In re Tiruppur City Municipal Corporation (GST AAAR Tamilnadu)
i. In respect of Q.No. 1, Sl. No. 5-B (Rent for locker provided in bus stand by the appellant) it is held to be an activity undertaken by the Municipality as a function entrusted under 243 W of the Constitution and the service of rent or fee collection for such a facility is neither a Supply of Goods nor a supply of Service as per Notification No. 14/2017-CT (Rate)
ii. In respect of Q.No. 2, the transaction between the corporation and the contractor as listed in Sl.No. 1. to 9, except at SI.No. 5A-Charges for TV advt. in Bus Stand &Sl.No.6 Bunk Stalls’ of the said question, in the factual matrix presented, it is held to be an activity/transaction in relation to the activity/transaction undertaken by the appellant engaged as Public Authority and the same are covered under Notification No. 14/2017-CT (Rate) as amended
iii. In respect of Q.No. 2, Sl.No. 5A-Charges for TV advt. in Bus Stand & Sl. N. 6 -Bunk Stall’ of the said question, the same is covered under Sl.No. 7 of Notification No. 12/2017-CT (Rate) as well as charging of tax on RCM basis under Sl.No. 5 of Notfn No. 13/2017-CT (Rate) subject to fulfillment of the conditions therein is available to appellant.
iv. In respect of supply of services of allowing road cutting, and the subsequent track renting, the situation being factual in as much gas the road cutting is followed by laying of cables by telephone companies for which track rent is collected, the supply would be a Composite Supply extended to this particular activity not extended to all types of road cutting activities.
FULL TEXT OF THE ORDER OF AUTHORITY OF APPELLATE ADVANCE RULING, TAMILNADU
At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.
1. The subject appeal has been filed under Section 98(5) of the Tamilnadu Goods & Services Tax Act, 2017/Central Goods & Services Tax Act 2017 by TVl Tirupur City Municipal Corporation (hereinafter referred to as ‘Appellant’). The Appellant is registered under GST vide GSTIN 33AAA11171624RIZ0. The appeal is filed against the Order No. 15 /ARA /2021 dated 28.01.2021 passed by the Tamil Nadu State Authority for Advance ruling on the application for advance ruling filed by Ow appellant.
2. The applicant is a “Municipality” as defined in clause (e) of article 243P of the Constitution. They are rendering taxable services (viz) renting of immovable property service, mandap keeper service. They are doing the functions entrusted to a municipality under Twelfth Schedule to Article 243W of the Constitution. They are rendering the following functions directly as well as through con tractors(through tender process)and collecting Fee from parks, Market fee daily, Market fee -weekly, Fee for entry vehicle in the market, Fees for pay and use toilets, slaughter house fees, Fees for bays in bus stand (bus stand entrance fee collection ), lius stand (others), charges for TV advt. in bus stand. locker rent proi Hen bus-stand, cycle stand, scooter, auto, four wheeler stand in bus stand and oilier places, Hunk stalls, annual track rent — cable operator fee (Optical fibre laying fee).
3. The Appellant had sought Advance Ruling on the following questions:
The following services are rendered by the appellant directly as well as through tender contractors and the appellant arc collecting service charges towards the service rendered by the appellant as detailed below from SI No 1 to 11. Certain specific exemptions are available w. r. t the services rendered by the appellant directly or through tender contracts.
Q.1. Advance ruling was required in respect of SI No 1 to 5.7 to 9 as to whether the services rendered by them arc exempted or not under the Notifn/ No mentioned against each SI no.
Q2.(i) In respect of services rendered by the appellant through tender contractors as mentioned in respect of SI No.1 to 9 are exempted or not vide the Notfn No. mentioned against each SI No.
Q2.(ii) In respect of SI No. 10 to 12 instead of reverse charge the appellant collected tax under direct charge from the service availers who are registered with GSTN w.e.f. 25 01 2018 and whether it can be regularised or not.
Q.3. In respect of SI No 14 the appellant are collecting charges for laying of cables alongside roads and collecting road cutting charges as well as annual rent. The appellate required advance ruling whether composite supply could be applied or not for classifying said service as renting of immovable property service and reverse charge could be applied or not for collecting GST as per entry SI No 5A of the table to Notfn No. 13/2017-CT (Rate) as amended from the telephone operators who are GSTN holders.
Q.1 (i) In respect SI No. 13 full exemption is applicable or not as noted against that SI No.
Q.1 (ii) In respect of SI No I5 the renting of immovable property service rendered by the applanate as a local authority to
(i) pure state Govt. offices
(ii) Central Govt offices, Co-operative society,
(iii) Nationalised Banks are exempted or not as per SI no 8 of the table to Notin. No 12/2017 dated28 -06 2017.
4. The AAR pronounced the following rulings:
Advance ruling is required in respect of SI No 1 to 5, 7 to 9, as to whether the services rendered by them directly are covered under Twelfth Schedule to Article 243W of the Constitution and /or exempted under the Notifti. No mentioned against each SI No as detailed below.
Q2. In respect of services rendered by us from SI No 1 to 9 through tender contractors whether they are covered under Twelfth Schedule to Article ;1./1 of the Constitution and/or exempted vide the Not fn. no. mentioned HOHL:;’ Criell SI No.as follows.
The applicant supplies the ‘Right to collect the fees/right to certain amenities’ to the contractors and the supply undertaken by the contractors are as per the tender conditions which is an independent supply. The anplicabHity the Notification to the supplies of the contractors is not answered as per S.95(a) read with S.103(1) of the GST Act.
Q2(ii) In respect of SI No 10 to 12 w.e.f. 25 01-2018, instead of reverse charge they collected tax under direct charge from the service availers who are registered with GSTN and whether it can be regularised.(to be treated as technical lapse and condoned since the service rendered by them had suffered tax and Govt. revenue is not affected)
The question seeks regularization of the payment made h them consiit the same as a technical lapse, which is not in the purview of this authority as per Section 97 (2) and therefore, the question is not admitted under Section 98(2) of the Act.
Q.3. In respect of SI No 11 we arc collecting charges for laying of cables alongside [dads and collecting road cutting charges as well as annual rent. We require pdvanee ruling whether composite supply can be applied for classifying the said service as renting of immovable property service and reverse charge can be applied for collecting GST as per entry SI No 5A of the table to Notfn No. 13/2017-CT (Rate) as amended from the telephone operators who are GSTN holders
Supply of allowing the road cut for laying the OltV and allowing the space alongside the road for the (WC lines are not ‘composite supply’ as defined tinder S. 2(30) of the GST Act, 2017 in as much as these two supplies are not made in conjunction with each other in the ordinary course of business. ilence Composite supply cannot be applied for classifying the said service as ‘Renting of Immovable property service’
Q.4 In respect of SI. No. 13 whether full exemption is applicable or not
The exemption provided in the entry no. 12 of Notification no 12/2017 C.T. (Rate) dated 28.06.2017 will be applicable to the applicant, in case of the applicant providing the ‘residential dwellings’ owned by them for use as residence
Q.4 (ii). In respect of SI No 15 the renting of immovable property service rendered by us as a local authority to
(i) Pure state Govt. offices (viz) Asst. Director Of L F Accounts, Project Officer, ICDS, ICDS Centre. Deputy Supt. Of Police and pure Central Govt offices (viz) post offices are fully exempted or not as per entry SI no 8 of the table to Notfn. No 12/2017 da1ed28 06 2017.
(ii) Co operative society(viz) Chindharnani Super Market, Jeeva Co Op Society, TNSTC Staff Society, Jeeva Co-Op Society and transport corporation TNSTC are exempted Or not as per entry SI no 8 of the table to Notfn. No 12/2017 dated28 06 2017.
(iii) Nationalised Banks arc exempted or not as per Si no 8 of the table to Notfn. No 12/2017 dated 28 06 2017.
Service of renting of immovable property by the applicant to another Central/State government /Union territory or Local authority alone is exempted from tax as per SI. No. 8 of Notification 12/2017 dated 28.06.2017 and the services of renting of immovable property to other ilia Central/State Government, Union Territory or Local authority, are not exempted under St.No. 8 of the table to Notification No.12/2017 C.T.(Rate) dated 28.06.2017.
5 Agggrieved by the above decision, the Appellant has filed the present appeal. The grounds of appeal are paraphrased as follows:
I (i) SI No 7- Slaughter house fees- In the application to the AAR it was pleaded that Services by way of slaughtering of animals is exempted vide entry SI No 56 of the Notfn. No. 12/2017 dated 29 06-2017 as amended which reads as follows.
Even though AAR in the order has given a ruling the it services by way of slaughtering of animals is not a service as per Notfn. No. 14/2017 dt. 25.06.2017 is requested that exemption under SI No. 56 of the Notfn No. 12/2017 dated 2017 may also be considered and extended. As per SI No 56 of the table to Notfn No. 12/2017 dated 2017 exemption is granted to the service rendered by way,” Services by way of slaughtering of animals”. It is applicable to the service and not to the person.(ie) whether it is done by X or Y or by the appellant it is exempted unconditionally. It may be considered in appeal by appellate authority and ordered that the above activity is not only covered under Notfn. No. 14/2017 dt. 28 06-2017 but also under SI No 56 of the Notfn No. 12/2017 dated 29 06 2017 as amended .
(ii) SI No.8 – Fees on pay & use toilets- In the application to the AAR it pleaded that services by way of public conveniences such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets is exempted vide entry SI No 70 or the Notfn No. 12/2017 dated 29 06 2017 as amended which reads as follows.
Even though AAR in the order has given a ruling that services by way of public conveniences such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets. is not a service as per Notfn. No.11/2017 It 28-06 2017 but the request of the appellant that the said service is exempted under SI No 76 or the Not In No 12/2017 dated 29-06-2017 was not considered and extended. It may please be noted exemption is granted to the service and not to the person ie) whether it is done by X or Y or by the appellant it is exempted unconditionally. It may be considered in appeal and ordered that the above activity is not only covered under Notification No. 14/2017-CT (Rate) but also under 51 No 76 of the Notfn. No. 12/2017 dated 20.06.2017 as amended
(iii) In respect of SI No 5B – locker rent provided in bus-stand it has been decided in the above order by AAR that it is taxable. In our application it was pleaded that the said service is covered under Twelfth Schedule to Article 243W of the Constitution and hence it is exempted. It is now submitted that the said activity locker rent is a Cloak room activity .
2. The functions entrusted to a municipality under the Twelfth Schedule to Article 243W of the Constitution are as under………
The words,” such as” under (1) and ,”including” under (q) of the functions entrusted to Municipality in the twelfth schedule to Article 243 W have vide coverage and it could not be restricted to the definition as ordered of the AAR. Hence it is submitted the locker rent may be declared as an activity covered under Twelfth Schedule to Article 213W of the Constitution and covered tinder Notification No. 14/2017-CT (Rate) and it may he declared as “no/ a service”.
II GROUNDS OF APPEAL IN RESPECT OF QUESTION No .2
O2. In respect of services rendered by the appellant from SI No I to 9 through lender contractors whether they arc covered under Twelfth Schedule to Article 21:1W of the Constitution and/or exempted vide the Notfn. no. mentioned against each SI No. of the table provided but the same was denied and hence the grounds of appeal arc as follows:
While discussing the following services rendered by the appellant direct to the public it was declared by the AAR they are not a supply of service . It may please he rioted that it is not an exemption Notfn/ – but a Notfn issued under Section 7 (2) to treat whether the activity undertaken by the local authority is a service or not since it is a function entrusted to a Municipality under article 213W of the Constitution. When it is not a service it is outside the scope of supply (in) levy and collection of tax wider Section 7. It was already declared /ordered by the AAR that the activity done by the appellant under 213 W is not a service in respect of
SI No 1 Fee from parks
SI No 2 Market fee-daily
SI No 3 Market fee weekly
SI No 4- Fees for bays in bus stand
SI no 7 Slaughter house fees.
SI no 8- Fees on pay & use toilets.
SI no 9. For entry of vehicle in the hUS stand IWO Wheelel-
When the above activities were declared as ‘not a service’ under Notfn. No.11/2017 It 28-06 2017 then there is no necessity to go into the details of the service recipient, consideration paid for the activity etc. In view of the decision of the AAR that the above activities are not a service for direct activity rendered by the appellant. it is prayed that the above activities done by the appellant through tender cunt blurs may also be declared as not a service since it is a function of a Municipality under article 243W of the Constitution and covered under Notfn. No.11/2017 It 28-06 2017.
The appellant never asked a question w. r. t the service provided by t he contractor to the public. The question was w.r.t the service provided by the appellant to the tender contractors. I fence the answer of the AAR to the Question No. 2 is not correct and it is requested the appellate authority may give the correct answer to Question No. 2 after taking into the following submissions.
Appellant’s submissions.
In respect of SI No 1 to 9 rendered by the appellant to tender contractors activities are purely on public interest and are undertaken as mandatory and statutory functions. They could not to be treated as a service as per the above Nottn.
Therefore, such activities assigned to and performed by a sovereign / public authority under the provisions of any law, could not be treated as taxable service. Any amount / fee collected for such activity could not to be treated as consideration for the purpose of levy of GST since it is outside the scope of levy. Hence the order of the AAR is not correct and the contention of appellant was he accepted orders of the AAR may be overruled.
1. Maintenance of park is covered under (1) of Twelfth Schedule to Twelfth Schedule to Article 243W of the Constitution which read as follows :
(I) Permission of urban amenities and facilities such as parks, gardens, playgrounds
2 and 3.Market fee -daily weekly are covered tinder (c), (i) and (i) a of Twelfth Schedule to Article 213W of the Constitution which read as follows : ….
(c) Planning for economic and social development
(i) Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded.
(b) Provision of urban amenities and facilities such as parks, gardens, playgrounds. (5) It has been ordered by the AAR w. r. t SI No. 2 & 3. Market fee daily & Market fee weekly that direct. collection by municipal corporation are covered Twelfth Schedule to Article 213W of the Constitution and as per Notification No. 11/2017 Central Tax (Rate) New Delhi, the 28th, June, 2017 the services by way of any activity in relation to a function entrusted to a Municipality under article 243W of the Constitution is not a service. Hence both the services are not chargeable to tax. The same ruling will apply to tender contractors also. It is submitted that exclusion from service was granted to the activity and not to the person ie) whether it is done by X or Y or by the appellant it is outside the scope of services. When the activity is out the scope of service there is no need examine the details of the activity receiver (tender contractors) and the consideration towards the activity (tender money) hence the above activities may be declared as not a service but an activity in relation to a function of Municipality uncle article 243W of the Constitution and covered underNotification No. 14/2017-CT (Rate) as well as the relevant GO of TNGST Act,2017. It is a fact that the contractors of Municipal Corporation are public servants and the activities rendered by the municipal corporation to the contractors (public servants) could not be termed as service and the contractors could not be termed as business entities but they arc agents of the municipality as per para C above. Hence the collection and maintenance work entrusted by the municipality to Lie contractors could not be termed as service since it. is arrangement between principal and agent (ie) in this case Govt. and public servant: and amount paid by the contractor to Govt towards rendering of work entrusted under Section 371 and other provisions of the Tamil Nadu District Municipalities Act, 1920 and the functions entrusted to a municipality under the twelfth schedule to article 243W of the constitution could not be termed as service. As there is no service the question of payment of GST will not arise on all those lease contracts since the rate fixed by Govt. was adopted and the activities were rendered by the contractor to the public in the name of the local authority and receipt has been issued in the name of the local authority to the public.
The daily & weekly market are related agriculture activity and it is prayed that no 2 & 3 may be declared as not as services and covered under Notfn no. 14/2017 and if they are treated as services they are covered tinder SI no 2.1 c: table to Notification No. 11/2017 C.T (rate), dated 28.06. 2017
4. fees for bays in bus stand through tender contractors (bus stand cut mco fee collection)
Fees for bays in bus stand is covered under (q)&,(1) of Twelfth Schedule to Article 2.1:.3\tv of tile Constitution which read as follows:
………………………………………………
q) Public ameneties including street lighting, parking lots, bus stops and public conveniences.
(1) Provision of urban anieluifies and facilities such as parks, gardens, playgrounds.
It has been ordered by the AAR w. r. t SI No.4. Foes for bays in bus stand dour direct collection by municipal corporation are covered Twelfth Schedule ut Article 243W of the Constitution and as per Notification No. 14/2017-Centrl Tax (Rate) New Delhi, the 28th June, 2017 the services by way of any activ0 in relation to a function entrusted to a Municipality under article 243W of the Constitution is not a service .Hence the service is not chargeable to tax. The sonic ruling will apply to tender contractors also It may please be noted exemption is granted to the activity and lint to the person ie.) Weather it is done by X or Y or by the appellant it is outside the scope of service . When the activity is out the scope of service there is no need examine the details of the activity receiver (tender contractors) and the considerations towards the activity (tender money) Hence the above activity may be declared as not a services but an activity in relation to a function of Municipality under article 213W of the Constitution and covered under Notfn. No. 14/2017CT (rate) dt. 28 06 2017 as well as the relevant GO of TNGST Act, 2017. It is submitted that it is not a taxable service clue to the following reasons. As per the Tamil Nadu District Municipalities Act, 1920 as detailed in Rani C above it is a fact that He contractors of municipal corporation arc public servants and the services rendered by the municipal corporation to the contractors (public servants) could not be termed as service and the contractors could riot lie termed as business entities but they are agents of the municipality Hence the collection and maintenance work entrusted by the municipality to the contractors could not be termed as service since it is arrangement between principal and agent (ie) in this case Govt. and public servant and amount paid by the contractor to Govt towards rendering of work entrusted under Section 371 and mien provision of the Tamil Nadu District Municipalities Act, 1920 and the functions entrusted to a municipality under the twelfth schedule to article 243W of the constitution could not he termed as service. As there is no service the question of payment of GST will not arise on all those lease contracts since the rate fixed by Govt. was adopted and the activity is rendered by the contractor to the public in the name of the local authority and receipt has been issued in the name of the local authority to the public.
5. Bus-stand – others. It relates to
(A) charges tor of TV advt. in bus-stand
(B) locker rent provided in bus-stand
The AAR has not taken into consideration of the plea of appellant in the application and has not discussed the issue at all in the order and the above contention may be taken into consideration ant the appeal may be allowed.
In respect of SI No 513 locker rent provided in bus stand it has been decided in the above order by AAR that it is taxable. In our application it was pleaded that the said service is covered under Twelfth Schedule to Article 243W of the Constitution and hence exempted. It is now submitted that the said activity locker rent is a Cloak room activity
It is submitted the locker rent may be declared as an activity covered under Twelfth Schedule to Article 243W of the Constitution and covered under Notfn No. 14/2017 and it may he declared as not a service’.
It is submitted than, it is not a taxable service due to the following reasons. As per the Tamil Nadu District Municipalities Act, 1920 as detailed in part C above it is a fact that the contractors of municipal corporation arc public servants and the services rendered by the municipal corporation to the contractors (public servants) could not be termed as service and the contractors could not be termed as business entities hut they are agents of the municipality Hence the collection and maintenance work entrusted by the municipality to the contractors could not, be termed as service since it is arrangement between principal and agent (ie) in this Govt. and public servant and amount paid by the contractor to Govt . towards rendering of work entrusted under Section 374 and other provisions of the Tamil Nadu District Municipalities Act, 1920 and the functions entrusted to a municipality under the twelfth schedule to article 243W of the constitution could he termed as service. As there is no service the question of payment of UST will not arise on all those lease contracts since the rate fixed by Govt. was adopted and the activity is rendered by the contractor to the public in the name of the local authority and receipt has been issued in the name of the local authority public
6. Bunk stalls.
AAR has riot discussed the points of the appellant. in the order and hence the above issue may be considered and decided in the favour of the appellant.
7. Slaughter house fees.
Maintenance of Slaughter house arc covered under (r) of Twelfth Schedule to Article 213W of the Constitution which reads as follows :
(r) Regulation of slaughter houses curd tanneries.
It has been ordered by the AAR that direct service by the municipal corporation w.r.t. slaughtering of animals is covered under of Twelfth Schedule to Article 243W of the Constitution and hence covered under Notification No. 14/2017-Central Tax (Rate) New Delhi, the 28th June, 2017 and hence it is not a service and it is not chargeable to tax. When it is out side the scope of service there is no need to examine who is the service availcr and consideration received etc. When it is not a service the same contention of the Notfn. is applicable to tender
contractors also due to the following reasons. As per the Tamil Nadir District Municipalities Act, 1920 as detailed in para C above it is a tact that contractors of municipal corporation are public servants and the services rendered by the municipal corporation to the contractors (public servants) could not be termed as service and the contractors could not be termed as business entities but they arc agents of the municipality Hence the collection and maintenance work entrusted by the municipality to the contractors could not be termed as services since it is arrangement between principal and agent (ie) in this case Govt. and public servant and amount paid by the contractor to Govt. towards rendering of work entrusted tinder Section 374 and other provisions of the Tamil Nadu District Municipalities Act, 1920 and the functions entrusted to a municipality under He twelfth schedule to article 243W of the constitution could not be termed as service. As there is no service the question of payment of GST will not arise on all those lease contracts since the rate fixed by Govt. was adopted and the activity is rendered by the contractor to the public in the name of the local authority rind receipt has been issued in the name of the local authority to the public.
Reserving our right to claim the benefit of Notification No. 14/2017-CT (Rate) the following submissions are made. In the application to the AAR it was pleaded that Services by way of slaughtering of animals is exempted vide authority and receipt has been issued in the name of the local authority public.
6. Bunk stalls.
AAR has riot discussed the points of the appellant in the order and hence the above issue may be considered and decided in the favour of the appellant.
7. Slaughter house fees.
Maintenance of Slaughter house arc covered under (r) of Twelfth Schedule to Article 243W of the Constitution which reads as follows :
(r) Regulation of slaughter houses and tanneries.
It has been ordered by the AAR that direct service by the municipal corporation w.r. t. slaughtering of animals is covered under of Twelfth Schedule to Article 243W of the Constitution and hence covered under Notification No. 14/2017-Central Tax (Rate) New Delhi, the 28th June, 2017 and hence it is not a service and it is not chargeable to tax. When it is out side the scope of service there is no need to examine who is the service availer and consideration received etc. When it is riot a service the same contention of the Notfn. is applicable to tender contractors also due to the following reasons . As per the Tamil Nadu District Municipalities Act, 1920 as detailed in para C above it is a fact that the contractors of municipal corporation are public servants and the services rendered by the municipal corporation to the contractors (public servants) could not be termed as service and the contractors could not be termed as business entities but they arc agents of the municipality Hence the collection and maintenance work entrusted by the municipality to the contractors could not be termed as services since it is arrangement between principal and agent (ie) in this case Govt. and public servant and amount paid by the contractor to Govt . towards rendering of work entrusted under Section 374 and other provisions of the Tamil Nadu District Municipalities Act, 1920 and the functions entrusted to a municipality under He twelfth schedule to article 243W of the constitution could not he termed as service. As there is no service the question of payment of GST will not arise on all those lease contracts since the rate fixed by Govt. was adopted and the activity is rendered by the contractor to the public in the name of the local authorise and receipt has been issued in the name of the local authority to the public.
Reserving our right to claim the benefit of Notification No. 14/2017-CT (Rate) the following submissions are made. In the application to the AAR it w.is pleaded that Services by way of slaughtering of annuals is exempted vide entry SI No 56 of the Notfn No 12/2017 dated 29 06 2017 as amended which reads as follows.
