This weekly summary roundup covers stories related to the Goods and Services Tax, Authority for Advance Ruling (AAR), and Appellate Authority for Advance Ruling (AAAR) that have been published at Taxscan.in. during the period from October 21st to December 1st
Supply of ‘Unbranded & Unlabelled Broken Rice’ Exempt from GST, 5% GST Applies If ‘Pre-Packed & Labelled In Re: M/s TAMAL KUNDU CITATION: 2023 TAXSCAN (AAR) 318
The two-member authority of the WBAAR comprising Dr. Tanisha Dutta (CGST Member) and Joyjit Banik (SGST Member) has granted exemption from the Goods and Services Tax (GST) to “unbranded and unlabelled broken rice on “pre-packaged and labeled varieties” providing clarity in the taxation of this essential food product.
The Authority’s findings were based on a thorough examination of the relevant provisions of the Central Goods and Services Tax (CGST) Act, 2017 and the West Bengal Goods and Services Tax (WBGST) Act, 2017. The authority also considered the changes in GST regulations effective from July 18, 2022.
Additionally, this ruling also highlights the significance of adhering to the Legal Metrology Act for proper labeling and packaging of food products in the context of taxation has been emphasized through this decision.
Central & State Educational Boards treated as Educational Institutions; Services of Printing Question Papers for Conduct of Examinations in Educational Institutions Exempt from GST In Re: M/s SARASWATY PRESS LIMITED CITATION: 2023 TAXSCAN (AAR) 319
The two-member authority, featuring Dr. Tanisha Dutta (CGST Member) and Joyjit Banik (SGST Member), has reached a decision on the services involving the printing of question papers for educational institutions’ examinations. The authority has ruled that such services fall under Sr. No. 66 of Notification No. 12/2017-Central Tax (Rate), categorizing them as an exempt supply. Consequently, GST will not be applicable to these services, potentially leading to cost savings for educational institutions and a positive impact on the education sector. Furthermore, the West Bengal Authority for Advance Ruling (AAR) has determined that Central and State Educational Boards should be recognized as “Educational Institutions” specifically for providing services related to conduct of examinations. This ruling brings clarity to the status of these boards in the context of rendering services associated with examination management.
Recipient of Service Not Eligible for ITC on GST Paid for Transfer of Rights of Leasehold Land as Services Constitute Construction of Immovable Property In Re: M/s M/s. llaycr Vapi P l-td CITATION: 2023 TAXSCAN (AAR) 320
The Goods and Services Tax (GST) Authority for Advance Ruling (AAR), Gujarat has held that a recipient of services is not eligible to claim Input Tax Credit (ITC) on the GST paid for the transfer of leasehold rights in land. The two-member authority comprising Milind Kavathar (SGST Member) and Amit Kumar Mishra (CGST Member) held that the recipient of services was not entitled to claim ITC on the CGST and SGST paid on the services received from VEL for the transfer of leasehold rights. This decision was based on the application of Section 17(5)(d) of the CGST Act, which restricts ITC when services are used for the construction of an immovable property, other than plant and machinery, for one’s account or business purposes.
In addressing the central issue in this case regarding the interpretation of Section 17(5)(d) of the Central Goods and Services Tax Act, 2017( which restricts ITC for services used in the construction of an immovable property), the bench distinguished between “goods” and “services” as per the CGST Act. Goods were defined as movable property, explicitly excluding land, while services encompassed anything other than goods, including activities related to the use of money or its conversion.
The bench stated that although the CGST Act did not explicitly define “immovable property”, it was derived from the General Clauses Act, 1897. The General Clauses Act defines immovable property as land, benefits arising from land and things attached to the earth. This definition included anything permanently attached to or forming part of the land.
The ruling emphasised that land was explicitly excluded from the definition of “goods” and did not fall within the definition of “services”.
Application for clarifying GST on utility charges collected by company from its Restaurant partners disposed as withdrawn by applicant In Re: M/s. LOYAL HOSPITALITY PVT. LTD. CITATION: 2023 TAXSCAN (AAR) 321
A two-member bench of the The Karnataka Authority for Advance Ruling consisting of Dr. M.P. Ravi Prasad, Additional Commissioner of Commercial Taxes, Member (State), and Kiran Reddy T, Additional Commissioner of Customs & Indirect Taxes, Member (Central), disposed of the application for clarifying Goods and Service Tax on utility charges collected by the company from its restaurant partners due to withdrawal by the applicant.
The applicant had sought an advance ruling in respect of the question of “Whether utility charges collected by the company from its Restaurant Partners attract GST under CGST/KGST Act?”
Subsidy received from central/ state government cannot be excluded from value of supply as same is not affecting price of supply IN RE M/S Hitze Boilers Private Limited CITATION: 2023 TAXSCAN (AAR) 322
The Karnataka Authority for Advance Ruling (AAR) has ruled that the subsidy received from the central/state government contributes to the value of the final output and so the subsidy amount could not be excluded from the value of supply.
The applicant who had been eligible for a 90% subsidy grant from the Central and State Governments had contended that the subsidy amount must be excluded from the value of supply, referring to Sections 2(31) and 15(2)(e) of the CGST Act 2017.The petitioner sought an advance ruling regarding the exclusion of subsidies from the value for GST liability calculation. He argued that GST should be charged on the total invoice amount, excluding the approved subsidy, citing Section 2(31) of the CGST Act.
The Authority, after reviewing the submissions, determined that the exclusion specified in Section 15(2)(e) is not applicable, and subsidies from the central and state governments cannot be disregarded when calculating the value of supply.Furthermore, the authority also held that the transaction value is the sole consideration for the supply. Since the supplier issues an invoice for the full amount, inclusive of the subsidy amount, it was held that the subsidy received from the central/state government could not be excluded from the value of supply.
Technological service provided to merchants through Namma Yatri APP does not amount to supply by Juspay In Re: M/s. JUSPAY TECHNOLOGIES PVT. LTD CITATION: 2023 TAXSCAN (AAR) 323
The Karnataka Authority for Advance Ruling has determined that the technological service provided to merchants through the Namma Yatri App is insufficient to supply Juspay. The two-member bench, comprising Dr. M.P. Ravi Prasad (Member – State) and Kiran Reddy T (Member – Central), ruled that the supply by the service provider to customers on the Applicant’s computer application does not amount to supply by the Applicant.
The authority observed that the unique business model of the applicant involves connecting auto drivers and passengers, with their role ending at this connection.They don’t collect consideration, lack control over the actual service provision, and don’t manage ride details or operate a control room/call center.As a result, the supply happens independently of the applicant, and they only identify the supplier of services without responsibility for operational and completion aspects.
The authority concluded that the supply of services is not through the electronic commerce operator, meeting the conditions of Section 9(5) for tax discharge by such operators.
No GST shall be leviable on Juspay towards supply of service supplied by service provider to customers through Juspay’s Computer application In Re: M/s. JUSPAY TECHNOLOGIES PVT. LTD CITATION: 2023 TAXSCAN (AAR) 323
The Karnataka Authority for Advance Ruling made a significant decision, stating that no Goods and Service Tax (GST) should be imposed on Juspay for the service it facilitates between a service provider and customers through its computer application. The authority, in its proceedings, noted the distinctive business model of the applicant, where their role is limited to connecting auto drivers and passengers, concluding at this point without involvement in collecting consideration, controlling service provision, or managing ride details through a control room or call center.
The authority’s verdict emphasized that the supply occurs independently of the applicant, as they are solely engaged in identifying the service provider without responsibility for the operational aspects and completion of the ride. Consequently, the applicant fails to meet the conditions outlined in Section 9(5) for the discharge of tax liability by an electronic commerce operator. Following a thorough review of submissions and relevant provisions, the two-member bench of the Authority of Advance Ruling ruled that the applicant is not obligated to collect and remit GST on the provided services.
Distributor’s Licensing Services for distribution of exhibitor’s rights to view film shall attracts 18% GST In Re: M/s. Sri NAGARAJU JAYANNA CITATION: 2023 TAXSCAN (AAR) 324
The two-member bench of the Karnataka Authority for Advance Ruling (AAR) consisting of Dr. M.P. Ravi Prasad (Member – State), and Kiran Reddy T (Member – Central), determined that the classification of licensing services for the distribution of rights to exhibit films is under has ruled that distributor’s licensing services for the distribution of exhibitor’s rights to view films shall attract an 18% Goods and Service Tax.
The applicant had contended that the department had inaccurately assessed the agreement’s nature as a distribution service. He contended that the classification should be based on the agreement’s nature and the associated rights, not solely on the method of determining consideration. The department’s attempt to categorize the distribution service under SAC 999614 was deemed incorrect, and the accurate classification of the SIM distribution service under SAC 997332 was upheld.
During the proceedings, the authority determined that the film distribution service falls within SAC 999614. The applicant’s reliance on specific case laws pertaining to goods classification was considered irrelevant in this context.
A Two-Member Bench of the Authority, featuring Riddhesh Raval, Member SGST, and Amit Kumar Mishra from the Gujarat Authority for Advance Ruling (AAR), has dismissed an application submitted by Tasty Thrills LLP regarding the GST liability pertaining to electricity charges in as sub lessor agreement..
As per the agreement between the applicant and the sub lessor, the applicant had been consistently paying his share of electricity charges, based on sub-meter readings, to the sub-lessor throughout the duration of their rent agreement. Subsequently, the sub-lessor combines the collected amount from the applicant with their own share of electricity charges and remits it to the electricity supplier. The sub-lessor had asserted that these electricity charges, collected in conjunction with rent, should be considered incidental charges and should therefore subject to GST, similar to other incidental charges.
The applicant had contended that the electricity charges were a reimbursement of actual expenses and that the sub-lessor acted as a ‘pure agent,’ with no incidental services provided. The applicant had sought an advance ruling on whether the sub-lessor was liable to charge and pay GST on these electricity charges.
Roof Solar Plant Classifiable under Plant and Machinery, Eligible for ITC In Re: . The Varachha Co-Op. Bank Ltd CITATION: 2023 TAXSCAN (AAAR) 131
The Gujarat Appellate Authority for Advance Ruling (AAAR) has determined that a roof solar plant falls under the category of plant and machinery, making it eligible for input tax credit (ITC). The Two-Member Bench of the Authority, consisting of Samir Vakil, Member SGST, and BV Siva Naga Kumari, Member CGST, highlighted that the roof solar plant, affixed to a foundation via nuts and bolts and possessing the flexibility of four different angles, is not classified as immovable property but rather as plant and machinery.
The lack of a specific definition for ‘immovable property’ under GST led the authority to reference Section 3(26) of the General Clauses Act, 1897, which defines it to include land, benefits arising from land, and things attached to the earth or permanently fastened to anything attached to the earth. Similarly, Section 3(36) of the General Clauses Act, 1897, defines “movable property” as property of every description, except immovable property.
Given that the Roof Solar Plant is not permanently fastened to the building, it qualifies as plant and machinery and is not considered immovable property. Consequently, it does not fall under the category of blocked credit, as mentioned in 17(5)(d) of the CGST Act, 2017.
GST leviable under RCM for Lease Renewal Amount payable to Surat Municipal Corporation In Re: M/s. The Surat Textile Market Cooperative Shops & Warehouses Society Ltd CITATION: 2023 TAXSCAN (AAR) 325
Two-Member Bench of the Gujarat Authority for Advance Ruling (AAR) comprising Riddhesh Raval (Member SGST) and Amit Kumar Mishra (Member CGST) observed that the applicant, The Surat Textile Market Cooperative Shops & Warehouses Society Ltd, is liable to pay GST under Reverse Charge Mechanism (RCM) in terms of Section 9(3) of the CGST Act, 2017, for the lease renewal amount payable to Surat Municipal Corporation.Authority.
Section 9(3) of the CGST Act, 2017 empowers the Government to issue notification, on the recommendations of the GST Council, specifying categories of supply of goods or services or both wherein tax shall be paid on RCM basis by the recipient. Section 9(4), ibid, on the other hand, empowers Government to issue a notification to specify a class of registered persons who shall in respect of supply of specified categories of goods or services or received from an unregistered supplier, pay tax on RCM basis.
Central Air Conditioning Plant, Lift, Electrical Fittings, and Fire Safety Extinguishers are Immovable Property, ineligible for ITC In Re: M/s. . The Varachha Co-Op. Bank Ltd CITATION: 2023 TAXSCAN (AAAR) 131
The Gujarat Appellate Authority for Advance Ruling (AAAR), consisting of Samir Vakil, Member SGST, and BV Siva Naga Kumari, Member CGST, concluded that certain items such as the Central Air Conditioning Plant, Lift, Electrical Fittings, and Fire Safety Extinguishers have been classified as immovable property, thereby making them ineligible for Input Tax Credit (ITC).
The appellant had engaged in a contract for the ‘supply & erection’ of a ‘Central Air Conditioning System.’ The determination was based on Section 2(119) of the CGST Act, which defines ‘Works Contract.’ This expression is specifically limited to contracts related to immovable property, as defined in clause 3(26) of the General Clauses Act, 1897. Additionally, Section 3 of the Transfer of Property Act 1882 provides further clarification on the term ‘attached to earth.
ITC cannot be claimed for Expenses related to CSR Initiatives In Re: M/s. Adama India Private Limited CITATION: 2023 TAXSCAN (AAAR) 132
A Two-Member Bench of the Authority comprising Samir Vakil, Member SGST and BV Siva Naga Kumari, Member CGST held that taking into account the definition of taxable supplies and the provisions of Section 17(2) of CGST Act, 2017, input credit cannot be availed on CSR activities.
Further as per the provision of Section 37 of the Income Tax Act, 1961, any expenses incurred by an assessee on corporate social responsibility activities as given under Section 135 of the Companies Act, 2013 shall not be considered to be an expense incurred by the assessee for the objectives of the company or profession.
Section 16(1) of the CGST Act states that ITC can be claimed for inputs and input services used in the course or furtherance of business. Since CSR activities are mandatory and can impact a company’s reputation and operations, the appellant argued they should qualify as being in the course and furtherance of business.
GST not Leviable on Escrow Deposit Pending Outcome of Award In Re: M/s Dedicated Freight Corridor Corporation of Indian Limited CITATION: 2023 TAXSCAN (AAR) 327
The Gujarat Authority for Advance Ruling (AAR) has made a significant decision, ruling that the Goods and Services Tax (GST) is not applicable to escrow deposits while awaiting the outcome of an arbitral award. This clarification stems from NITI Aayog’s directive for Public Sector Undertakings (PSUs) to deposit 75% of the disputed amount in an escrow account during ongoing litigation, a practice extended to cases involving adverse Dispute Adjudication Board (DAB) decisions.
The applicant had argued that the amount placed in the escrow account does not qualify as consideration under the definition in the CGST Act, 2017. There is no exchange of goods or services involved, as the deposit aims to revive the construction industry and is linked to unresolved legal proceedings. Additionally, the applicant maintains control over the deposited amount, requiring contractor permission for withdrawal.
The Two-Member Bench of the Authority, led by Riddhesh Raval, Member SGST, and Amit Kumar Mishra, Member CGST, observed that the amount deposited by the applicant in the escrow account (75%) against a bank guarantee, pending the outcome of further challenges to the Arbitral Award or dissatisfaction with DAB decisions, is not subject to GST under the provisions of the CGST Act.
Demised Premises for Commercial Use not covered in the Definition of Residential Dwelling In Re: M/s Deepak Jain CITATION: 2023 TAXSCAN (AAR) 328
The Rajasthan Authority of Advance Ruling (AAR) has determined that ‘demised premises’ do not fall under the category of ‘residential dwelling’ for the purposes outlined in notification 05/2022. This ruling is based on the fact that the said premises were being utilized for commercial purposes.
The applicant, in this case, entered into a lease agreement with an Indian company (Lessee) engaged in providing comprehensive fund accounting, reporting, and analytics solutions to fund administrators within the hedge fund industry. Although the property’s land use is classified as residential and the lease deed issued by Jaipur Development Authority (JDA) designates the demised premises as residential, the lease agreement explicitly states that the premises will be utilized solely for commercial purposes by the Lessee, specifically for establishing a branch or office.
The Authority Bench, led by Central Tax Member Umesh Kumar Garg and State Tax Member Mahesh Kumar Gowla, observed that despite the residential classification, the property had been leased for commercial use. Referring to prior rulings such as M/s Aluri Krishna Prasad and M/s Lakshmi Tulasi Quality Fuels, the bench concluded that the transaction was of a commercial nature. Therefore, it was ruled that the ‘demised premises’ would not be considered within the definition of ‘residential dwelling’ as per Notification No. 05/2022-Central Tax (Rate) dated 13/07/2022, owing to its commercial utilization.
Purpose and duration of stay are crucial in definition of “Residential Dwelling” In Re: M/s Deepak Jain CITATION: 2023 TAXSCAN (AAR) 328
The Rajasthan Authority of Advance Ruling (AAR) has ruled that the purpose and duration of stay are crucial aspects in the definition of residential building.
The applicant has entered into lease agreement with a company incorporated in India (Lessee)which is inter alia engaged in the business of providing comprehensive, independent fund accounting, reporting, and analytics solutions to fund administrators providing administration services to hedge fund industry.
The authority bench of Central Tax Member Umesh Kumar Garg and State Tax Member Mahesh Kumar Gowla noted that, “the definition of Residential dwelling is not mentioned in GST Law. It was thus noted that it is to be decided by finding out the use of property rented out by the Applicant and accordingly the taxability of GST shall be determined. It was thus ruled that, “The important factors to be included in the definition of Residential Dwelling is the purpose for which the dwelling is put to use and the length of stay intended by the users.”
GST leviable under RCM for Premium on Lease Renewal Amount Payable to Surat Municipal Corporation In Re: M/s The Surat Textile Market Cooperative Shops & Warehouse Society Ltd CITATION: 2023 TAXSCAN (AAR) 329
The Gujarat Authority for Advance Ruling (AAR) has made a notable observation, stating that the Goods and Services Tax (GST) is applicable under the reverse charge mechanism (RCM) for the premium on lease renewal amount payable to Surat Municipal Corporation.
The lease of a plot and the associated one-time lease premium, salami, premium on lease renewal, and annual premium paid by the applicant constitute a ‘supply’ and fall within the ambit of Section 7(1) of the CGST Act, 2017.
The Two-Member Bench of the Authority, comprising Riddhesh Raval, Member SGST, and Amit Kumar Mishra, Member CGST, has ruled that the one-time premium, salami, premium on lease renewal, and annual lease premium paid by the applicant to the Surat Municipal Corporation for leasing the Surat Textile Market are considered a supply of service under Section 7(1) of the CGST Act, 2017. Consequently, these payments are taxable under GST in accordance with Notification No. 11/2017-CT (Rate) dated 28.06.2017.
Lessor shall Pay GST on Residential Dwelling if utilized for Commercial Purpose on FCM Basis In Re: M/s Deepak Jain CITATION: 2023 TAXSCAN (AAR) 328
The Rajasthan Authority for Advance Ruling (AAR) comprising of Central Tax Member Umesh Kumar Garg and State Tax Member Mahesh Kumar Gowla thus ruled that the lessor shall be liable to pay Goods and Services Tax on residential buildings if utilized as demised premises for commercial purposes under forward charge mechanism.
The Authority Bench observed that the property in question has been leased/rented for commercial use. So even if the use of said property has not been changed by JDA but since the so called residential dwellings does not remain as such as it being used for commercial purposes. The said supply of service i.e. renting for commercial use is covered under 997212 and taxable at 18% and the Applicant i.e. lessor is supposed to pay GST as mentioned above on forward charge basis.
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