GST LIABILITY ON SERVICES BY IICA: NOT EXEMPT, RULED TAXABLE BY DAAR
DELHI AUTHORITY FOR ADVANCE RULING
GOODS AND SERVICES TAX
Case Title: M/s Indian Institute of Corporate Affairs
(GST DAAR DELHI)
Advance Ruling No. 08/DAAR/2018
Date of Judgment/Order: 28th June 2019
BRIEF FACTS OF THE CASE
Para No. 32. In order to substantiate the importance of toilets in preservation of environment, it is pertinent to realise how open defecation impacts the environment and measures required to deal with this menace. Open defecation in its general sense refers to the practice whereby people go out in fields, bushes, forests, open bodies of water, or other open spaces rather than using the toilet to defecate. The environment suffers as a result of open defecation because it introduces toxins and bacteria into the ecosystem in amounts that it cannot handle or break down at a time. Further, it is an important cause of water pollution and causes various waterborne diseases such as diarrhea, typhoid, cholera and hepatitis. In order to eradicate the problem of open defecation, Ministry of Drinking Water and Sanitation, Government of India under its flagship “Swacch Bharat Mission” has vowed to achieve a clean and open defecation free India by 2 October, 2019.
Para No. 46. The applicant is registered as a society under the Societies Registration Act, 1860. It is a Government of India enterprise and is engaged in implementation of projects related to Corporate Social Responsibility (CSR). It has signed a Memorandum of Understanding (MoU) dated 16.01.2017 with Agriculture Insurance Company of India Limited (AIL) for implementation of “Integrated Village Development Programme’ for improving infrastructure facilities in 50 villages in the States of Bihar, Jharkhand, Madhya Pradesh, Maharashtra and Uttar Pradesh. Under this MoU arrangement, the applicant is required to provide Solar Street lights, Solar Water Pumps and construction of toilets in the selected villages. By implementing this social welfare project, the AICL wanted to discharge its Corporate Social Responsibility (CR) for the financial year 2016-17:
Para No. 47. The ICA had submitted a proposal to AICL on 04.07.2016, namely, ‘Developing a CSR road map and undertake CSR projects’. Thereafter, a MoU was signed between the two on 03.08.2016 for conducting a comprehensive baseline and need assessment survey. Thereafter, the IICA had submitted a Detailed Project Report (DPR) to AICL.
Question No. 1:
Para No. 65. The first issue mentioned above is whether the amount paid by M/s AICL to the applicant is in the nature of consideration for supply of good or services or the same can be considered as grant-in-aid. The applicant has claimed that the amount received by them from AICL is not covered in the definition of “consideration” as per Section 2(31) of the CGST Act, 2017. The first argument of the applicant is that the payment of money by AICL to them cannot be called consideration as the applicant is not providing any services to M/s AICL but the agreed services are being supplied directly to the ultimate recipients / beneficiaries of the scheme. The applicant has claimed that the whole activity can be divided into two parts. The first part consist of payment of the money / amount by AICL to the applicant for which no services are provided by them to AICL. They have claimed that the said amount is in the nature of grant-in-aid, which is non-taxable. The second part consist of services supplied by the applicant directly to the beneficiaries for which such beneficiaries make no payment i.e. applicant does not receive any consideration for the said services. Hence, in view of the applicant, none of the said two parts of the activity is subject to the payment of GST.
Para No. 66. However, it is observed that under sub-section (a) of the Section 2(31) of the CGST Act, 2017, the consideration for the supply of goods or services may be paid by the recipient or by any other person. Hence, even if it assumed that services supplied by the applicant are not received by M/s AICL but are received by the beneficiaries, the amount paid by M/s AICL to the applicant is still covered in the definition of “consideration” paid for the said supply of goods or services by the applicant and is covered in the definition of supply given under Section 7(1) of the CGST Act, 2017. Hence, contention of the applicant that the whole activity can be split into two separate non-taxable transactions, is not correct.
RULING
Para No. 82. The amount received by the applicant from AICL is not in the nature of grant-in-aid and is covered in the definition of “consideration” for the supply of goods or services under Section 2(31) of the CGST Act, 2017 in respect of the MoU dated 16.01.2017. Hence, they. are liable to pay GST under Section 9(1) of the CGST Act, 2017.
Para No. 83. The said supply of goods or services are not exempted from the payment of GST under S. No. 1 or 5. No. 76 of the Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 and parallel notifications under SGST and IGST. Hence, the applicant is liable to pay GST on the supply of goods or services under the MoU dated 16.01.2017 entered by them with AICL.
