In re Pushpa Rani Pabbi (GST AAR Punjab)
Question: Whether the parking lot services provided by the Contractor appointed by the Market Committee, which is a Government Authority is exempt under Notification No.12/2017 as the parking lot activity is covered under Article 243 of the Constitution.
Answer: The parking services provided by the Contractor appointed by the Market Committee, are not exempt under Notification No. 12/2017 as the Market Committee is not a Government Authority. Marketing Committee (Mandi Board) does not qualify under the definition as provided in clause 2(zf) of the notes appended to Notification No.12/2017. The activity / services of parking provided by the applicant falls under heading 9967 and attracts GST @ 18% (CGST 9 % + SGST 9 %).
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING
II. BRIEF FACTS OF THE CASE:
Pushpa Rani Pabbi (Applicant) is a registered Proprietorship concern registered under the CGST Act, 2017 and Punjab SGST Act, 2017 with GSTIN No. 03AGNPP9409P1ZN. The applicant has been appointed as a contractor for providing parking lot services at the place of the market committee at Jalandhar. The applicant is of the view that the Market Committee is a Government Authority as per the definition of Government Authority provided in the clause (zf) of the notes appended to Notification No. 12/2017 as it is established by the State Government and the services provided by the Governmental Authority by way of any activity in relation to any function entrusted to a municipality under Article 243 W of the Constitution is NIL rated service notified under Notification No, 12/2017 – Central Tax (Rate) dated 28.06.2017 (as amended)
III. QUESTION(S) ON WHICH ADVANCE RULING IS SOUGHT:
Whether the parking lot services provided by the Contractor appointed by the Market Committee, which is a Government Authority is exempt under Notification No.12/2017 as the parking lot activity is covered under Article 243 of the Constitution.
IV. ELIGIBILITY OF THE APPLICATION FOR ADVANCE RULING:
The Section 97(2) of the Central Goods and Services Tax Act, 2017, read with S 97(2) of the Punjab Goods And Services Tax Act, 2017, provides for the issues on which advance ruling can be sought.
97 (2) The question on which the advance riding is sought under this Act, shall be in respect of-
(a) classification of any goods or services or both;
(b) applicability of a notification issued under the provisions of this Act;
(c) determination of time and value of supply of goods or services or both;
(d) admissibility of input tax credit of tax paid or deemed to have been paid;
(e) determination of the liability to pay tax on any goods or services or both;
(f) whether applicant is required to be registered;
(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.
It is observed that the queries of the applicant in para III is related to the question ‘whether the parking lot services provided by the Contractor appointed by the Market Committee is exempt under Notification No. 12/2017‘, falls under the ambit of Section 97(2)
(a) – classification of any goods or services or both and applicability of a notification issued under the provisions of this Act. Hence, the application of the applicant is eligible for a ruling by the Punjab State Advance Ruling Authority.
V. SUBMISSIONS BY THE APPLICANT:
The applicant has, inter-aiia, stated that
1. That they have been appointed as a contractor for providing parking lot services at the place of the market committee (Mandi Board) at Jalandhar.
2. That the Market Committee is a Government Authority as per the definition of Government Authority provided in the clause (zf) of the notes appended to Notification No. 12/2017 as it is established by the State Government.
3. That the services provided by the Governmental Authority by way of any activity in relation to any function entrusted to a municipality under Article 243W of the Constitution is Nil, rated service notified under Notification No. 12/2017 CGST (Rate) Dated 28.06.2017 as amended upto date. Article 243 W of the Constitution read with twelfth schedule covers the parking lot services provided by the Market Committee
4. That the activities of market committee relating to maintenance of parking lot is taxable at NIL rate. The purpose behind it seems to provide tax free environment for the local bodies in the matter of their administration and the people getting services from the local authorities are not burdened by the GST. In many cases the Governmental authorities outsource their functions to private contractors, as is the case in hand where they have been given a contract for the maintenance of parking lot.
5 That since they are providing Parking lot services as a part of the functions entrusted to the market committee under Article 243W read with Twelfth schedule of the Constitution, therefore, the activity of maintenance of parking lot services provided by the applicant as a contractor of the market committee is covered under Notification No. 12/2017 and is therefore NIL rated.
6. That they have been employed by the market committee to provide services of parking lot at the place of market committee on their behalf. Thus in a way they act as an agent of the market committee. In the context of the peculiar facts of the case it is clear that they are providing parking lot services as a representative or agent of the market committee.
7. Reliance has been placed on the decision of the Hon’ble Supreme court though in different context in Larsen And Toubro Limited and Anr. vs State of Andhra Pradesh And Ors.
8. In view of the above facts it would be irrational to say that whenever the market committee provides parking lot services directly the same is exempt and whenever it provides through an agent the same is taxable and such an interpretation would not only defeat the very purpose of exempting market committee services but would also be violative of Article 14 of the Constitution of India.
9. That the market Committee (Mandi Board) primarily deals with the activities relating to agricultural produce. The maintenance of parking lots at Market Committee’s place to facilitate the agriculture should also be considered as part of other support services related to agriculture covered under SAC code 998619, which is also taxable at NIL rate under Notification No. 12/2017.
VI. HEARING:
The case was taken up for hearing on 02.08.2019. Sh. Amit Bajaj, Advocate Sh. Sunil Dutt, CA and Sh. Parvinder Kumar Pabbi, Husband of Prop, appeared for personal hearing on behalf of the applicant. They submitted their side of the argument in the form of a written submissions relying on Notification No. 12/2017 dated 28.06.2017, copy of tender, copy of Argument (Ikramama) and case laws in their favour. They requested to examine and consider their submissions and to pass a suitable ruling. They have nothing more to add.
VII. DISCUSSIONS AND FINDINGS:
1. from the analysis of the applicant’s submissions and statements, the following issue merit careful consideration for the favour of the final decision :
“Whether the parking lot services provided by the Contractor appointed by the Market Committee, which is a Government Authority is exempt under Notification No. 12 of 2017 as the parking lot activity is covered under Article 243 of the Constitution.”
2. The Applicant is a registered Proprietorship concern registered under the CGST Act, 2017 and Punjab SGST Act, 2017. The applicant has been appointed as a contractor for providing parking lot services at the place of the Market Committee at Jalandhar. As per applicant’s contention, the Market Committee is a Government Authority as per the definition of Government Authority provided in the clause (zf) of the notes appended to Notification No. 12 of 2017 as it is established by the State Government. The services provided by the Governmental Authority by way of any activity in relation to any function entrusted to a municipality under Article 243W of the Constitution is NIL rated service notified under Notification No. 12/2017- Central Tax(Rate) Dated 28.06.2017 (as amended)
3. The first aspect to be examined is whether the Market Committee is a Government Authority or not as per the definition of Government Authority provided in the clause (zf) of the notes appended to Notification No. 12/2017. Punjab State Agricultural Marketing Board (PSAMB) was established under the Punjab Agricultural Produce Markets Act, 1961 with an objective to control and supervise the marketing network of sale, purchase, storage and processing of processed or non processed agricultural produce so notified from agricultural, horticulture, animal husbandry and forest produce. The Punjab Agriculture produce is being regulated under the Punjab Agriculture Produce Markets Act, 1961. The preamble of the act is “An act to consolidate and amend the law relating to the better regulation of the purchase, sale, storage and processing of Agricultural produce and the establishment of the markets for Agricultural produce in the State of Punjab”, The primary object of Punjab Mandi Board and Market committee is to establish modern markets for efficient marketing of agricultural produce by providing modern facilities in the mandis and to enforce the provisions of the Act, Rules Bye-laws framed there under. Punjab State Agricultural Marketing Board is a body corporate as well as a local authority by the name of the State Agricultural Marketing Board, having perpetual succession and a common seal, with power, subject to the provisions of this Act, to acquire and hold property and shall by the said name sue and be sued. The Board may from time to time direct these market committees to control and regulate the admission to the markets. Market Committees are service rendering agencies and their main source of income is market fee.
4. Before arriving at conclusion as to whether the Market Committee is a Government Authority or not, it is important to look at various legal position,
i) As per Section 2(69) of CGST Act “local authority” means-
(a) a “Panchayat ” as defined in clause (d) of article 243 of the Constitution;
(b) a “Municipality ” as defined in clause (e) of article 243P of the Constitution;
(c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund;
(d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006;
(e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution;
(f) a Development Board constituted under article 371 and article 371J of the Constitution; or
(g) a Regional Council constituted under article 371A of the Constitution;
ii) The term ‘Government Authority’ has also been defined in the Notification No. 12/2017-Central Tax (Rate) and the same is reproduced below:
“2(zf “Governmental Authority ” means an authority or a board or any other body, –
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government, with 90 per cent, or more participation by way of equity or control, to carry out any function entrusted to a Municipality under article 243 W of the Constitution or to a Panchayat under article 243 G of the Constitution. “
iii) The FAQ’s on ‘Government services’ issued by the CBEC (now CBIC) has clarified as under:
“2 Are Government or local authority or governmental authority liable to pay tax?
Ans: Yes. The Government or a local authority or a governmental authority is liable to pay tax on
Supply of services other than the services notified as exempt or notified as neither a supply of goods nor a supply of services under clause (b) of sub-section (2) of section 7 of the CGST Act, 2017. In respect of services other than – (i) renting of immovable property; (ii) services by the Department of posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than government ; and (iii) services in relation to an aircraft or a vessel, inside or outside the precincts of an airport or a port, the service recipients are required to pay the tax under reverse charge mechanism.
3. What is the meaning of ‘Government’ ?
Ans: As per Section 2(53). Of the CGST Act 2017, “Government” means the Central Government; As per clause (23) of Section 3 of General Clauses Act, 1897 the Government includes both the Central Government and any State Government. As per clause (8) of section 3 of the said Act the ‘Central Government’, in relation to anything done or to be done after the commencement of the Constitution means the President. As per Article 53 of the Constitution, the executive power of the Union shall be vested in the President and shall be exercised by him either directly or indirectly trough officers subordinate to him in accordance with the Constitution. Further, in terms of Article 77 of the Constitution, all executive actions of the Government of India shall be expressed to be taken in the name of the President. Therefore, the Central Government means the President and the officers subordinate to him while exercising the executive powers of the Union vested in the President and in the name of the President. Similarly, as per clause (60) of section 3 of the General Clauses Act. 1897, the State Government’, as respects anything done after the commencement of the Constitution, shall be in a State the Governor, and in an Union Territory the Central Government. As per Article 154 of the Constitution, the executive power of the State shall be vested in the Governor and shall be exercised by him either directly or indirectly through officers subordinate to him in accordance with the Constitution. Further, as per article 166 of the Constitution, all executive actions of the Government of State shall be expressed to be taken in the name of Governor. Therefore, State Government means the Governor or the officers subordinate to him who exercise the executive powers of the State vested in the Governor and in the name of the Governor.
4 Who is a local authority?
Ans: Local authority is defined in clause (69) of section 2 of the CGST Act, 2017 and means the following:
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