Section 7 CGST Act
Case Title | Gujarat Industrial Development Corporation |
Court | Gujarat AAAR |
Honorable Judges | Member Milind Torwane & Member Seema Arora |
Citation | 2022 (5) GSTPanacea 382 HC Gujarat GUJ/GAAAR/APPEAL/2022/07 |
Judgement Date | 09-May-2022 |
Council for Petitioner | Jigar Shah |
Council for Respondent | NA |
Section | Section 7 |
In Favour of | In Favour of Revenue |
The Gujarat Bench of Member Milind Torwane & Member Seema Arora has held that bench hold that the appellant is not eligible to claim exemption as they are not a governmental authority carrying out function entrusted to a municipality under article 243W of the Constitution.
Bench uphold the Advance Ruling of the Gujarat Authority for Advance Ruling, with modification in their findings to the effect that the appellant does not fall under the category of ‘State Government’ but is covered under the category ‘Government Entity’, in the case of M/s. Gujarat Industrial Development Corporation.
FACTS OF THE CASE
The appellant has raised the following question for advance ruling in the application for Advance Ruling filed by it.
“Whether various activities carried out by the appellant to the plot holders in terms of provisions of GIDC Act, 1962 and charges collected for the same as may be notified from time to time amounts to supply under Section 7 of the CGST Act, 2017?”
The appellant has submitted that they were established under the provisions of Gujarat Industrial Development Act, 1962 (hereinafter referred as GID Act) by the Gujarat Government for the purpose of orderly establishment and organization of industries in industrial areas and estates as well as establishing commercial centers in connection with the establishment and organization of such industries in the State of Gujarat. Referring to various provisions and sections of CGST Act, 2017, GID Act, the appellant submitted that their activity in question is not to be considered as supply under Section 7 of CGST Act as the same does not fall under the definition of business under Section 2(17) of CGST Act, 2017
The appellant also submitted that as per their interpretation of law, their activities are exempted by the virtue of Sr.No. 04 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (as amended) which exempts the services by government authority by way of any activity in relation to any function entrusted to a municipality under article 243W of the Constitution
The GAAR ruled as follows:-
Question: Whether various activities carried out by the appellant to the plot holders in terms of provisions of GIDC Act, 1962 and charges collected for the same as may be notified from time to time amounts to supply under Section 7 of the CGST Act, 2017?
Answer: The various activities carried out by the Applicant M/s Gujarat Industrial Development Corporation, Gandhinagar to the plot holders in terms of of provisions of GIDC Act, 1962 and charges collected for the same as may be notified from time to time amounts to supply under Section 7 of Central Goods and Service Tax Act, 2017 (CGST Act) and is liable to GST for the reasons discussed hereinabove.
Aggrieved by the aforesaid advance ruling, the appellant has filed the present appeal
The appellant in the ground of appeal has submitted that GAAR rejected all the arguments of appellant without giving any reasons and also failed to understand that both the nature of activity and identity of provider plays equal role in determination of supply
Further, Section 8 of GID Act empowers State Government to dissolve the appellant if the State Government is satisfied that the purpose of the appellant is successfully achieved. The appellant also referred to various sections of GID Act.
Section 7 CGST Act
COURT HELD
Considering the facts as recorded, held that bench are of view that the activities in which the appellant is engaged are undertaken as public authority, therefore clause (i) of Section 2(17) of CGST Act, 2017 covers the activities of the appellant. The provisions of sections 7(1) and 7(1A) of CGST Act, 2017 read with clause (i) of Section 2(17) of CGST Act, 2017 indicates that the activities of the appellant would fall under the definition of supply
In view of forgoing discussion, bench hold that the appellant is not eligible to claim exemption as they are not a governmental authority carrying out function entrusted to a municipality under article 243W of the Constitution.
In view of the foregoing, bench reject the appeal filed by the appellant. Bench uphold the Advance Ruling No. GUJ/GAAR/R/88/2020 dated 17.09.2020 of the Gujarat Authority for Advance Ruling, with modification in their findings to the effect that the appellant does not fall under the category of ‘State Government’ but is covered under the category ‘Government Entity’, in the case of M/s. Gujarat Industrial Development Corporation
ANALYSIS OF THE JUDGEMENT
Section 7 CGST Act
Bench are of view that the words ‘object’ and ‘purpose’ are neither directly nor indirectly related to the definition of business provided in CGST Act, 2017. Further, provision (i) of Section 2(17) defines the activity or transaction related to Central/State Government or public authority as business.
The activities in which the appellant is engaged are undertaken as public authority, therefore clause (i) of Section 2(17) of CGST Act, 2017 covers the activities of the appellant. The provisions of sections 7(1) and 7(1A) of CGST Act, 2017 read with clause (i) of Section 2(17) of CGST Act, 2017 indicates that the activities of the appellant would fall under the definition of supply
It is clear that above mentioned exemptions are available only to Central Government, State Government, Union territory, local authority or governmental authority (upto 26.07.2018) and to governmental authority only (effective from 27.07.2018) in respect to service provided by them by way of any function entrusted to a municipality under article 243W of constitution
In view and furtherance of above, it can be stated that activities viz. upliftment of oppressed people by providing them proper shelters, easy loans for business, encouraging their children for study by providing them scholarships etc are covered in “planning for economic and social development”.
Bench are of view that the activity of appellant i.e. establishment, organization and development of industries and industrial areas and estates is not at all related to entry at Sr.No.3 of XII schedule of the Constitution of India. The appellant place reliance in its own case GIDC Vs CIT AIR 1997 SC 3275 wherein it was held that the industrial development is enveloped within the expression “planning, development or improvement of cities, towns and village or for both” in section 10(20A) of Income Tax Act, 1961. Bench are of view that the said expression in the above judgement doesn’t find merits in the XII Schedule and hence doesn’t help the claim of appellant.
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Gujarat Industrial Development Corporation
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