In re New Tirupur Area Development Corporation Limited (GST AAR Tamilnadu)
a. The applicant not being the class of persons specified in Notification No. 14/2017-C.T.(Rate) dated 28.06.2017 as amended, they are not eligible for the said Notification as discussed in Para 10.2 above.
b. The activity of Sewage offtake and treatment extended to Tirupur Municipal Corporation as per the CA is exempt under SI.No.3 of Notification No.12/2017- C.T.(Rate) dated 28.06.2017 for the reasons discussed in Para 11.3 above.
c. The Consultancy Services rendered by the applicant to Tirupur City Municipal Corporation in respect of the Project- Construction Management and Supervision Consulting Service to assist Project ULBs- Tirupur City Municipal Corporation exempt under SI.No.3 of Notification No. 12/2017- C.T.(Rate) dated 28.06.2017 for the reasons discussed in Para 11.4 above.
d. In respect of the activities incidental to main business activities, it is rules as under :-
i. Interest on receivable on delayed payments being charges received for ‘Agreeing to tolerate an act’ classifiable under SAC 999794 is taxable @ 9% CGST and 9% SGST as per Sl.No. 35 of Notification No. 11/2017- C.T.(Rate) dated 28.06.2017 read with. Sl.No. 35 of Notification No. II (2)/CTR/532(d- 14)/2017 vide G.o. (Ms.)No.72 dated 29.06.2017 as amended for the reasons discussed in Para 13.(1a) above.
ii. Cheque Bouncing Charges being charges received for ‘Agreeing to tolerate an act’ classifiable under SAC 999794 is taxable @ 9% CGST and 9% SGST as per Sl.No. 35 of Notification No. 11/2017- C.T.(Rate) dated 28.06.2017 read with Sl.No. as of Notification No. II (2)/CTR/532(d- 14)/2017 vide G.O. (Ms.)No.72 dated 29.06.2017 as amended for the reasons discussed in Para 13.1 (b) above.
iii. New connection works executed as per CA for TCMC , the established asset is accounted as their assets are not taxable being self-service for the reasons discussed in para 13.1(c ) above.
iv. Connection/ Reconnection/ Disconnection/ Permanent Disconnection Charges are charges received for the services of ‘Water Distribution Services’ classifiable under SAC 9969 and is taxable @ 9% CGST and 9% SGST as per Sl.No. 13 of Notification No. 11/2017- C.T.(Rate) dated 28.06.2017 read with Sl.No. 13 of Notification No. II (2)/CTR/532(d- 14)/2017 vide G.o. (Ms.)No. 72 dated 29.06.2017 as amended for the reasons discussed in Para 13.1 (d) above.
But as regard to the activity of ‘supply of Water-goods’ by the applicant to the purchasers as per the CA, we have different views on this aspect as discussed in Para 12.2 supra. Since we have different views on this particular issue, we are making a reference to the Appellate Authority for hearing and decision on this issue in terms of Section 98(5) of the Act ibid which provide that where the members of the Authority differ on any question on which the advance ruling is sought, they shall state the point or points on which they differ and make a reference to the Appellate Authority for hearing and decision on such question.
AAAR Order: GST exempt on sewerage treatment services provided to TCMC
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, TAMILNADU
M/S. New Tirupur Area Development Corporation Limited, Polyhose Towers 1st Floor 86 Mount Road Chennai Tamil Nadu is a public limited company, promoted by TN Government, Tamilnadu Water Investment Company Limited (TWIC), and ILFS Ltd, is registered under the GST Act 2017 vide GSTIN No. 33AAACN3562H1ZP (hereinafter referred as ‘Applicant’ or ‘NTADCL’). The applicant has sought Advance Ruling on the following questions:-
a. Whether the following activities will suffer GST or not
Main business activities:-
a) Sale of water
b) Sewage treatment charges
c) Consultancy Services such Detailed Project Report (DPR), Project Management Consultancy (PMC) and any other infrastructure related consultancy to TCMC / GoTN
Incidental to main business activities,-
d) Interest on receivable on delayed payments
e) Disconnection Charges
f) Reconnection charges
g) Permanent disconnection charges
h) Cheque Bouncing charges
i) Non-Revenue – Service provided to Customer on New Connection works Concept of No Loss No Gain, New Connection Shifting and other works
b. The company abstracts raw water from river Cauvery and supplies to users in potable condition, whether the water treatment process undertaken by the company would fall within the meaning of the word “purification”
c. Whether the GST Registration Certificate require amendment
The applicant has submitted the copy of application in Form GST ARA – 01 and also submitted a copy of Challan evidencing payment of application fees of Rs.5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST
2.1 The applicant has stated that the main objective of the Company was to promote infrastructure development activities in the area of water supply at New Tirupur.; They had implemented an integrated water supply project for the town of Tirupur.; In order to implement the integrated water supply and sewage treatment project for Tirupur City Municipal Corporation (TCMC), wayside villages and Tirupur Local Planning Area (TLPA), a Concession agreement was signed between the Government of Tamilnadu, Tirupur Municipality (now Corporation) and the applicant to implement a 185 million litre per day (MLD) water supply project expandable upto 250 MLD and a 15 MLD Sewage Treatment plant (STP) expandable up to 30 MLD at the total project cost of Rs. 1023 crore.; By virtue of the Concession Agreement entered and the mere nature of the activity, NTADCL assumes the responsibility under Article 243 G and Article 243 W contemplated under the sixth schedule of the Constitution of India.; They had signed a water drawal agreement with TN Government for drawing raw water up to a Maximum of 185 Million Litres Per day from the river Cauvery for supply towards domestic and non-domestic purposes within the Tirupur Municipality.
2.2 The applicant has stated Notification 01/2017 includes waters including natural or artificial mineral waters and aerated waters, not containing added sugar or other sweetening matter nor flavoured. Having the Word WATERS which is self-explanatory, that besides, water, and other water like mineral, aerated water is taxable. Notification No. 2/2017 – Central Tax dated 28th June 2017 absolutely exempts as many as 149 items with defined Chapter/ Heading/Sub-heading/tariff from intra-State supplies of such goods. This list of items covers items such as Printed books, newspapers, Condoms, live poultry, fish, meat, lassi, milk, plants, potatoes, tomatoes, onions and vegetables, fruits, water, salt, bread, electrical energy, firewood, bangles, raw silk, agricultural implements, hearing aids, etc. It is important to that here the word WATER is appearing. Therefore, this notification is in favour of them, whereby the WATER is exempt. Further the entire activity undertaken by them is in relation of the activity as per Article 243W and243G, wherein under BOOT agreement, the entire infrastructure was created by TN GOVT through SPV which is the applicant and it will be later taken over by the TN Govt as where is basis. Therefore, as per the notification No. 14/2017- C.T.(Rate), the entire activity of the applicant is exempt from CGST/SGST/IGST
2.3 The applicant at present has taken a stand as per the following Notifications and has not considered for tax, the Notifications which are as follows:-
a) Notification No. 2/2017 – Central Tax dated 28th June 2017
b) Notification No. 12/2017 dated 28th June 2017
c) Notification No. 14/2017 dated 28th June 2017.
They had earlier approached Advocate and Consultant who had opined that they can avail the exemption as per the Notification. However in view abundant caution the Board of Directors has decided to approach this forum to have a Clarification and seek a Direction on the above query to render decision.
3.1 The applicant was extended an opportunity to be heard on 11.02.2020. The authorised representative appeared. They furnished a written submission and stated that they have entered into a Concession Agreement with Government of Tamil Nadu & Tirupur Municipality for supply of treated raw water lifted from Cauvery River and supplied to water distribution stations. Similarly, Sewage water is received in sewage pumping station. Billing is done at meter at (WDS & SPS). They bill to the Tirupur Municipality Corporation. For textile industries, they are in charge of giving connection. They are fulfilling the obligation of Tirupur Municipal Corporation to supply portable water and do water treatment. The price to Municipal Corporation is fixed by the Municipal Corporation. For industries, they supply on cost based recovery. They stated that they are eligible for exemption at SL No. 3 of Notification No. 12/2017 as they only render pure services and SI. No. 4 as they are governmental authority. They submitted current share holdings pattern. They also submitted the Resolution for formation of the organization, MOA, AOA, Certificate of registration under companies Act. They undertook to submit Bulk Water Supply Agreement, service agreement and relevant agreement with Industries, Invoices for the consultancy agreement within two weeks and the State Jurisdiction Officer made their submissions.
3.2 In the written submission, they had inter-alia stated as follows:-
> NTADCL is a Public Limited company promoted by GOTN, TWIC and ILFS Ltd as a Special Purpose Vehicle (SPV) with “an exclusive concession to provide the water treatment and supply service and sewage offtake and treatment service” for the Tirupur Municipal Corporation vide concession agreement dated 11th February 2000 between Government of Tamilnadu, Tirupur Municipality (now Tirupur City Municipal Corporation – TCMC) and NTADCL.
> By virtue of the Concession Agreement provided, NTADCL assumes the sovereign functions of Tirupur City Municipal Corporation under 243W read with the 12th Schedule of the Constitution of India more particularly, item nos. 1, 2,3, 5 & 6 of the Schedule and Article 243G under 11th Schedule item no. 11 of the Schedule, which are applicable in vogue and the assesee’s claim to be considered exemption of GST under Notification 12/2017 read with Sl.No.3 and 3A.
> NTADCL has been carrying on the following activities to TCMC & Merged Panchayat/ Wayside Village, TWAD board, Village Panchayat & Industries within Tirupur Local Planning Area (TLPA) agreed within the Concession Agreement
> Tirupur Municipality is a local authority as per Section 2(69)(b) wherein it includes Municipality as defined in Clause e of Article 243P of the Constitution. Further it is a Municipality as defined in Article 243Q of the Constitution. TCMC, a body corporate having perpetual succession formed under the Tamil Nadu District Municipalities Act, 1920 having its principal office at Tirupur, acting through the Commissioner, Tirupur Municipality.
> They had applied for a ruling in connection with the Pure service rendered to a governmental authority, 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.
> They are carrying on pure services, which is evident from the concession agreement, wherein the services has been clearly defined in Page No. 17 of the Concession Agreement, which states that Service means “either or both of the Water Treatment and Supply Service, or the Sewage Offtake and Treatment Service”. Therefore, this is considered as a pure service rendered to the Governmental authority viz., Tirupur Municipality (now Corporation).
> Notification No. 12/2017 exempts vide Sl.No.3, 3A “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”
> They are carrying activity in relation to the Article 243W and 243G which are appearing in 12th Schedule SI.No.1,2,3,4, 5 & 6 and 11th Schedule SI.No.11. They are rendering pure services to a local authority by way of any activity in relation to Article 243W and 243G of the Constitution of India. Accordingly, it is claimed that the said services are exempted by availing the Exemption under Notification No. 12/2017 read with SI.No.3, 3A under Chapter 99.
> Pure services are defined in Schedule Il clause 5. As per Schedule Il Clause 5(e), (i) it is evident from the Concession Agreement that they are agreeing to the obligation “to do and act” by entering into the Concession Agreement ii) further the Company obtains a right to use the water from river Cauvery by way Of a Bilateral Water Drawal agreement. As per the above interpretation, it is evident that what they are doing is a pure services for the purpose of qualifying exemption under Notification 12/2017 read with SI.No.3, 3A under Chapter 99.
> As per the Concession Agreement they have inherited the functions of Tirupur Municipality in respect of supply of water and Sewage Offtake and Treatment Service and Tirupur Municipality and GOTN by virtue of the concession agreement has authorised them to collect the Charges for the Services rendered by them.
> Pure services: In support of the facts discussed under Schedule Il Clause 5(e) and Clause 5(f) and established the facts and circumstances to qualify for consideration of exemption under Notification No. 12/2017 read with Sl.No.3, 3A, they submit the following:-
