In Re: M/s. IL&FS Education and Technology Services Limited
GST
2019 (2) TMI 1603 – APPELLATE AUTHORITY FOR ADVANCE RULING, ODISHA – 2019 (22) G. S. T. L. 515 (App. A. A. R. – GST)
APPELLATE AUTHORITY FOR ADVANCE RULING, ODISHA – AAAR
Dated:- 14-11-2018
ORDER No. 01/ODlSHA-AAAR/Appeal/2018
GST
SHRI RAKESH KUMAR SHARMA MEMBER AND SHRI SASWAT MISHRA, MEMBER
Present For the Appellant
1. Shri Kapil Kumar Sharma, Advocate, Partner, Lakshmikumaran & Sridharan Attorneys,
2. Smt. Saumya Dubey, Advocate, Associate, Lakshmikumaran & Sridharan Attorneys,
3. Shri Amitabh Dubey, CFO, IL&FS Education and
4. Shri Vineesh Khanna, Vice President, IL&FS Education.
1.1 M/s IL & FS Education and Technology Services Ltd. (hereinafter referred to the Applicant or the Appellant”), assigned with GSTIN 21AABCI2106H1ZC, having registered address at 51-KIIT, ITI Campus-14, Chandaka Industrial Estate, Khorda. Odisha-751024. had filed an application on 27 03.2018 under Section 100(1) of
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concerns, one such ICT project being implemented by the Appellant in the State of Odisha. The Odisha Madhyamik Shiksha Mission (hereinafter referred to as “OMSM”), Government of Odisha, has mandated the Odisha Knowledge Corporation Limited (hereinafter referred to as “OKCL”) to implement ICT project in 4000 government and government aided higher secondary schools across the State of Odisha. Accordingly, OKCL floated a tender (Tender Code No.3) on e-tendering portal of Secured e-Tendering System (SeTs).
1 4 The said tender was for Supply, Installation, Maintenance and Commissioning of Projection system, Interactive White Board, Computer Hardware, Connected Accessories, Installation of Software and other allied accessories, site prepafation (i.e. vinyl flooring, furniture and fixtures, electrical fittings, power backup facilities, LAN, etc ), maintenance of equipment and provisions of computer training services for 5 years, in 4000 schools, divided in 6 zones on the BOOT Model basis.
1
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School Project.
Entry No. 72 of Notification No. 12/2017-Central Tax(Rate), dated 28.06.2017, which is relevant to this appeal, is reproduced below for ease of reference
SL.No.
Chapter, Section, Heading, Group or Service Code (Tariff)
Description of Services
Rate (per cent)
Condition
(1)
(2)
(3)
(4)
(5)
72
Heading 9992
Services provided to the Central Government, State Government, Union territory administration under any training programme for which total expenditure is borne by the Central Government, State Government, Union territory administration.
Nil
Nil
(Entry No.72 of Notification No. 12/2017- Central Tax (Rate), is same as entry No.72 of Notification SRO No. 306/2017 dated 29.06.2017, issued by the Finance Department of Government of Odisha)
1.7. The AAR, Odisha, after examining the grounds filed in the Application filed by the Applicant, has observed that three pre-perquisites are to be satisfied for the supply of services to qualify for the notified exempti
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of goods and services which are not naturally bundled. Each of the components of the composite supply are distinctly identifiable both in terms of quantity and value. The service provided or to be provided is not exclusively in the nature of training programme.
(c) Though the source of funding for the service is the State Government and Central Government, yet, as per the contract, the payment responsibility is vested on OKCL.
Therefore, the activities of the applicant by way of supply of goods and services under the ICT project are not covered under Entry 72 of the notification no. 12/2017 dated 28.06.2017, to be entitled to the benefit of exemption from GST.”
1.9 While rendering the aforesaid Ruling, the AAR has also observed that as per para 1(c) of Schedule II of the OGST/CGST Act, any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods and not a servi
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t under the ICT Project.
1.11 The Appellant has also made a prayer for condonation of 5 days delay, under sub-section-2 of Section 100 of the CGST Act, 2017.
2. The grounds of appeal, as mentioned by the Appellant, in their Appeal, are summarised here-as-under;
2.1 First pre-requisite: The services are provided under the training programme:
The Appellant has contended that they are carrying out various activities viz. installation, commissioning, site maintenance, operation, etc. to implement the ICT Project in the government schools and government aided schools in the State of Odisha.
The Appellant relies on the following points with a view to establish that the provided by them are under training programme.
(i) All the activities undertaken under the ICT Project are naturally bundled, principal supply being that of provision of computer training;
(ii) The basic infrastructure is being developed to provide computer training to the students and teachers;
(iii) The ICT in School
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od of contract, the equipment, infrastructure, etc. are to be repaired by the Appellant at its own cost.
(b) it is the responsibility of the Appellant to obtain necessary insurance for the equipment, infrastructure, etc. Thus, for the entire contract period, the risk remains with the Appellant.
(c) the Appellant is also claiming the depreciation of the IT equipment, infrastructure, etc. Thus, the IT equipment, infrastructure appears as assets in the books of accounts of the Appellant.
Therefore, the above referred terms of the agreement clearly establish that during the period of contract, the ownership of the equipment and infrastructure lies with the Appellant.
As the entire infrastructure is owned by the Appellant, the activities of maintenance or operation of the infrastructure, hardware, software, etc. carried out by the Appellant are with regard to self-owned equipment. Thus, it cannot be said that the Appellant is engaged in the supply of operation or maintenance services in
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re developed by it would be transferred after the expiry of the contract period (i.e. 5 years). This is also clearly provided in the agreement that the ownership of the entire hardware, software, other equipment, etc. will be transferred at zero value at the end of the contract period.
In view of the above, it can be concluded that during the entire period of contract, the Appellant is not engaged in the supply of goods inasmuch as supply of goods is taking place only after the expiry of contract period of 5 years.
It is to be noted that the Appellant is claiming depreciation of the IT equipment in its books of accounts and as per the accounting policy, the normal life span of IT equipment is 5 years. Thus, after 5 years, the net realizable value of IT equipment in the books of account of the Appellant reduces to zero. As the IT equipment does not have any realizable value in the books of accounts of the Appellant, the same are being transferred to SMED at zero value.
Without prejud
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#39; used in the above referred Entry No. 72 has not been defined in the Notification No. 12/2017. Further, this term is also not defined in the CGST/OGST Act as well as in CGST/OGST Rules.
2.2 Further, the Appellant has rebutted to the findings of the Advance Ruling Authority, as mentioned herein below:
(a) that under the CGST Act, the concept of composite supply is applicable only when two or more identifiable and taxable supplies of goods or services or both, which are naturally bundled, are rendered in conjunction with each other. To understand the same, attention is invited to the definition of composite supply under the CGST Act.
(b) As per Section 2(30) of the CGST Act, “composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal
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upply taking place at the end of the contract period, at zero value.
The Appellant would like to highlight here that as per the contract entered into between the Appellant and OKCL, title in the goods/infrastructure is transferred to SMED and not to OKCL. In such a case, even by applying Para l(c) of Schedule II, it cannot be said that the Appellant is supplying goods to OKCL.
(e) With respect to services provided to Government of State of Odisha, the Appellant submitted that OKCL is a corporation established under Companies Act, 1956, which has been mandated by OMSM, Government of Odisha to act as an implementing agency to implement the ICT Project, on its behalf.
Further, admittedly, the funds for implementation of this project are being provided by OMSM to OKCL, for further release to the Appellant, in accordance with the agreed terms. Moreover, in case, OKCL fails to discharge its obligations under the agreement entered into between OMSM and OKCL, OMSM would step into OKCL's
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“total expenditure is borne by the Central Government. ..”) and not 'paid' by the government. There is no dispute as regards to the fact that it is the responsibility of OMSM (State Government) to ensure that appropriate funds are provided for implementation of the ICT Scheme. In fact, the said submission can be traced to Clause 5.2 of the agreement between OMSM and OKCL (Annexure-D). Therefore, even though the expenditure is 'paid' by OKCL under contract to the Appellant, the same is 'borne' by Centra! and State Government only (jointly).
3. A personal hearing in the matter was held on 26.10.2018. Shri Kapil Kumar Sharma, Advocate alongwith other representatives of the Appellant, appeared for P.H. on 26.10.2018 on behalf of the Appellant and reiterated the written submissions made in the Appeal. He also submitted additional written submissions and reiterated the submissions made therein.
4 1 we have carefully considered the submissions made by the Appellant i
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lared on 17.08.2018. Further, 18.08.2018 and 19.08.2018 were Saturday and Sunday. The Appellant also submitted that the Corporate Office of the Applicant is in Noida, U.P., and the appeal was drafted by the Applicant's Attorneys, whose office is situated in New Delhi. Hence, the entire appeal book was prepared in New Delhi and it was subsequently posted to another office of Applicant in Bhubaneswar, Odisha. The appeal book and filing documents were dispatched from Delhi on 17.08.2018 through Blue Dart Express courier. The courier was expected to reach within 2 days of dispatch, i.e., by 19.08.2018. However, due to delay in transit, the documents were received by Applicant's Odisha office on the evening of 20.08.2018. It is thus submitted that the delay in filing the appeal has been caused due to technical factors beyond the control of Applicant.
4.4 On records, it is found that the Appellant has received the copy of the Advance Ruling passed by AAR, Odisha, on 17.07.2018 and h
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ng, Group or Service Code (Tariff)
Description of Services
Rate (per cent)
Condition
(1)
(2)
(3)
(4)
(5)
72
Heading 9992
Services provided to the Central Government, State Government, Union territory administration under any training programme for which total expenditure is borne by the Central Government, State Government, Union territory administration.
Nil
Nil
* Entry No. 72 of Notification SRO No. 306/2017-Finance Department is identical to the Entry No. 72 of Notification No.12/2017-Central Tax(Rate).
4.6 On going through the aforesaid notification, it is noticed that the following three conditions are required to be satisfied in order for the supply to qualify for the notified exemption, under Entry No.72 of Notification No. 12/2017-Central Tax(Rate).
(a) The supply has to be a supply of Service provided to the Central Government, State Government or Union territory Administration;
(b) Such service must be under any training programme;
(c) The total expenditure
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viding services to Government.
4.9 On perusal of para 8 of the Agreement dated 12.09.2013 between OKCL and the Appellant it is noticed that the Appellant is required to supply and install the specified goods provide specified services in the ICT Labs of the Govt and Govt. Aided High Schools located in the specified zones. Therefore, it is evident that the Appelant has made supplies to OKCL. which is a body corporate and registered under the Companies Act 1956 as a Company.
4.10 We notice that the Authority for Advance Ruling. Odisha, in their findings (para 5 3 of the Order)has clearly observed that OKCL was promoted by the Higher Technical education department Govt of Odisha and was incorporated under the Compares Act 1956 as a public limited company to create new paradigm in education and development through universalization and integration of Information Technology in teaching learning and educational management processes in particular and socio economic transformative processes i
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a State Therefore OKCL is neither the Sate Government nor a part of the State Government of Odisha or the Central Government and therefore the supplies by the applicant to OKCL should not be held to be a supply to Government.
4.11 No counter argument has been put forth by the Appellant to substatniate their claim that the supplies were made by them to the Government. Therefor we fully agree with the finding arrived at the Advance Ruling given by the Advance Ruling (AAR), Odisha, on this point and hold so Even if some percentage of shares are owned by Government of Odisha in the OKCL. the company cannot be construed as Government. Therefore, we hold that the Appellant does not meet the primary requirement of the conditions as laid down under Entry No. 72 of Notification No.12/2017-Central Tax(Rate), dated 28.06.2017, so as to be eligible for the said exemption, as the services provided by the Appellant to OKCL cannot be construed as services provided to the Central Government, State G
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. will be transferred at zero value at the end of the contract period Therefore, the stand taken by the Appellant is self-contradictory in as much as on one hand, they claim that the provision of service as operation or maintenance of self-owned equipment does not amount to supply of services to third party. But on the other hand, they claim that the ownership in the infrastructure developed by it would be transferred after the expiry of the contract period (i e 5 years). The said transfer of ownership is also unconditional Therefore we hold that the consideration received by the Appellant is in respect of provision of supplies, taxability of which has been discussed in the foregoing paragraphs.
Moreover, under Schedule-II (1)(c) of the CGST Act, 2017/SGST it is clearly defined that any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods.
4.14 It is also ob
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