In re Choice Foundation (GST AAR Kerala)
Now, it has to be noted that the applicant, in the case at hand, has stated that they require the ruling in their individual capacity of M/s The Choice Foundation, Kochi, a Society registered under Travancore Cochin Literacy, Scientific and Charitable Societies Registration Act, 1955. The applicant has stated that they offer their expert services and undertake day-to-day administration and operation of the educational institution purely from an academic perspective which is going to be run and managed by by the new born JV. The moot point to be deliberated is whether the applicant is the ‘person’ to whom the project is extended and the one providing the service. It is very clear that the project is executed by the ‘Joint Venture’. The applicant in its Individual capacity is different from the JV, in which the applicant is a member. The ‘project’ is executed by the JV and not by the applicant.
As per Section 95(a) of the CGST Act read with Section 103 of the Act, the term ‘advance ruling’ means a decision provided by this authority to the applicant on matters or questions specified in sub-section (2) of Section 97 in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant and the ruling is applicable to only such person and the jurisdictional officer of such person. Thus it is seen that only an applicant who satisfies the condition mentioned in section 95 can apply for Advance Ruling.
From the submissions made by the applicant it can be seen that it is the Joint venture in which the applicant is a member who is going to run and manage the ‘Project’ and not the applicant. As discussed supra, a Joint Venture Company, which is formed by two or more entities, has a separate existence than that of the said entities. Therefore, supply of goods or services or both, being undertaken or proposed to be undertaken in respect of the “Project will be by the Joint Venture Company, and not by the applicant.
Question 1.. Vis-a-viz the applicant, who would be the recipient of service in the proposed joint venture?
Ruling No ruling can be given since the question on which advance ruling is sought do not fall under the purview of any of the clauses of the section 97 (2) of the CGST/KSGST Act, 2017.
Question 2. Vis-a-viz Choice Estates and Constructions Private Limited, who would be the recipient of service in the proposed joint venture?
Ruling No ruling can be given since the question on which advance ruling is sought does not fall under the purview of any of the clauses of the section 97 (2) of the CGST/KSGST Act, 2017 and also this question is not in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.
3. Whether the amount which would be paid by the students to the educational institution proposed to be jointly operated by the applicant and Choice Estates and Constructions Pvt. Ltd by way of the proposed joint venture would be liable to GST?
No ruling can be given since the question is not in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.
4. Whether the applicant’s share in revenue from the educational institution would be liable to GST?
Yes. The service supplied by the applicant to the educational institution i.e, the joint venture is liable to Goods and Services Tax as per Notification No. 11/2017-Central Tax (Rate) dated 28 /06/ 2017.
5. Whether Choice Estates and Constructions Pvt. Ltd.’s share in revenue from the educational institution would be liable to GST?
No ruling can be given since the question is not in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.
AAR cannot give ruling if question is not in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, KERALA
1. M/s. Choice Foundation (hereinafter referred to as the applicant) is a society registered under the Travancore-Cochin Literary, Scientific, and Charitable Societies Registration Act, 1955 possessing the expertise and experience in operating premier educational institutions in the State of Kerala.
2. At the outset, it is clarified that the provisions of the Central Goods and Service Tax Act, 2017 (hereinafter referred to as GST Act) and the Kerala State Goods d Services Tail Act, 2017 (hereinafter referred to as KSGST Act) are same except for certain provisions. Accordingly, a reference made hereinafter to the provisions of the CGST Act, Rules and the notifications issued there under shall include a reference to the corresponding provisions of the KSGST Act, Rules and the notifications issued there under.
3. M/s. Choice Estates and Constructions Pvt. Ltd. (hereinafter referred to as “CECPL”) is a private limited company engaged in the business of construction, development and maintenance of infrastructure. CECPL is the owner of property consisting of land and building situated in Thiruvalla, Kerala, India (hereinafter referred to as the ‘Property).
4. The applicant proposes to enter into a joint venture agreement with CECPL, with the intention to combine the individual expertise of the applicant and CECPL for the joint operation of an educational institution on the Property.
5. As per the proposed terms of the joint venture, each of the parties, i.e., the applicant and CECPL shall be individually responsible for areas within their expertise and shall be jointly responsible for the operation of the educational institution. The proposed terms of the joint venture are briefly as follows:
5.1. The applicant shall be responsible for the academic operations of the educational institution and undertake the day-to-day administration and operation of the educational institution purely from an academic perspective.
5.2. CECPL would be responsible for the entire infrastructural requirements of the educational institution.
5.3. A four-member strategic committee consisting of equal representatives of the applicant and CECPL would be responsible for taking strategic and operative decisions pertaining to the running and operation of the educational institution. All decisions relating to the educational institution including the quantum of fees to be collected from the students of the educational institution shall be
5.4. The revenue generated from operation of the educational institution shall be shared between the applicant and CECPL in a fixed ratio to be decided subsequently.
5.5. The applicant and CECPL shall open and maintain a joint bank account with y nationalized dank or other bank as m tually agreed which shall be jointly operated by the authorized signatories oft e applicant and CECPL.
5.6. All revenue accruing relating to the educational institution shall be account maintained, by the applicant and CECPL and shared in the agreed revenue share ratio.
5.7. The applicant and CECPL may draw revenue from the joint account on a monthly/quarterly basis for meeting their respective expenses incurred for carrying out their responsibilities towards the educational institution, subject to approval in writing b; the strategic committee.
5.8. Drawings from the joint account shall be written approval of the Strategic committee.
5.9. The applicant and CECPL shall work tow successfully operating the educational institution and in furtherance of mutual benefit and interest.
6. In light of the evolving provisions of GST, the applicant has certain queries regarding the implication of GST under the, CGST Act,2017 and Kerala SGST 2017 on the joint venture arrangement proposed to be entered into with CECPL for the operation of an educational institution.
7. Applicant requested an advance ruling on the following:
1. Vis-a-viz the applicant, who would be the recipient of service in the proposed joint venture?
2. Vis-a-viz Choice Estates and Constructions Private Limited, who would be the recipient of service in the proposed joint venture?
3. Whether the amount which would be paid by the students to the educational institution proposed to be jointly operated by the applicant and Choice Estates and Constructions Put. Ltd. by way of the proposed joint venture would be liable to GST?
4. Whether the applicant’s share in revenue from the educational institution would be liable to GST?
5. Whether Choice Estates and Constructions Pvt. Ltd’s share in revenue from the educational institution would be liable to GST?
8. Contentions of the Applicant:
8.1. Regarding questions no.1 and 2, the applicant and CECPL propose to combine their individual areas of expertise in the form of a joint venture to jointly operate an educational institution on the Property for the rendering of educational service. In the proposed transaction, the applicant and CECPL would be the service providers who jointly render education service to the students enrolled with the educational institution jointly operated by the applicant and CECPL.
8.2. Section 2(93) of the CGST Act which defines “recipient” of supply of goods or services or both reads as follows:
“Section 2(93) “recipient” of supply of goods or services or both, means, –
(a) Where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration:
(b) Where no consideration is payable for the supply of goods, the person to who in the goods are delivered or made available, or to whom possession or use f the goods is given or made available; and
(c) where no consideration is payable for the supply of a service, the to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shill include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied.
8.3. It may be understood from the emphasised portion of the above-extracted definition of ‘recipient’ that in the case where consideration is payable for the supply of goods or service or both, the recipient of goods or services shall be the person who is liable to pay that consideration.
8.4. In the proposed transaction, the applicant and CECPL would jointly render services by operation of an educational institution in consideration for a fee payable by the students enrolled in such educational institution. Therefore, by virtue of the definition of ‘recipient’ as per Section 2(93) of the CGST Act, the applicant is of the understanding that the recipient of service vis-a-viz the applicant and vis-a-viz CECPL in the instant case would be the student who is liable to pay such fee.
8.5. Regarding question No.3, the proposed transaction in the instant case involves the applicant and CECPL jointly operating an educational institution by which they would jointly render education se-vice to the service recipient, who in the instant scenario would be the student enrolled in the educational institution.
8.6. The service in question would be service rendered by an educational institution to the students enrolled with it, which for the purpose of determining GST liability is covered under Notification No.12/2017-Central Tax (Rate) dtd.28-06-2017. The relevant portion of the said notification is extracted below:
