Uttarakhand Peyjal Sansadhan Vikas Evam Nirman Nigam is a government Authority, However Work Contract service provided to government Authority, does qualify for RCM-Uttarakhand AAR
In the recent case of THDC India Limited, AUTHORITY FOR ADVANCE RULINGS FOR THE STATE OF UTTARAKHAND held that, Service provided by an Government Authority does not required payment of tax under RCM as per SI. No. 5 of the Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017 issued under Section 9(3) of the CGST Act, 2017. Authority further concluded that, Uttarakhand Peyjal Sansadhan Vikas Evam Nirman Nigam is a goverment Authority, However Work Contract service provided to gov. Authority, does qualify for RCM.
A) Fact of the case:- The Applicant i.e. THDCIL (service receiver) is a Public Sector Enterprise and registered as a Public Limited Company under the Companies Act, 1956 and has been conferred 1 Mini Ratana-Category-I Status’ and up-graded to Schedule ‘A’ PSU by the Government of India. On 11.09.2023 the THDCIL inked a Memorandum of Understanding (MOU) with Uttarakhand Peyjal Sansadhan Vikas Evam Nirman Nigam (service provider in the instant case), having GSTIN 05AAALU0118MHZL (UKPSVEN’s PAN is AAALU0118M wherein the 4th Character is “L” denoting it as a Local Authority. As per the MOU stated above at Point 1) the Scope of the Work (Point No. 1 of the MOU) is that the UKPSVEN shall be responsible for design, engineering and construction of 500 KL RCC Over Head Tank at THDCIL Campus, Rishikesh on “Deposit / Cost plus basis” and that the scope excludes GST and Labour Cess. As per the MOU stated at Point 1) above the GST (Point No. 15 of the MOU) the THDCIL shall reimburse to the UKPSVEN the applicable GST as per provision of the relevant law. The UKPSVEN took the stand that the status of their Department is of Local Authority but for the instant Work, they did not fall under the Local Authority and henceforth they raised the E Invoice having Document No. UKPJN/23-24/001, Dt. 07/ 12/2023, wherein they charged GST under Forward charge.
B) Question Raised before AAR:-
1. Whether the Applicant i.e. the THDCIL needs to pay GST under Forward charge or under RCM?
2. Whether UKPSVEN can have Dual Status i.e. for some purposes it may be deemed to be Local Authority while for others it may not?
C) Observation by AAR:- The “UKPSVEN” is a body corporate formed by the State legislature under UPWSS Act enacted by the UP State Legislature. Further, as per section 3 of the Uttaranchal (The Uttar Pradesh Water Supply and Sewerages Act, 1975) Adaptation and Modification Order, 2002 read with UPWSS Act, “UK Peyjal Nigam” is a body corporate established by the Government of Uttarakhand, as such, the requirement of governmental authority has been fulfilled in the present case.
The “UKPSVEN” is constituted for the development and regulation of water supply and sewerage services in the State of Uttarakhand. Under the section 14 of Uttaranchal (The Uttar Pradesh Water Supply and Sewerages Act, 1975) Adaptation and Modification Order, 2002 read with UPWSS Act, the “UKPSVEN” is inter alia entrusted with the function to operate, run, and maintain any waterworks and sewerage system. As per article 243W read with Twelfth Schedule of the Constitution of India, water supply for domestic, industrial and commercial purposes and public health, sanitation conservancy and solid waste management is a function of municipality. Further, as per the Uttaranchal (The Uttar Pradesh Water Supply and Sewerages Act, 1975) Adaptation and Modification Order, 2002 read with UPWSS Act, the State Government of Uttarakhand, have full control over the “UKPSVEN”, hence the condition as mandated in the definition of Governmental Authority gets fulfilled in the instant case.
From the facts and circumstances of the instant case, as discussed above, we hold that the service provider in the instant case i.e. UKPSVEN (M/s Uttarakhand Peyjal Sansadhan Vikas Evam Nirman Nigam) is not a ‘local authority‘, within the meaning and ambit of the provisions of the CGST/SGST Act, 2017, but is a “governmental authority”
D) Conclusion:- SI. No. 5 of the Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017 issued under Section 9(3) of the CGST Act, 2017, it has been mandated that if the services have been supplied by the Central Government, State Government, Union territory or local authority to a business entity, then central tax leviable under section 9 of the said Central Goods and Services Tax Act, shall be paid on reverse charge basis by the recipient of the such services. In the instant case, as has been held above that the applicant does not qualify to be a “LOCAL AUTHORITY”.
By virtue of provisions of SI. No. 4 & 5 of the Notification No. 12/2017-Central Tax (Rate), dated 28.6.2017, as amended, services by governmental authority under service code of Chapter 99 will be taxed as ‘NIL’ rate under the category of “Services by governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243W of the Constitution and Services by a Governmental Authority] by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution. “ And since the construction of an overhead water tank at Rishikesh in the THDC colony is a construction service and pertains to supply of water which is an activity in relation to a function entrusted to a Municipality & Panchayat under article 243W & 243G respectively of the Constitution of India the said service is exempted from payment of tax.
RULING
Q.1 Whether the Applicant i.e. the THDCIL needs to pay GST under Forward charge or under RCM?
Answer– Answer is in negative. There is no applicability of the RCM as per the provisions of the Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017, as the supplier of services is not a “Local Authority”. Also the services provided under the referred MOU are exempt in view of the provisions of the Notification No. 12/2017-Central Tax (Rate), dated 28.6.2017, as amended, as the supplier of services falls under the category of a “Governmental Authority”. In the instant case, the applicant being a receiver of services, there is no applicability of GST under Forward Charge.
Q.2 Whether UKPSVEN can have Dual Status i.e. for some purposes it may be deemed to be Local Authority while for others it may not?
Answer– Answer is in negative. M/s Uttarakhand Peyjal Sansadhan Vikas Evam Nirman Nigam, does not qualify to be a “Local Authority”.
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