In re AS&D Enterprise LLP (GST AAR Haryana)
In general terms, an LLP is a viewed as an alternate corporate business model that involves the integration of the advantages of a limited liability company with the flexibility of a partnership. It allows its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement. From the LLP Act, 2008 the main features inter alia are that the LLP shall be a body corporate and a legal entity separate from its partners. Any two or more person, associated for carrying on a lawful business with a view to profit, may by subscribing their names to an incorporation document and filling the same with the registrar, form-a Limited Liability Partnership. It will have perpetual succession. Even if the partners opt to leave, the LLP persists. It can enter into the contracts and own property in its own capacity. It is a separate legal entity having to bear the full liability for its assets which makes it possible for partners’ liability to be limited to their agreed contribution to the LLP.
The LLP Act, 2008 confers powers on the Central Government to apply provisions of the Companies Act, .1956 as appropriate, by notification with such changes or modifications as deemed necessary.
Whereas a Body Corporate is an organization such as a company or government that is considered to have its own legal rights and responsibilities. The body corporate is a separate legal entity and can enter into its own contracts and manage its own legal proceedings.
From the above, it can be inferred that an LLP is an Body Corporate for the purpose of Companies Act, 2013 and the same would apply to the term body corporate for the purpose of the notification no. 13/2017-CGST(Rate) dated 28.06.2017 and as amended on 31.12.2018 vide notification no. 29/2018. In consequence the Reverse Charge Mechanism would not be applicable in the present case. Moreover, the legislative intention behind the application of RCM is on those supplies in which the government/executive do not have control over the supplier or who are working in the unorganized sector. So, the RCM is made applicable for any person other than body corporate by the said notification.
In conclusion, it can be said that an LLP is a body corporate and so excluded from the entry no. 14 of the notification no. 13/2017-CGST(Rate) dated 28.06.2017 and notification no. 29/2018 dated 31.12.2018. The applicant is required to charge applicable tax on the security services supplied by him as per section 9(1) of the CGST/HGST Act, 2017 read with the relevant provision of IGST Act, 2017.
Whether services (Security services) provided by the applicant LLP are covered by entry 14 of Notification No. 13/2017-CT(Rate) dated 28.06.2017 and liable for tax under reverse charge mechanism or Not?
No (the services provided by the applicant, limited liability company partnership are not covered under the entry 14 of the notification no. 13/2017 dated 28.06.2017 and 29/2018 dated 31.12.2018. The reverse charge mechanism for the levy of tax under section 9(3) is not applicable in the present case).
FULL TEXT OF THE ORDER OF AUTHORITY OF ADVANCE RULING, HARYANA
APPLICANT’S ELIGIBILITY FOR SEEKING AN ADVANCE RULING:
To file an application before the Authority of Advance Ruling, the applicant must satisfy the conditions prescribed under the Central Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act, 2017) and Haryana Goods and Services Tax Act, 2017 (hereinafter referred to as HGST Act, 2017). Since the provisions of both the Acts are parimateria, any reference to provisions of CGST Act, 2017 in this order should be construed as a reference to corresponding provisions in HGST Act, 2017 as well.
Sections 97(2) of the CGST Act, 2017 prescribes that Advance Ruling may be sought inter alia on the question of (b) Applicability of a notification issue under the provisions of this Act.
Proviso with reference to the Section 98(2) of CGST Act, 2017 states that where the questions raised in the application is already pending or decided in any proceedings in the case of the applicant under any provision of this Act, the application may be rejected by the Advance Ruling Authority after providing an opportunity of being heard to the applicant and in this case. The applicant has undertaken in form ARA-01 that the issue is neither pending nor decided in
any proceedings under any of the provisions of the Act. Besides the applicable fees in the case has been paid. So, he is eligible to seek an Advance Ruling under the above provisions and the case is being heard on merits.
Statement of facts as per ARA-Ol:-
The applicant is Limited Liability Partnership Company registered under the Goods and Services Tax Act, 2017. The applicant is engaged in the business of providing security services to various business entities situated all over India.
The security services are provided in the form of deployment of security personnels to keep ward & watch and providing safety and security of assets/installations/offices/buildings/ properties/equipments etc. of the site or any other locations as may be specified by the recipient.
The applicant’s interpretation of law on the query:- As per section 2(98) of CGST Act, “reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both sub-section (3) or sub-section (4) of section 9, or under subsection (3) or sub-section (4) of section 5 of Integrated Goods and Services Tax Act. Therefore, under Reverse Charge Mechanism, the liability to pay tax is fixed on the recipient of the supply of goods or services instead of the supplier in respect of notified categories of goods or services.
Consequently, in exercise of the powers conferred by sub-section (3) of section 9 of the CGST Act, the Central Government, vide notification no. 13/2017-CGST(Rate) dated 28.06.2017, notified certain categories of supply of services on which the liability to pay tax is on the recipient of such services under reverse charge mechanism (RCM). In the understanding of the applicant, services provided by it are taxable @ 18% as per Notification No. 11/2017-CT (Rate) Chapter 99 (Heading 9985). The Government vide Notification No. 29/2018 – dated 31.12.2018 amended notification no. 13/2017-CGST(Rate) dated 28.06.2017 to insert entry No. 14.
The relevant part of the notification is as under:-
