In re Auto Cluster Development and Research Institute (GST AAR Maharashtra)
The Smart Cities Mission is a vision of the Government of India to drive economic growth and improve the quality of life of people by enabling local area development and harnessing technology, especially technology that leads to Smart outcomes, area-based development which will transform existing areas, including slums, into better planned ones, thereby improving liveability of the whole City. In some cases, new areas to be developed around cities in order to accommodate the expanding population in urban areas. To fulfill the vision of the Government of India, Smart Cities are coming up in various States and the Pimpri Chinchwad Smart City is one such project for which PCSCL has been formed with the support of the Government of Maharashtra also.
However, in the instant case, it is clearly seen that even though the pure service (renting of immovable property services) is provided to PCSCL, a Government Entity, the said service, per se, cannot be considered as an activity in relation to any function entrusted to a Municipality under Article 243W of the Constitution, or entrusted to a Panchayat under Article 243 G of the Constitution because the activity of renting of immovable property does not find mention in either Article 243 G or Article 243 W of the Constitution.
In view of the above discussions, we are of the opinion that, Renting of immovable Property Services i.e. ‘Pure Service’ provided by the applicant to PCSCL, a Government Entity are not by way of any activity in relation to functions entrusted to a Municipality under article 243W of the Constitution or entrusted to a panchayat under article 243G of the Constitution and therefore, the impugned service supplied by the applicant is not exempt under the relevant provisions of Notification No.12/2017 Central Tax (Rate) dated 28/6/2017 as amended from time to time and therefore the applicant has to discharge GST @ 18%.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING,MAHARASHTRA
The present application has been filed under Section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act” respectively ] by M/s. Auto Cluster Development and Research Institute, the applicant, seeking an advance ruling in respect of the following questions.-
1. Whether PCSCL is termed as Government or Local Authority of Government Authority or Governmental Entity as per GST Law
2. Whether PCSCL is eligible to take claim benefits of Government or Local Authority of Governmental Authority or Governmental Entity (eg. Exemption as per Notification No.12/2017 Central Tax (Rate) dated 28/6/2017)
3. Whether Renting of immovable Property Services provided to PCSCL exempt as per GST Law. If taxable then at what rate GST will be applicable.
4. Whether Utility charges recovered from PCSCL are exempt as per GST Law. If taxable then at what rate GST will be applicable
5. Whether PCSCL liable to deduct tax at source (GST TDS as per provisions of GST Law)?
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to’ the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression ‘GST Act’ would mean CGST Act and MGST Act.
2. FACTS AND CONTENTION – AS PER THE APPLICANT
2.1 The applicant, M/s. Auto Cluster Development and Research Institute (Auto Cluster) is a Company Limited by guarantee, formed under section 25 of Company Act 1956. Auto Cluster is Special Purpose Vehicle formed under cluster development scheme of Government of India. It aims to form clusters of enterprises having similar activities. A cluster, according to the programme, would be defined as a group of enterprises situated within an identifiable, contiguous and a practical area which produce similar products or render similar services. The cluster would have similar production process, energy consumption, technology used, pollution control measures, marketing strategies, communication channels and would face similar complications as well as opportunities in area on Pimpri Chinchwad Municipal Corporation (PCMC). It is non-profit making company. The Auto Cluster is headed by Commissioner, PCMC and management consists of Automotive Research Association of India, College of Engineering Pune & representatives of industry. It provides Testing, Inspection, Prototype, Renting of immovable Property and other allied services to industry.
2.2 Auto Cluster provides Renting of immovable Property Services to Pimpri Chinchwad Smart City Limited (PCSCL) and collects utility charges (eg. Electricity charges) from PCSCL as Reimbursement.
2.3 PCSCL is special purpose Vehicle former under Companies Act 2013 having sub category State Government Company. PCSCL is formed under smart city mission of Central Government. According to scheme, the shares of PCSCL are held by Government of Maharashtra and PCMC in ration of 50-50. The Management of PCSCL is controlled by Government of India, Government of Maharashtra. Currently the appointment of management governed by GR issued by Government of Maharashtra.
2.4 The basic purpose behind formation of PCSCL is to build various infrastructure facilities for public at larger infrastructural facilities includes Smart Water, Smart Sewerage, Smart Parking, Smart Environment, Smart School, School Health Monitoring, Public E toilet, Environment Education Park, Hawking Zone etc. Many of the infrastructure facilitates are in relation to list provided in Article 243W of Constitution of India. The financial assistance to build these infrastructure facilities were provided by Government of India as Grant and by the Government of Maharashtra & Pimpri Chinchwad Municipal Corporation by way of Share Capital.
B. STATEMENT CONTAINING APPLICANT’S INTERPRETATION OF LAW AND/OR FACTS
2.5 PCSCL is State Government Company jointly owned by Government of Maharashtra and PCMC. The management of PCSCL is controlled by Government of India, Government of Maharashtra. Currently the appointment of management governed by GR issued by Government of Maharashtra. Based on this fact, it can be concluded that, PCSCL is controlled by Governmental Authority.
2.6 As per the Smart City Mission as well as Memorandum of Association and Article of Association of PCSCL, it is engaged in providing infrastructural facility as per Article 243W of Constitution and Article 243G of Constitution.
2.7 Renting of immovable Property Services is pure service. Utility charges are reimbursement of cost of actual facility used as per bill issued & payable to third party. Considering all facts, Renting of immovable property and Reimbursement of utility charges will be exempted from GST as per Sr. 3, Chapter 99 of Notification No.12/2017 Central Tax (Rate) dated 28/6/2017.
03. CONTENTION – AS PER THE CONCERNED OFFICER:
OFFICER SUBMISSION 17.12.2020:-
3.1 M/s. Auto Cluster Development and Research Institute, the applicant, headed by the Commissioner of Pimpri Chinchwad Municipal Corporation (PCMC) is a special purpose vehicle formed under cluster development scheme of the Government of India and aims to form clusters of enterprises having similar activities.
Whether PCSCL is termed as Government or Local Authority or Government Authority or Government Entity as per GST Law?
3.2 Section (2) of CGST Act, 2017, defines the term “Government” and the term “Local Authority”. The terms “Government Authority” and “Government Entity” are not separately defined under the CGST Act. 2017.
3.3 It is claimed by the applicant that, PCSCL is a “Government Authority” by virtue of being jointly owned and controlled by the Government of Maharashtra and the local PCMC.
3.4 under the above statutory definitions, government and local authority can be understood as the bodies which are directly engaged in the governance or administration of the civil matters of the country. The citizens of the country elect their representatives to these bodies for being governed by them. Municipality means an institution of self-government constituted under Article 243Q..
3.5 It appears that PCSCL is a body created by the government and the local authority for specific purpose. However, it appears that the bodies such as PCSCL are not covered under the above definitions. It is apparently not a panchayat nor an institution of self-government.
Whether PCSCL is eligible to take claim benefits of Government or Local Authority of Government Authority or Government Entity (eg Exemption as per Notification No.12/2017 Central Tax (Rate) dated 28/6/2017.
3.6 It appears that Auto Cluster has applied for a ruling as to whether PCSCL is exempt from not being charged GST under the Notification No.12/2017 Central Tax (Rate) dated 28/6/2017 by virtue of being a Government Authority. In other words, whether Auto Cluster is exempt from charging GST to a Government Authority such as PCSCL. The exemption is worded in the notification as under:
“Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.”
3.7 Auto Cluster is not engaged in any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.” Providing the service of renting of immovable property and utilities such as electricity are not municipal functions. As discussed above, PCSCL is not eligible for the said exemption as a recipient of service nor Auto Cluster is exempt from charging GST to them. Auto Cluster is providing a service for which they are receiving consideration. Therefore, they must pay GST.
Whether Renting of Immovable Property Services provided to PCSCL exempt as per GST Law. If taxable at what rate GST will be applicable.
3.8 Not exempt, PCSCL has to self-assess the services to GST from time to time by referring to the notifications etc., which are in public domain.
Whether utility charges recovered from PCSCL are exempt as per GST Law. If taxable then at what rate GST will be applicable.
3.9 Not exempt, PCSCL has to self-assess the services to GST from time to time by referring to the notifications etc which are in public domain.
Whether PCSCL liable to deduct tax at source (GST TPS) as per provisions of GST Act.
3.10 This is out of the purview of the Goods and Service Tax Act, 2017.
Officer Submission 29.01.2021(Via email)
3.11 Auto Cluster provides “Renting of Immovable Property Services” to Pimpri Chinchwad Smart City Limited (PCSCL). PCSCL is engaged in providing infrastructural facilities under the Constitution of India. Auto Cluster also collects utility charges (eg electricity charges) from PCSCL.
3.12 It is contended by applicant that, both the companies, Auto Cluster Development & Research Institute and the PCSCL are creations of the state government, and jointly managed by the state government and PCMC.
3.13 It appears that PCSCL is a body created by the government and the local authority for specific purpose. However, it appears that the bodies such as PCSCL are not covered under the above definitions. It is apparently not a panchayat nor an institution of self-government. As per the Memorandum of Association of the Pimpri-Chinchwad Smart City Limited, it is a public company registered under the Companies Act, 1956 in the year 2017. The PCSCL has been created to meet certain objectives, but the company itself cannot be looked upon as a government authority in common parlance.
04. HEARING
4.1 Preliminary e-hearing in the matter was held on 04.02.2021 Shri. Swarup Chingale, and Shri. Ruturaj Chingale, CA, both of them, Authorized representatives of the applicant, were present. Jurisdictional Officer Shri. Prashant Patil, Deputy Commissioner of CGST, Pune-1 was also present.
4.2 The application was admitted and called for final e-hearing on 26.11.2021. The Authorized representative of the applicant Shri. Swarup Chingale, CA, and Shri. Ruturaj Chingale, CA and Shri. Sunil Bhosale, PCSCL were present. Jurisdictional officer was absent. Applicant to produce copy of agreement/s and details of assets/property given on rent details of various charges i.e. what are those charges (how same are sourced and how same are supplied). The jurisdictional officer may file additional written submissions.
4.3 We heard both the sides.
5. OBSERVATIONS AND FINDINGS:
5.1 We have gone through the facts of the case, documents on record and written/oral contentions made by both, the applicant as well as the jurisdictional officer at the time of preliminary as well as the final hearings.
5.2 The applicant, M/s. Auto Cluster Development and Research Institute, a Special Purpose Vehicle formed under cluster development scheme of Government of India, headed by Commissioner Pimpri Chinchwad Municipal Corporation of Maharashtra (PCMC), provides Testing, Inspection, Prototype, Renting of immovable Property and other allied services to industry. The applicant provides Renting of immovable Property Services to Pimpri Chinchwad Smart City Limited (PCSCL) and also collects utility charges (eg. Electricity charger) from PCSCL as Reimbursement. In view of the submissions made by the applicant, we now take up their questions as under:-
Q.1 Whether PCSCL is termed as Government or Local Authority of Government Authority or Governmental Entity as per GST Law?
5.3.1 Section 95 of the CGST Act, 2017 states that, “advance ruling” means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.
5.3.2 As per the submissions made, it is seen that the subject question raised is pertaining to the recipient of the impugned supply and is not ‘in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant’ and therefore cannot be answered in terms of the provisions of Section 95 of the CGST Act, 2017.
Q.2 Whether PCSCL is eligible to take claim benefits of Government or Local Authority of Governmental Authority or Governmental Entity (eg. Exemption as per Notification No.12/2017 Central Tax (Rate) dated 28/6/2017)?
5.4 We find that even Question No. 2 pertains to the recipient of the impugned supply and therefore cannot be answered in terms of the provisions of Section 95 of the CGST Act, 2017.
Q3. Whether Renting of immovable Property Services provided to PCSCL exempt as per GST Law. If taxable then at what rate GST will be applicable.
5.5.1 The applicant is a Company Limited by guarantee formed under section 25 of Company Act 1956, headed by Commissioner, Pimpri Chinchwad Municipal Corporation of Maharashtra, and has members from the Automotive Research Association of India, College of Engineering, Pune & other representatives of the industry and provides Testing, Inspection, Prototype, Renting of immovable Property and other allied services to industry.
5.5.2 The Renting of Immovable property service is provided by the applicant to PCSCL which, according to the applicant is a ‘Government Authority’ by virtue of being jointly owned and controlled by the Government of Maharashtra and the local municipal corporation of Pimpri Chinchwad i.e. PCMC in the ratio of 50:50.
5.5.3 As per applicant’s submissions, PCSCL is State Government Company jointly owned by Government of Maharashtra and PCMC whose management control is with Government of Maharashtra and the appointment of management governed by GR issued by Government of Maharashtra. The applicant has claimed that, the Renting of immovable property charges received by it will be exempted from GST as per Sr. 3, Chapter 99 of Notification No. 12/2017 Central Tax (Rate) dated 28/06/2017 being pure services supplied to PCSCL, since PCSCL is engaged in providing infrastructural facility as per Article 243W of Constitution and Article 243G of Constitution.
5.5.4 The exemption as per Sr. 3, Chapter 99 of Notification No. 12/2017 Central Tax (Rate) dated 28/06/2017, as amended is in respect of “Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.”
5.5.5 The relevant Entry Sr. No. (3) of Notification No. 12/2017-CT(R) dated 28.06.2017 as amended by Notification No. 02/2018 – CTR dated 25.01.2018, is as under:-
