In re M/s Indian Institute of Corporate Affairs (GST AAR Delhi)
Q1. Whether Goods and Services Tax shall be leviable / chargeable on the transaction / agreement as per provisions of Central Goods and Service Tax Act, 2017.
. The amount received by the applicant from AICL is not in the nature of grant-in aid and is covered in the definition of “consideration” for the supply of goods or services under Section 2(31) of the CGST Act, 2017 in respect of the MoU dated 16.01.2017. Hence, they are liable to pay GST under Section 9(1) of the CGST Act, 2017.
Q2. If t he answer to above question is Yes, Whether the transaction can be exempted in whole or in parts, referring to specific provisions enumerated in exemption notification.
The said supply of goods or services are not exempted from the payment of GST under S. No. 1 or S. No. 76 of the Notification No. 12/2017 — Central Tax (Rate) dated 28.06.2017 and parallel notifications under SGST and IGST. Hence. the applicant is liable to pay GST on the supply of goods or services under the MOU dated 16.01.2017 entered by them with AICL.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, DELHI
Statement of Facts:
1. The Indian Institute of Corporate Affairs (“IICA”), the applicant, is a society registered under the Societies Registration Act, 1860. The applicant has the following registrations and exemptions available:
(i) An exemption under Section 10 (23C) (iv) and (v) of the Income Tax Act, 1961 for AY 2017-18 onwards.
(ii) Registration under Section 12A/12AA of the Income Tax Act, 1961 vide registration no. 12A/2009-10/i-1290/593 dated 19.08.2009.
2. The applicant is primarily engaged In:-
(i) Induction and in-service training to Indian Corporate Law Service (10.S) officers;
(ii) Capacity building and training programs in the field of competition law, –market–regulations, finance, corporate governance and public pollcies
(iii) Policy advisory functions, public outreach and stakeholder consultations through seminars, conferences and forums.
3. The applicant has the following network of schools and centres through which it executes the above stated functions:
(i) Indian Corporate Law Services Academy
(ii) School of Competition Law and Market Regulation
(iii) School of Corporate Governance & Public Policy
(iv) School of Finance
(v) School of Corporate Law
(vi) Centre for E-governance
(vii) Centre for Responsible Corporate Govern ante
(viii) Centre for Micro Small & Medium Enterprises
(ix) Centre for Business Innovation
(x) Centre for Institutional Partnerships & Corporate Communications
(xi) Knowledge Resource Centre
4. For the purposes of learning and development, providing metadata and implementation of projects in the field of corporate social responsibility, a body called National Foundation for Corporate Social Responsibility (NFCSR) was established at IICA in 2012 to be the apex national institution that aims to build an enabling environment for the corporate sector to work in partnership with the government, non-government and civil society organizations for effective contribution towards sustainable growth and development. It has been provided an initial corpus fund by the Ministry of Corporate Affairs, enabling India to take a leadership position in the area of CSR. The IICA has a specific mandate for the National Foundation on Corporate Social Responsibility (NFCSR) to be the CSR enabler, and to evolve as the apex national level Institution that can effectively enable and Inform the implementation of the CSR laws and parameters of the country. In order to fulfill this mandate, the NFCSR offers the following facilitation services:-
(i) Learning & Development (People) through CSR training services and BSE IICA CSR Index
(ii) Metadata on CSR (Information)
(iii) CSR Implementing Agency Hub (Partners)
(iv) Documentation, Assessment & Evaluation, Advocacy & Dissemination & Research (Projects & Implementation)
(v) Centre of Excellence for Sustainable Development (CESD)
5. The applicant has entered into Memorandum of Understanding (MoU) dated 16.01.2017 with the Agriculture Insurance Company of India Limited (“AICL”), wherein, MCL in order to discharge its corporate social responsibility (‘CSR’) for the financial year 2016-17, awarded an social welfare assignment on:
“Implementation of Integrated Village development programme – improving infrastructure facilities in SO villages In the states of Bihar, Jharkhand, Madhya Pradesh, Maharashtra and Uttar Pradesh as per the study done by the Applicant”
6. The sequence of facts and other relevant details are enumerated below:-
(a) The IICA had entered into Mot) with Ala on 03.08.2016 and conducted a comprehensive baseline and need assessment survey with regard to 50 villages in S states mentioned above and as a result, IICA submitted a detailed project report (DPR) to the MCL for the following broad activities to be executed towards discharge of its Corporate Social Responsibility (CSR) fu, the financial year 2016-17 through IICA, as:
(i) Installation, transportation, maintenance and upkeep of Solar Street lights.
(ii) Installation, transportation, maintenance and upkeep of Solar Water pumps.
(iii) Construction of household toilets as per government’s Swachh Bharat Gramin design, with comprehensive awareness building and training of community for use and maintenance of toilets.
(iv) Healthcare encompassing doctor’s consultancy and basic medicine supplies for 1 year.
(b) Consequently, AICL gave its consent for implementation as per the following details from the detailed project report:
(i) installation of solar water pumps – 122 in Nos;
(ii) Installation of solar lights -1230 in Nos;
(iii) Sanitation (construction of toilets) – 3670 In Nos.
7. The relevant extracts from the MOU is produced below:
(a) “SCOPE OF THE WORK”
(i) The project seeks to develop and improve village level facilities and infrastructure to make significant difference in quality of life of the rural area. The specific objectives of the project are:
a. Provision of drinking water facility in covered villages
b. To provide solar street lights in villages
c. To improve village sanitation by building household toilets and creating awareness
(ii) Proposed project components:
a. Provide one solar water lifting pump for a population of 1000 villagers
b. Installing need-based solar street lights in selected villages
c. Building household toilets and running community awareness camps for sanitation
(iii) Expected outcomes:
a. The project would bring improvement in lives of 1,26,327 rural population in 50 villages in 5 states of India.
(b) The duration of the MOU shall be 1 year which commence from the date of execution and shall expire on 15th January 2018 or until both the parties have fulfilled all its obligations and responsibilities under the MOU, whichever is later.
(c) The project amount of Rs. 20,35,76,800 shall be paid by AICL in four to five installments based on the timelines for the execution of the project. The total amount includes actual cost and additional compensation to RCA for management of the project.
Details of Questions on which Advance Ruling is requested:
Question No.1
8. Whether Goods and Services Tax shall be leviable / chargeable on the transaction / agreement as per provisions of Central Goods and Service Tax Act, 2017.
Question No.2
9. If t he answer to above question is Yes, Whether the transaction can be exempted in whole or in parts, referring to specific provisions enumerated in exemption notification.
Views of the Applicant:
View-I
10. The whole activity can be divided into two parts, viz. transaction between AICL and IICA (Part-A) and transaction between IICA and ultimate recipients or beneficiaries (part-B).
PART-A
11. The amount given by AICL to IICA is in the nature of grant, whereby IICA upon receipt of grant will use the funds for any of the following three activities:
(i) Installation of solar water pumps;
(ii) installation of solar lights;
(iii) Sanitation (construction of toilets)
12. This activity only involves movement of money from MCI to IICA and money has been specifically been excluded from the definition of “Goods” under section 2(52) of the CGST Act, 2017. This movement of money cannot be construed as consideration as IICA is not making any supply to AICL in return as all the facilities/structures/benefits arising out of the above mentioned three activities would be used and owned by the beneficiaries and not by AICL.
13. The amount received by IICA is In the nature of grant as per pars 2 of the Circular No. 127/09/2010, which states that “Between the provider of donation/grant and the trainee there is no relationship other than universal humanitarian interest.” In such a situation, service tax is not leviable, since the donation or grant-in-aid is not linked to specific trainee or training.
14. Similarly, in the arrangement between AICL and IICA, there is no relationship, other than universal humanitarian interest, between the amount given by AICL and the charitable work done by IICA, as IICA carries full authority and decision making powers to decide as to who would be the recipient of the above mentioned services.
PART-B
15. The activity done by IICA for the ultimate beneficiaries is a social activity without any consideration, therefore this would not fall under the definition of “Supply” given in Section 7 of the CGST Act, 2017, and therefore, would not attract the provisions of GST Law.
View-II
16. However, if the transaction between AICL and IICA is treated as a supply from IICA to AICL as per the provisions of Section 9 of CGST Act, 2017, then the following questions would arise to determine its chargeability to GST provisions:
(i) Whether the supply is of goods or services or both.
(ii) Whether the supply is an exempt or taxable supply.
17. Regarding, whether the supply is of goods or services or both, the following activities of:
(i) Installation of solar water pumps;
(ii) Installation of solar lights;
(iii) Construction of toilets;
are works contract in relation to immovable property and as per clause 6(a) of Schedule II of the CGST Act, 2017, the said activity performed by IICA will fall under “supply of services.”
18. Regarding, whether it Is an exempt or taxable supply, these three activities of supply of services are covered in S. No. 1 and 76 of the Notification No. 12/2017 dated 28.06.2017.
19. The following activities of IICA, being an entity registered under Section 12AA of the Income Tax Act, 1961, would come under clause (i) (B) and (iv) of definition of charitable activities:
