The Maharashtra Authority of Advance Ruling (AAR) in its recent ruling in the case of Maharashtra Jeevan Pradhikaran (MJP) has ruled that no GST Registration was required if the supplier is wholly engaged in supplies that are exempted from GST.
Facts of the case:
The Maharashtra Jeevan Pradhikaran (MJP) has appointed applicant, Mekorot Development & Enterprise Ltd, the applicant (MDE) as a consultant for the study, survey, drafting, and formation of the Water Supply Master Plan (WSMP) to address the water drought problem in the Marathwada region and assist the Government of Maharashtra (GOM) to make a comprehensive strategy to solve the Marathwada (Aurangabad division) Water Crisis permanently.
MDE is a fully owned subsidiary of Mekorot, the national water company of Israel which is fully owned by the Government of Israel.
MJP is a Government of Maharashtra undertaking established through The Maharashtra Jeevan Authority Act, 1976. MJP was constituted in 1977 under The Maharashtra Water Supply and Sewerage Board Act, 1976 (MWSSB Act), for rapid development and proper regulation of Water Supply and Sewerage service in the State of Maharashtra.
The act was later changed to The Maharashtra Jeevan Authority Act. 1976. MJP being a GOM undertaking, the Maharashtra state government holds 100% controlling power in MJP.
Issue on which ruling was sought:
The applicant has sought the advance ruling on the issue whether MJP qualifies as Government entity and whether the work carried out is exempted. Further ruling was sought that if it is concluded that the supplies made or proposed to be made by MDE to MJP qualifies for an exemption then the consequent question is whether MDE requires to obtain registration under GST law.
Order of AAR:
The Coram of Rajiv Magoo and T.R. Ramnani ruled that MJP qualifies as Government Entity being constituted and established by Govt. of Maharashtra with 100% participation by way of equity or control. Further, it was held that if the impugned supplies made or proposed to be made by the applicant to MJP are the only supplies undertaken by the applicant, in such a case, the applicant is not required to obtain registration under GST law, since the impugned supply is held to be exempt under the provisions of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017.
However, if the applicant is undertaking or proposes to undertake any taxable supply of goods or services or both, then in such a scenario the applicant will be required to obtain GST registration under section 22 of the GST Act, on crossing the threshold turnover limit.
Relevant Statutory Provisions:
As per Entry 3 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017 following services are exempt from GST.
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 [or a Government Entity] 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.
As per clause 2 (zfa) of above Notification “Government Entity” means an authority or a board or any other body including a society, trust, corporation,-
(i) set up by an Act of Parliament or State Legislature; or
(ii) established by any Government,
with 90per cent. or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Territory or a local authority.
Section 22 of the CGST Act
Persons liable for registration.— (1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees:
Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees:
Provided further that the Government may, at the request of a special category State and on the recommendations of the Council, enhance the aggregate turnover referred to in the first proviso from ten lakh rupees to such amount, not exceeding twenty lakh rupees and subject to such conditions and limitations, as may be so notified
Section 23(1)(a) of the CGST Act
Persons not liable for registration.— (1) The following persons shall not be liable to registration, namely:––
(a) any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act;
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
