The Rajasthan Appellate Authority for Advance Ruling (AAAR), observed that 18% GST applicable under reverse charge mechanism (RCM) for No Objection Certificate (NOC) on road Cutting charges to Jaipur Nagar Nigam.
The present appeal has been filed under Section 10() of the Central Goods and Services Tax Act, 2017 (‘the CGST Act’) read with Section 100 of the Rajasthan Goods and Services Tax Act, 2017 (‘the RGST Act’) by M/s Lakhlan & Qureshi Construction Co (‘appellant’) against the Advance Ruling No. RAJ/AAR/2021-22/31 dated 15.12.2021.
According to the appellant, the Authority of Advance Ruling has erred in holding that since Government of Rajasthan holds only 50% shareholding in M/s JSCL and balance shareholding is held by Jaipur Nagar Nigam (JNN) which is not a government. Therefore, M/s JSCL are not a “Governmental Authority” as defined in the explanation to clause (16) of Section 2 of the IGST Act, 2017 only on the basis of equity. As per the AAR, Ws JSCL are not satisfying the definition of Governmental Authority.
As per the appellant, the service provided by Jaipur Nagar Nigam to the appellant is not a supply of service and they are not liable to pay GST under RCM for the fees paid for obtaining NOC from JNN for road cutting charges.
As per the appellant, the Authority of Advance Ruling, Rajasthan has erred in holding that the appellant is liable to pay GST at the rate (i.e., 9% CGST and 9% SGST) under RCM on road cutting charges paid to JNN on behalf of M/s JSCL for the activity of granting of permission for road cutting.
The appellant submitted that the AAR wrongly held that it is not covered under the list of works mentioned under Article 243W of the Constitution as entrusted to a Municipality and that clause (b) of sub-section (2) of Section 7 of CGST Act, 2017 read with Notification No. 14/2017 as amended by Notification No. 16/2018 – Central Tax (Rate) is not applicable for services provided by JNN to Appellant.
A Two-Member Bench of the Authority comprising Mahendra Ranga, Member Central Tax and Dr Ravi Kumar Surpur, Member, State Tax observed that “In respect of amount paid as NOC for road cutting to Jaipur Nagar Nigam, Clause (b) of sub-section (2) of Section 7 of CGST Act, 2017 read with Notification No. 14/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 16/2018 – Central Tax (Rate) dated 26.07.2018 is not applicable in this case. Therefore, the appellant are liable to pay GST @18% ( i.e. 9% CGST + 9% SGST) as a recipient under RCM.”
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