In one of the Advance Rulings for exemption in taxability of renting of immovable services, there was a difference of opinion between members. However, as per section 101 of CGST Act, 2017, the Appellate Authority modified the ruling.

In this case, the applicant (NDDB) was a statutory body formed under the NDDB Act. Besides providing technical assistance and administrative & managerial services to promote, plan and organize programmes for the purpose of development of dairy and other agricultural industries and biological industries on a nationwide basis, it has allowed the ‘Anandalaya Educational Society’, an education institution created by NDDB by way of trust, to occupy and use the building and premise owned by NDDB within its campus through a lease deed at very nominal amount for enabling the institute to grow and prosper which eventually would encourage the activity of education. The applicant believed that since the Anandalaya trust is indirectly controlled by NDDB, it would fall within the definition of ‘related party’ as provided in the GST legislation and the applicant apprehends that there may arise GST liability on the fair value of rent of the immovable property given on lease to Anandalaya Educational Society.

The applicant’s view was that as it qualifies as a ‘governmental authority’ under the GST legislature, the service of renting or leasing of its property to encourage the education institute within its campus provided by the applicant to the Anandalaya Educational Society would qualify for exemption under S.No. 4 of  Notification No. 12/2017-Central Tax (Rate).

The applicant raised following questions for advance ruling in its application:

1) Whether NDDB would be qualified as ‘Governmental Authority’ from GST perspective ?; and

2) Whether renting of immovable property service provided by NDDB to an educational institute would be exempted under S.No. 4 of Notification No. 12/2017-Central Tax (Rate)?

The AAR vide its Order dated 22.02.2019, ruled as under:

1) National Dairy Development Board (24AADCN2029C1Z5) would be qualified as ‘government authority’ from Goods and Services Tax perspective, if it fulfils the condition namely ‘with ninety percent or more participation by way of equity or control to carry out any function entrusted to a municipality under article 243W of the Constitution”.

2) Renting of immovable property service provided by National Dairy Development Board (24AADCN2029C1Z5) to an educational institute would be exempted under S.No. 4 of Notification No. 12/2017-Central Tax (Rate) and corresponding State Tax Notification, if it qualifies as ‘governmental authority’.

[(2019) 23 GSTL 151; (2019) 73 GST 72; (2019) 3 TMI 1119 (2019) 103 taxmann.com 404 (AAR, Gujarat)]

Being aggrieved by the advance ruling, assessee preferred an appeal u/s 100 of the CGST Act, 2017 before AAAR, Gujarat contending that the Advance Ruling is issued with ‘if’ condition i.e. the appellant would qualify as ‘Governmental Authority’ if it fulfils the condition of ninety percent or more participation by way of equity or control’, and such conditional ruling or ruling with ‘if’ condition is not proper and against legal provisions.

Further, the condition put forth in the ruling is limited to the fact whether the appellant fulfils the condition of ninety percent or more participation by way of equity or control. It has been submitted that the ruling has accepted the fact that the Appellant fulfils the criteria of carrying out any function as entrusted to a municipality under Article 243W of the Constitution. It submitted that the appeal is preferred in order to determine requirement of fulfillment of condition of ninety percent or more participation by way of equity or control, in light of available facts.

The AAAR considered the appeal but there was difference of opinion between the two members.

The main issue to be decided is whether the exemption provided vide S.No. 4 of Notification No. 12/2017-Central Tax (Rate) is admissible to appellant for providing service of ‘Renting of Immovable Property’ to ‘Anandalaya Educational Society’?

Per Mr, Ajay Jain, Member, it was held that :

“(i) National Dairy Development Board (24AADCN2029C1Z5) would be qualified as ‘governmental authority’ from Goods and Services Tax perspective, if it fulfils the condition namely ‘with ninety percent or more participation by way of equity or control to carry out any function entrusted to a municipality under article 243W of the Constitution”.

(ii)…………..”

The AAR was modified by holding that :

(i) In absence of sufficient information, it cannot be determined whether M/s. National Dairy Development Board is “Governmental Authority” as per definition of “Governmental Authority provided vide clause (zf) of Para 2 of Notification No. 12/2017-Central Tax (Rate)  and corresponding State Notification No. 12/2017-State Tax (Rate), or otherwise; and

(ii) Exemption provided vide Sr. 4 of Notification No. 12/2017-Central Tax (Rate) and corresponding State Notification No. 12/2017-State Tax (Rate) is not admissible to M/s. National Dairy Development Board for providing service of ‘Renting of Immovable Property’.

Per P.D. Vaghela, Member, who differed on the findings, it was held that :

“(i) National Dairy Development Board (24AADCN2029C1Z5) would be qualified as ‘governmental authority’ from goods and services tax perspective, if it fulfills the condition namely “with ninety percent or more participation by way of equity or control to carry out any function entrusted to a municipality under article 243W of the Constitution”

The appeal challenges the order of Authority for Advance Ruling only on single issue viz., whether Authority for Advance Ruling was right in passing the order as mentioned in Para 1 above. The appellant has not filed this appeal challenging the ruling of Authority for Advance Ruling on “renting of immovable property service provided by National Dairy Development Board (24AADCN2029C1Z5) to an educational institute would be exempted under S.No. 4 of Notification No. 12/2017-Central Tax (Rate) and corresponding State Tax Notification, if it qualifies as “Governmental Authority”. Therefore, it cannot be decided in this appeal on issue which is not subject matter of this appeal.

In view of difference of opinion, section 101(3) of the CGST Act, shall apply. [In Re: National Dairy Development Board (2020) 36 GSTL 257; (2019) 6 TMI 1483; (2020) 120 taxmann.com 138 (AAAR, Gujarat) dated 29.06.2019].

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