In re National Institute of Design (GST AAR Gujarat)
Question-1: Whether NID would qualify as ‘Governmental Authority’ as defined under the Integrated Goods and Services Tax Act, 2017?
Answer: Since it has been established from the discussions hereinabove, that the applicant M/s. National Institute of Design, Ahmedabad has been formed by an Act of Parliament to carry out the function entrusted to a municipality under Article 243W of the Constitution and to a Panchayat under Article 243G of the Constitution, the applicant will qualify as ‘Governmental Authority’ if it also fulfils the condition namely ‘ninety percent or more participation of Government by way of equity or control.’
Question-2: Whether NID is liable to pay GST on procurement of following services under reverse charge mechanism, in view of the exemption granted in Sl. no.3 of Notification No.12/2017-Central Tax(Rate) or Sl.No.3 of Notification No.09/2017-IGST (Rate) ?-
- Security services received from any person other than body corporate as per Notification No.13/2017 – Central Tax (Rate)
- Access to e-books/e-database from service provider located outside India as import of service as per Notification No.10/2017 – IGST (Rate)
Answer: In view of non-submission of copies of agreement or contract with regard to the services received/to be received by the applicant, it would not be possible for us to give a decision in the matter for the reasons discussed hereinabove.
Question-3: Whether NID is required to be registered as a tax deductor under GST as per the provision of Section 24 of the CGST Act?
Answer: Since it has been established from the discussions hereinabove, that NID has been formed by an Act of Parliament, the applicant will have to register themselves as a tax deductor under the provisions of Section 24 of the CGST Act, 2017 read with Section 51 of the Act, if they fulfil the condition of ‘fifty-one percent, or more participation of Government by way of equity or control, to carry out any function’.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, GUJARAT
The applicant M/s.National Institute of Design, Paldi, Ahmedabad (hereunder referred to as ‘NID’ or ‘the Applicant’) having registration no 24AAATN1137D1Z6 has been declared as an institution of national importance for promotion of quality and excellence in design education, research and training in all disciplines relating to Design and for matters connected therewith or incidental thereto. The NID Act regulates NID by laying down its powers, functions and responsibilities. The applicant has submitted a copy of the NID Act along with their submission as well as the copy of their registration with GST authorities.
2. The applicant has submitted that according to Section 9 of the NID Act, the President of India would be the visitor of the institution, who may appoint one or more persons to review the work and progress of the institute or to hold the inquiries into affairs of the institute and to report them in such manner as he directs and that on the basis of the report, the visitor shall take such actions and issue such directions as he may consider necessary, which shall be binding on the Applicant. The applicant has explained some of the sections of the NID Act as under:-
(1) Section 10 of the NID Act provides that a Governing Council (‘Council’) shall be an authority of the institution. Moreover, as per Section 11 of the NID Act, Council would comprise of a chairperson who would be nominated by the President of India. Apart from chairperson, the Council also shall have such number of members, who are nominated by Central Government, State Government or visitor / President or Senate of NID. Further, the Director of the Applicant would also be appointed by Central Government as per Section 18 of NID Act.
(2) In order to enable the NID to function effectively, Section 22 of the NID Act provides that the Central Government, after due appropriation made by Parliament, would pay to the institution such sum of money as it may deem fit, in each financial year. This means that NID is receiving substantial grant from Department for Promotion of Industry and Internal Trade(‘DPIIT’), Ministry of Commerce & Industry, Government of India for its functioning.
(3) It is further stipulated in Section 23 of NID Act that NID would maintain a fund wherein all money received or earned by NID including grants, donation, fees etc. would be credited. Further, the amount so credited to the Fund would be deposited in banks or invested in such manner as may be decided, with the approval of the Central Government.
(4) As far as book-keeping is concerned, Section 25 of NID Act states that the accounts would be maintained by NID in such manner as directed by the Central Government in consultation with the Comptroller and Auditor General of India (CAG). The accounts of the NID are audited by the Comptroller and Auditor General of India and the certified accounts along with audit report would be forwarded to Central Government and same would be laid before each House of Parliament.
(5) Section 36 of the NID Act also stipulates that the Central Government may issue directions as it may deem necessary for effective administration of this Act.
3. The applicant has submitted that in order to render education services, being the only objective of the Applicant, NID procures numerous services such as security services, subscription of e-books/database, house-keeping services, professional services, annual maintenance services etc.; that major services provided by NID are educational services, which are exempted supplies and therefore the applicant is not able to avail input tax credit of taxes paid on receipt of supply; that on perusal of GST law, the applicant understands that Sl. No. 3 of Notification No.12/2017 – Central Tax (Rate) and Notification no. 9/2017 – Integrated Tax (Rate) wherein pure services provided to a Central Government, State Government or Union Territory or local authority or a Governmental Authority by way of any activity in relation to a function entrusted to a Municipality under Article 243W of the Constitution of India (‘COI’) is exempted; that since, NID is set-up by an Act of Parliament and the Central Government has complete control over the institution, the Applicant believes that they would merit categorization as a Governmental Authority as defined in the GST Act; that they believe that their activity of providing education in the field of design is one of the functions of Article 243W of COI and services received by them in relation to/pertaining to education service should be eligible for exemption from payment of GST; that in light of above discussion, if the applicant decides to avail security services from individual or partnership firm, the liability to pay tax rests with the applicant as per Notification #13/2017- CT (Rate), as amended from time to time. The applicant has further stated that apart from the above, they make payment to service providers located outside India for access of e-books or e-database, which are used for the educational purpose. For such services, the liability to pay tax rests with the Applicant as per Notification #10/2017 – IGST (Rate), as amended from time to time, as import of services for which sample copy of invoices have been submitted by the applicant for ready reference. The applicant have also stated that they have obtained registration as tax deductor under Section 24 of CGST Act, 2017.
4. Considering the above facts, the applicant has asked the following questions seeking Advance Ruling on the same:-
(i) Whether NID would qualify as ‘Governmental Authority’ as defined under the Integrated Goods and Services Tax Act, 2017?
(ii) Whether NID is liable to pay GST on procurement of following services under reverse charge mechanism, in view of the exemption granted in Sl. no.3 of Notification No.12/2017 – Central Tax (Rate) or Sl. no. 3 of Notification No.09/2017 – IGST (Rate) ?
