Janya (a fictional character is very inquisitive and wants to question each and everything)

Tanishi (a fictional character finds answers from nowhere and everywhere and wants to give solutions for everything)

Janya: I have seven transactional questions in my mind. I am stating them one by one to you- Tanishi

QUESTION 1

Janya: Whether services provided to various Boards constituted by the State Government, especially sweeping services will qualify for exemption under GST Law

Tanishi:

Applicable Section

Government Entity” means an authority or a board or any other body including a society, trust, corporation, i) set up by an Act of Parliament or State Legislature; or ii) established by any Government, with 90 per cent. or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Territory or a local authority.”

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 percent. 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.

‘Local authority’ as defined under section 2(69) of the CGST Act 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 of the Constitution; or

(g) A Regional Council constituted under Article 371A of the Constitution;

Interpretation:

Sweeping Service that the Applicant supplies to the Housing Directorate of the Government of any State, cannot be classified as an 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. The exemption under Sl No. 3 or 3A, as the case may be, of Notification No 12/2017-CT (Rate) dated 28.06.2017 and WB Govt Gazette Notification-1136-FT dated 28.06.2017 is not, therefore, applicable to such supplies of services.

QUESTION 2

Janya: Whether a turnkey contract for electrical cable supply and laying work shall be classified as works contract under GST Law

Tanishi:

Applicable Section

Notification No 11/2017 dated 28.06.2017; Notification No 20 dated 22.08.2017; Notification No. 24/2017 dated 21.09.2017

Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier. (Provisions of paragraph 2 of this notification shall apply for valuation of this service) 9%CGST + 9%SGST

composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Services Tax Act, 2017 9% CGST + 9% SGST

Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied to the Government, a local authority or a Governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of, – (a) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958); (b) canal, dam or other irrigation works; (c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal 6% CGST + 6% SGST

Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,- (a) a road, bridge, tunnel, or terminal for road transportation for use by general public; (b) a civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana; (c) a civil structure or any other original works pertaining to the “In-situ rehabilitation of existing slum dwellers using land as a resource through private participation” under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana, only for existing slum dwellers; (d) a civil structure or any other original works pertaining to the “Beneficiary led individual house construction / enhancement” under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana; (e) a pollution control or effluent treatment plant, except located as a part of a factory; or (f) a structure meant for funeral, burial or cremation of deceased 6% CGST + 6% SGST

Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, or installation of original works pertaining to,-

(a) railways, excluding monorail and metro;

(b) a single residential unit otherwise than as a part of a residential complex;

(c) low-cost houses up to a carpet area of 60 square metres per house in a housing project approved by competent authority empowered under the ‘Scheme of Affordable Housing in Partnership’ framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India;

(d) low cost houses up to a carpet area of 60 square metres per house in a housing project approved by the competent authority under- (1) the “Affordable Housing in Partnership” component of the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana; (2) any housing scheme of a State Government;

(e) post-harvest storage infrastructure for agricultural produce including a cold storage for such purposes; or

(f) mechanised food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages. Services provided to the Central Government, State Government, Union Territory, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of – (a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; (b) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or(iii) an art or cultural establishment; or (c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Services Tax Act, 2017. 6% CGST + 6% SGST

Construction services other than (i), (ii), (iii), (iv), (v) & (vi) above 9% CGST + 9% SGST

Interpretation:

This entire turnkey contract should be termed as works contract as per GST Law and tax rate as per Notification No. 11/2017 dated 28.6.17 as amended up to date.  In my view, 18%, should be the tax rate.

QUESTION 3

Janya: Whether the person who is engaged in construction of “Private Railway Siding” for carriage of coal & oil to a particular project is liable to pay GST and if so at what rates

Tanishi:

Applicable Section

Notification No 11/2017 dated 28.06.2017; Notification No 20 dated 22.08.2017; Notification No. 24/2017 dated 21.09.2017

Interpretation

In my view, the construction of a “Private Railway Siding” should be termed as a composite supply of works contract and under the circumstances should be taxable at 12% in terms of notification No. 11/2017 dated 28.6.17

QUESTION 4

Janya: Whether there is dual jurisdiction of Central Tax officer and State tax officer

Tanishi:

There cannot be Overlapping Jurisdiction. In case, it is assumed that statute provide or does not debar for concurrent jurisdiction, even in that case, if jurisdiction is exercised by one officer Of the Central Tax Officer or State Tax Officer, it should impliedly oust the jurisdiction of other officers. The doctrine of comity of jurisdiction requires that for the proper administration of justice, there should not be overlapping of the exercise of powers and functions.

Decision of Punjab & Haryana HC in Kenapo Textiles P Ltd V State of Haryana (1992) 84 STC 88

Decision of Supreme Court of India In India Household and Healthcare Ltd V LG Household and Healthcare Ltd 2007 5 SCC  510

The above are relevant in context that once a particular officer exercises jurisdiction, it would exclude the jurisdiction of all other officers.

QUESTION 5

Janya: Whether the activities performed by the Association are covered under the definition of Charitable Activities as defined under clause 2(r) of Notification No.12/2017-CT (Rate) dated 28.06.2017

Tanishi:

Applicable Section

Section 8 Companies under Companies Act, 2013 & registered U/s. 12AA of the Income Tax Act, 1961 carrying out activities of:

(a) Promotion of research in the field of Life Sciences, Physical Sciences, Environmental Sciences, Earth Sciences, Disasters, Engineering and Technology, Management and Commerce, Food, Agriculture and Veterinary Sciences, Cosmetics Sciences, Synergy, Medical Sciences, Pharmaceutical Sciences, Education, Nutrition, Health, Social Sciences, Arts and Humanities, Law, Sports Sciences, Spiritual Sciences, Yoga, Advanced Computing and Robotics, Languages and many more;

(b) Performing & publishing of online research journals on one or more of above-mentioned field/subjects.

(c) Organizing Seminars, Symposiums, Conventions, Congress etc. addressing on one or more of above-mentioned issues.

Notification No.12/2017-CT (Rate) dated 28.06.2017 and corresponding notification issued under MPGST Act, at Entry No. 1 states as under:

(1) (2) (3) (4) (5)
1 Chapter 99 Services by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) by way of charitable activities. NIL NIL

The definition of Charitable Activity for the purpose of this Notification is given in the Notification itself and it states as under:

“charitable activities” means activities relating to –

(i) public health by way of,-

(A) care or counselling of

(I) terminally ill persons or persons with severe physical or mental disability;

(II) persons afflicted with HIV or AIDS;

(III) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or

(B) public awareness of preventive health, family planning or prevention of HIV infection;

(ii) advancement of religion, spirituality or yoga;

(iii) advancement of educational programmes or skill development relating to,-

(A) abandoned, orphaned or homeless children;

(B) physically or mentally abused and traumatized persons;

(C) prisoners; or

(D) persons over the age of 65 years residing in a rural area;

(iv) preservation of environment including watershed, forests and wildlife;

The definition of Charitable Activity is not an inclusive definition but an exclusive one, meaning that the specific activities which are treated to be falling under Charitable Activity are an exhaustive list and there is no scope of interpretation as to which activities might fall under charitable category.

Interpretation:

Promotions of Research and Publishing of online research journal are not activities covered in the exemption entry since they do not fall under care or counselling; or spreading public awareness; or advancement of religion, spirituality or yoga; or advancement of educational programmes or skill development.

In respect of Organization of Seminars, Symposiums and Conventions come under the term “spreading of public awareness”, if they are for the spreading of Public Awareness of preventive health, family planning or prevention of HIV infection shall be covered under the exemption notification. The determinative factor in this case would be to ascertain whether the programme is open for public or not. Once it is established that it is not for select group of people or for a class of people, then such activity ceases to a Public Awareness activity.

QUESTION 6

Janya: Whether bank accounts of the directors attached in addition to bank account of the company attached is valid and enforceable.

Tanishi:

As per Gujarat HC order in the case of M/s H.M. Industrial P Ltd 1160/2019 pronounced on 07.02.2019; unless the directors are proven guilty.

By the impugned orders of provisional attachment of the property under section 83 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act), the respondent department has, inter alia, attached the bank accounts of the directors of the petitioner-company. A perusal of the provisions of section 83 of the CGST Act shows that the same empowers the Commissioner, if the circumstances therein are satisfied, to attach provisionally any property, including bank account, belonging to the taxable person, in such manner as may be prescribed. The term taxable person has been defined under sub-section (107) of section 2 of the CGST Act to mean a person who is registered or liable to be registered under section 22 or section 24 of that Act. In the present case, it is the petitioner-company which is registered under the provisions of the CGST Act and is, therefore, the taxable person. Under the circumstances, if at all, the provisions of section 83 of the CGST Act could have been invoked against the petitioner herein, however, under no circumstances, the same could have been invoked against the directors of the petitioner-company.

On behalf of the respondents, reliance has been placed upon the provisions of section 89 of the CGST Act to submit that the same permits recovery of the dues of the private company from its directors in case such amount cannot be recovered from the company. In the opinion of this court, reliance placed upon section 89 of the Act is thoroughly misconceived in as much the same relates to recovery of any tax, interest or penalty due from a private company in respect of supply of goods or services. Moreover, even if such amount cannot be recovered from the private company, the directors of the company do not ipso facto become liable to pay such amount and it is only if the director fails to prove that nonrecovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company, that the same can be invoked. However, in any case, at this stage, section 83 of the Act does not apply to the directors of the private company. In these circumstances, the respondents are directed to forthwith release the attachment of the following bank accounts.

QUESTION 7

Janya: Whether ITC generated in hedging transaction (brokerages paid) can be utilized for payment of outward tax on buying and selling of Gold and silver.

Tanishi:

Applicable Section:

SECTION 16 OF CGST ACT

(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.

SECTION 2 OF CGST ACT

(60) ‘input service’ means any service used or intended to be used by a supplier in the course or furtherance of business;

Interpretation: 

Hedging refers to process of reducing the risk of loss caused due to price fluctuation. Hedging transaction on NCDX platform is an inward supply of service used for mitigating risk on taxable output supply of gold and silver.

Further it is not blocked as per section 17(5).

Thus ITC of brokerage paid on hedging transaction is available on such input services.

While every care has been taken to ensure the accuracy/ authenticity of the above, the readers are advised to recheck/ reconfirm the same from the original sources/ relevant departments. The company shall in no way be responsible for any loss or damage suffered to any person on account of the same. The views expressed are personal opinion, compilation and is no way, to be used for any legal opinion, matters

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