if they are registered as TDS deductor only u/s 51
In case of Hemchand Yadav Vishwavidyalaya-AAR Chhattisgarh,the applicant, a State University, had invited a Notice Inviting Tender with regard to provision of security services to their University in which eight firms had participated and submitted their financial bids.On opening the financial bids by the empowered committee, it was noticed that seven firms have quoted their financial bid rates taking into consideration the applicable GST @ 18%.But one firm M/s. Ex-Man Security Service, Bilaspur (C.G.) submitted its financial bid rate without including any GST citing the rules of Central Government dated 1-1-2019 in which the service recipient is liable to pay the applicable GST. The applicant wants advance ruling regarding the applicability of GST under Notification No. 29/2018-Cenfral Tax (Rate), dated 31-12-2018 on service provider providing security services to the university registered as a Tax Deductor.
The applicant interprets that the above notification has a proviso which says that the services provided to the department of government, local authorities, government agencies which are registered u/s 51 for the purpose of deducting tax and not for making taxable supplies are exempt from the payment of GST. The applicant’s contention is that the security services provided to University is not exempt from GST and accordingly the security service provider firms should include GST in their bills.
The Authority stated that the applicant is a State University. The applicant is registered with GST holding GSTIN- 22AAAJH0647Q1DD as a Tax Deductor u/s 51 of the CGGST Act, 2017. At the same time, it had also obtained another GSTIN-22AAAJH0647Q1Z4 as a regular dealer for the purpose of sale of scrap papers, providing consultancy services, renting of part of university building for bank, post office, canteen, etc. The Authority further referred the Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017 wherein it becomes clear that the services provided to an educational institution with regard to security services would be tax exempt in case educational institution is providing schooling till higher secondary. However, in case the same Security services are provided to educational institution providing higher education then it would be taxable under GST.
Another aspect to be evaluated is regarding tax liability on provision of security services under forward charge or reverse charge in the light of Notification No. 29/2018-Central Tax (Rate), dated 31-12-2018.The proviso to serial no.14 clearly states that anything contained in entry 14 shall not apply to department or establishment of central or state, local authority or Govt, agencies which has taken registration under the Central Goods and Services Tax Act, 2017 (12 of 2017) only for the purpose of deducting tax under section 51 of the said Act and not for making a taxable supply of goods or services.
Further, the applicant being only registered as a Tax deductor under section 51 of the CGST and CGGST Act holding GSTIN- 22AAAJH0647Q1DD till 24-6-2019 and having no other GSTIN as supplier of goods or services, would not be liable for GST under reverse charge, in view of the exclusions as stipulated under proviso to Notification No. 29/2013-Central Tax (Rate), dated 31-12-2018. The liability to GST in such case would be with the service provider viz. the security agency under Forward charge. However, with effect from 25-6-2019. the applicant having been registered as a regular dealer and normal taxpayer, holding another GSTIN-22AAAJH0647Q1Z4, would be liable to GST under Reverse charge being the recipient of supply of Goods or Services or both under sub-section (3) or sub-section (4) of Section 9, or under sub-section (3) or sub-section (4) of Section 5 of the Integrated Goods and Services Tax Act. It is also noteworthy to mention here that the applicant is not engaged in providing services by way of pre-school education and education up to higher secondary school or equivalent.
5. Whether the Deposit Work undertaken by an electricity distribution
State Transmission Utility is an integral part of supply of services of transmission or distribution of electricity?If taxable, then whether ITC is available to the applicant in undertaking “Deposit Works” i.e. creating infrastructure for electricity transmission?
Held:Not an integral part of services supplied and not eligible to claim ITC.
In the case of M/ SUttar Pradesh Power Transmission Corporation Ltd.-AAR Uttar Pradesh,the applicant has been notified as State Transmission Utility of Uttar Pradesh entrusted with the business of transmission of electrical energy to various licensees within the State of Uttar Pradesh. The applicant has sought an advance ruling on whether the deposit work undertaken by applicant is an integral part of supply of services of transmission or distribution of electricity and whether it is eligible to claim ITC under GST.
The applicant submitted that if any infrastructure is required to be enhanced then, the distribution licensee is entitled to recover the cost from consumer for the same. The applicant, on request of the distribution company, would lay down the required infrastructure and would recover the cost from the consumer directly. This activity of the applicant has been referred as Deposit Work Further, entry No. 25 of Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017 exempts the services of transmission or distribution of electricity by an electricity transmission or distribution utility. The deposit work undertaken by the applicant falls within the ambit of “Transmission or distribution of electricity”. Also, providing electric line and electric plant are elements of service which are naturally bundled in the ordinary course of business, with the principal service of transmission of electricity which gives the bundle its essential character. Consequently, the supplies are composite in nature and transmission of electricity is the principal supply. Accordingly, the exemption given to transmission or distribution of electricity will also be extended to Deposit Work undertaken by the Applicant.
The Authority stated that as regard to the term composite supply, it is observed that, for a supply to be consider as a composite supply, its constituent supplies should be so integrated with each other that one is not supplied in the ordinary course of business without or independent of the other. In other words, they are naturally bundled. The concept of the “Naturally Bundled”, used in Section 2(30) of the CGST Act, 2017, lays emphasis on the fact that the different element in a composite supply are integral to the overall supply and if one of the elements is removed the nature of supply will be affected. However, here it is seen that the deposit work undertaken by the appellant are not directly related with the transmission of electricity and transmission of electricity may take place with or without depositary work. Further the appellant, in its submission, have also submitted that the amount for the depositary work is collected only from those customers who have availed the said service and the said amount is recovered as non-tariff charge. This itself shows that the transmission of electricity is independent of depository work under taken by the appellant.
From the above discussion and clarification issued under the Circular No. 34/8/2018-GST, dated 1-3-2018, issued vide F. No. 354/17/2018, it becomes clear that deposit work undertaken by the applicant are not an integral part of the supply of services of transmission or distribution of electricity and the applicant is not eligible to avail the exemption from levy of GST under Entry No. 25 of Notification 12/2017-Central Tax (Rate), dated 28-6-2017 bearing description “Transmission or distribution of electricity by an electricity transmission or distribution utility” with respect to the non-tariff charges recovered from their customers. Also, the applicant is not eligible to claim ITC as the immovable property created by the applicant does not falls under the category of “plants and machinery” under section-17(6) of the CGST Act, 2017.Hence, the applicant is not eligible to claim Input Tax Credit.
6. Whether services of crushing the food grains & delivering crushed food grains to State govt. after packing is exempt from GST?
Held: Yes.
In the case of M/s Sakshi Jhajharia-AAR West Bengal, the applicant intended to provide the service of crushing food grains to the State Government. The Government will send to the Applicant the whole, unpolished food grain for processing. The Applicant will return the grain after crushing. The processed food grain will be used for distribution through the Public Distribution System (hereinafter PDS). The applicant has sought an advance ruling on the taxability of the above said services.
The applicant intends to deliver the crushed food grains packed in the manner the recipient requires. The packing material is supplied by the applicant. The applicant is, therefore, making supply of a bundle consisting of the service of crushing the grains and supply of materials required to pack the crushed grains, where the former is the predominant
supply. They are supplied in conjunction with each other in the ordinary course of businessas food grain cannot be transported without proper packing. It is, therefore, a composite supply of goods and services where service of crushing food grains is the principal supplyand providing packing materials is ancillary to it. Also, the applicant intends to make the composite supply as above to the State Government.The recipient is, therefore, the State Government. Further, the applicant intends to crush the food grains belonging to the recipient and deliver the crushed grains to the recipient after packing. If the terms of the agreement with the recipientis such that it binds both the supplier and the recipient in a way that neither can divert the food grains to any use other than distribution through PDS, the Applicant’s supply can berelated to distribution through PDS, which is covered under Entry No. 28 of the EleventhSchedule of the Constitution. lt will be an activity in relation to a function entrusted to a Panchayat under article 243G of the Constitution, and its supply to the State Government should be exempt under Sl No. 3A of the Exemption Notification, provided the proportion ofthe packing materials in the composite supply in value terms does not exceed 25%.
Hence, in view of the above, it is concluded that if the Applicant’s agreement with the State Government binds both the supplier and the recipient in such a way that neither can divert the food grains to any use other than distribution through PDS, the Applicant’s composite supply of crushing the food grains belonging to the State Government and delivery of the crushed grains will be exempt under Sl No. 3A of Notification No 1212017 CT (Rate) dated 2810612017 (corresponding StateNotification No. 1136 – FT dated 2810612017), as amended, provided the proportion of the packing materials in the composite supply in value terms does not exceed 25%.
7. Whether GST is leviable on sale of Transferable Development Rights (TDR)/ Floor Space Index (FSI) received as consideration for surrendering the joint rights in land in terms of Development Control Regulations?
Held: Yes, taxable @ 18%
In case of M/s.Vilas Chandanmal Gandhi–AAR Maharashtra, the applicant was an owner of land situated within the limits of Punjab Municipal Corporation (PMC) and wanted to develop the land jointly in collaboration with M/s Amar Builders and Developers (Developer) and share the profits through distribution of sale proceeds after development of the land by way of construction of residential/ commercial project. Accordingly, the applicant transferred the development rights in land to the developer for above stated purpose. Thereafter, the applicant and the developer realized that vacating/ removing reservation may not be possible and they decided to surrender their rights in the said land to PMC. PMC gave them TDR’s/ additional FSI, as consideration for surrendering their rights in land to PMC. Later on, both the parties decided to sell a part of TDR’s/ additional FSI to Vamona Developers Pvt. Ltd. and share the sale proceeds in an agreed ratio. The applicant had charged GST on the sale of TDR’s. However, VDPL informed the applicant that GST is not leviable on the sale of TDR’s/ additional FSI. Therefore, the applicant has sought an advance ruling on the taxability of the above transaction.
The applicant made a reference to the section-2(52) of the CGST Act,2017 and section-3(36) of the General Clauses Act,1897 and concluded that moveable properties are covered under the definition of “goods”. The applicant further submitted that TDR/ additional FSI are land, being benefits arising out of land by referring section-3(4) of the Bombay Land Revenue Code, 1879 and section-2(z) of the Real Estate (Regulation and Development) Act,2016. Accordingly, the above transaction is neither supply of goods nor supply of services under GST. But the applicant also made an alternate submission stating that the above transaction may be taxable. Under GST, services cover everything other than goods, money and securities. Hence, the above said transaction will be considered as supply of service. The same is in line with Notification No. 4/2018 C.T (R) and Notification No.5/2019 C.T (R) and Notification No.6/2019 C.T (R).
The Authority stated that GST is payable at the rate of 18% on transfer of development rights or FSI under Sl No.16, item (iii) of the Notification No.11/2017 C.T (R) dated 28.06.2017. The same is in line with Notification No.4/2018 C.T (R), 13/2017 C.T (R) (as amended by Notification No.5/2019 C.T (R) and FAQ’s (Part-II) on Real Estate issued vide F.No.354/32/2019-TRU dated 14.05.2019 by the Govt. of India, Ministry of Finance, Department of Revenue (Tax Research Unit), New Delhi.
Hence, from a conjoint reading of the above notifications and FAQ, it becomes clear that GST is leviable on sale of Transferable Development Rights (TDR)/ Floor Space Index (FSI) received as consideration for surrendering the joint rights in land in terms of Development Control Regulations @ 18%.
8. Whether a Co-Operative Housing Society paying GST on maintenance charges collected from its members shall be entitled to claim ITC of GST paid on replacement of existing lift/ elevator at its own premises to the vendor registered under GST for the act of manufacture, supply, installation and commissioning of lift/elevator?
Held: No.
In the case of M/s. Lal Palmas Co-operative Housing Society Limited-AAR Maharashtra, the applicanthas been providing various services to its members, for which the members are charged maintenance charges under various heads like service charges, electricity charges, lift charges, insurance, etc. and charging GST on such charges. The applicant proposed to replace the existing lift along with its supporting structures. The applicant has sought an advance ruling on whether they are eligible to claim ITC of GST paid on replacement of existing lift to the vendor for manufacture, supply, installation and commissioning of lift?
The applicant referred section-16(1) of the CGST Act,2017 pertaining to eligibility and conditions for taking ITC. It also made a reference to the relevant portion of the definition of a “works contract” as mention in sec-2(119) of the CGST Act, 2017. The applicant also stated that Schedule-II of the CGST Act, 2017 describes works contract as defined u/s 2(119) as a composite supply which shall be treated as supply of service. Further, it provided that as per the definition of “lift” and “appliance” as per Advanced Law Lexicon (4th Edition), manufacture supply, installation and commissioning of lifts is in the nature of works contract which is covered under the category of supply of service.
The Authority stated that in order to replace the existing lift/ elevator, the society may have gone in for erection and installation of lift in their building, probably on the basis of a lumpsum contract price. The contracts entered with the contractor will be considered as indivisible works contract. The erection of lift can be done only inside the building structure as an integral part of the building in which the lift is to be installed. Once the lift is installed and commissioned in the building, it becomes an integral part of the building and makes the building fit for occupation. Hence, the same will be considered as an immovable property. The Hon’ble Apex Court in the case of Triveni Engg. Industries Ltd. Vs C.C.E 2000(40) RLT 1 (SC)-2000(120) ELT 273, clearly laid down that after assembling, on completion of process of erection, the item becomes a part of the building or an immovable property. In the case of Quality Steel Tubes (P) Ltd. Vs C.C.E, U.P, it was held that the erection and maintenance of the lift forms part of the immovable property. In view of the above, there is no doubt that the lift is an immovable property. Also, from a conjoint reading of section-16(1) read with section-17(5) of the CGST Act, 2017, it is concluded that ITC shall not be available for GST paid on replacement of existing lift/ elevators.
