In Re: M/s. IL & FS Education and Technology Services Ltd.
GST
2018 (10) TMI 683 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2018 (18) G. S. T. L. 175 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – AAR
Dated:- 25-6-2018
GST-ARA-48/2017-18/B-55
GST
SHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, MEMBER
PROCEEDINGS
(under section 98 of the Central Goods and Service Tax Act, and the Maharashtra Goods and Services Tax Act, 2017)
The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by IL&FS Education and Technology Services Ltd., the applicant, seeking an advance ruling in respect of the following question:-
The present Advance Ruling Application is for determining applicability of Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 read with Entry No. 72 of Notification N
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0 is registered in Mumbai, Maharashtra and falls within the jurisdiction of Mumbai Nodal Division-5, Maharashtra. The Applicant is the social infrastructure arm of IL&FS group and is engaged in the key areas of education, Skill development, healthcare and cluster development for long term and sustainable impact.
2. Inter alia, the Applicant is working with various State or Union Territory Governments to promote computer training among the students and teachers of the government and government aided higher secondary schools under the Information and Communication Technology ('ICT') @ School Project (hereinafter referred to as “ICT Project”).
Overview Of ICT Project
3. Information and Computer Technology (ICT) is universally acknowledged as an important tool for improving the quality of education. Realizing the importance of ICT and the vital role that it plays in educational sector, the Government of India framed nationwide policy viz. National Policy on Education, 1986 (as modifie
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Government aided schools into smart schools, where each school should have a computer lab and students are provided with premier computer training. In addition to computer training, ICT in Schools also provide for encouragement of usage of digital medium to impart education in other subjects and to create capability in terms of teaching staff enabling the schools to fully implement ICT in Schools.
Mode of Implementation
6. As discussed above, this new policy framed by the Central Government endeavors to provide guidelines to assist the States in optimizing the use of ICT in school education Within a national policy framework. As per the guidelines in the new policy, the Central Government provides that for effective implementation of Projects, the State or Union Territory Governments may consider entry of private partners in various aspects of the ICT Project by adopting the Build, Own, Operate and Transfer (BOOT) model to avoid out of date/ obsolete equipment in schools. Thus, the n
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s, optimum utilization and cost-effective implementation of ICT Projects. Thus, the State and Union Territory Governments have to implement Projects in accordance with the guidelines issued by the Central Government in this regard.
9. As the State or Union Territory Government is required to implement ICT Projects in accordance with the guidelines issued by the Central Government, almost all states have been following the PPP model by sourcing out the ICT Project work to the private parties under the BOOT model (as suggested by the Central Government).
10. Thus, as a matter of fact, throughout the nation, the States are adopting the BOOT model to implement ICT Project in schools. In fact, the Applicant is also implementing such ICT Projects on BOOT model basis in various states viz. Odisha, Maharashtra, West Bengal, etc.
ICT Project in the State of Maharashtra
11. The present application concerns one such ICT project being implemented by the Applicant in the State of Maharashtra.
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t”).
Activities to be undertaken by the Applicant
14. In terms of the agreement, DE(S&HS) would arrange the necessary minimum constructed rooms/ space in each school for setting up computer labs and the Applicant would carry out the necessary work viz. flooring, furniture and fixtures, etc. for preparing each site to be used as an ICT lab.
15. Further, as per the specifications laid down in the Annexure-I and Annexure-IA to the agreement and the decision of the technical committee, the Applicant would procure the requisite number of IT equipment i.e. Computers, Printers, Scanners, etc. The equipment so procured would be installed and commissioned by the Applicant in the ICT lab prepared in schools. All these activities i.e. site preparation, installation and commission are to be completed by the Applicant in the time prescribed in the agreement i.e. Within 120 days from the date of handing over of the sites by DE(S&HS).
16. Once the labs are ready, the Applicant Shall operate the
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re applications.
18. Moreover, it is also the responsibility of the Applicant to maintain and upkeep the ICT labs in proper working conditions for the entire contract period at its own cost. For this, the Applicant would have to provide requisite manpower to carry out the necessary repairs as and when required within the time limit prescribed in the agreement. Besides, the Applicant would also appoint a help desk which will serve as a single point of contact for all ICT related incidents and service requests. Further, the Applicant shall also provide 1 District coordinator for each district and 1 Project manager for a region for project management & monitoring which would coordinate with the Government of Maharashtra.
19. In terms of the agreement, all the above-mentioned activities are to be carried out for a total consideration of Rs. 284,61,00,000/- (Rupees Two hundred and eighty-four crores sixty-one lakhs only) which would be payable in installments (throughout the period of con
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es or both;
f. Whether applicant is required to be registered;
g. Whether any particular thing done by the applicant with respect to any goods or Services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.
22. The Applicant submits that the issue on which advance ruling is sought in the instant matter relates to the applicability of Sl. No. 72 of Notification No. 12/ 2017-Central Tax (Rate) dated 28.06.2017 under CGST Act to the services provided by the Applicant. The questions relating to applicability of a notification issued under the CGST Act, 2017 are eligible to be posed for advance ruling before the Advance Ruling Authority in terms of Section 97(2)(b) of the CGST Act, 2017. Hence, present advance ruling application is maintainable before the Hon'ble Authority of Advance Ruling,
ISSUE(S) REQUIRING ADVANCE RULING:
23. The Applicant submits the following question for Advance Ruling and their interpretation on the questi
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cified otherwise, subject to the relevant conditions as specified in the corresponding entry in column (5).
26. For quick reference, Entry No. 72 of the Notification No. 12/2017 is reproduced herein below:
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
27. The corresponding exemption is provided under Entry No. 72 of Notification No. 12/2017 dated 29.06.2017 issued under Maharashtra Goods and Service Tax Act, 2017.
Analysis of the exemption entry
28. On a careful perusal of the above extracted entry, it is clear that NIL rate under the said entry would be leviable to all the services which are provided:
a. under any traini
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activities carried out by the Applicant would qualify as 'supply of services under the training program' or not?
32. In order to answer this question, it is pertinent to understand true nature, scope and extent of the activities undertaken by the Applicant in the implementation of ICE Projects under the ICT in Schools scheme.
All the activities undertaken under ICT Projects are naturally bundled
33. It has been explained in the facts of the instant matter (Para 6-9 of Annexure I to the application) that the national level policy framed by the Central Government for implementation of ICT Projects provides that the State Government(s) should preferably follow BOOT model.
34. This suggestion of the Central Government is in fact being followed by the State Governments. Multiple state governments, as mentioned in facts also, are awarding the contracts for implementing ICT Projects on BOOT model only. In all such cases, the private parties are implementing ICT Projects under BOOT Model,
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nments as recipient of supply, the Applicant is of the understanding that all the activities performed by the private parties under the BOOT model are naturally bundled.
The basic infrastructure is being developed to provide computer training to the students or teachers
38. With the background in mind, as discussed above, the Applicant would like to highlight the fact that the basic idea of the Government of Maharashtra behind sourcing out the ICT project to the Applicant is that the Applicant should provide computer training to specific number of schools in Maharashtra for five years. Further, to be able to impart such computer training, the Applicant is also made responsible for creating the infrastructure in such schools as required, which will be used by the Applicant for first five years and thereafter, by the respective schools.
39. It is pertinent to note that the infrastructure built by the Applicant is used by the teachers appointed by the Applicant to provide computer tra
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he agreement clearly provides that the supply of computer hardware, software, faculty and provision of education services under BOOT model are in pursuit to improve the quality of education in secondary and higher secondary schools of Maharashtra.
44. On a careful perusal of the new policy issued by the Central Government and the preamble of the agreement, it is abundantly clear that the prime object behind this scheme is to promote computer literacy among students and teachers. Thus, the main thrust under this scheme is to impart computer training and to achieve this, the Government is making provisions for ICT lab and other IT infrastructure.
BOOT Model achieves the object of imparting computer training and therefore. is preferred over outright purchase of assets
45. It may be argued that in order to achieve the object of providing computer training, the Government may purchase the assets and employ the teachers from the external service provider or engage the available school te
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OT model, the experts in the IT fields are engaged and thus, the schools will get benefit of the expertise of the private IT vendors.
e. It takes a considerable time for the computer learning processes to stabilize and the BOOT model leverages the expertise of IT vendors for the time period enough for smooth transition.
47. Thus, for the above referred merits of the BOOT Model, the Government has encouraged the State Governments to opt it for implementing ICT Projects.
48. It is to be noted that prior to introduction of the new policy, the Government of India had amended its old policy in 2011 by issuing revised guidelines of in Schools (hereinafter referred to as revised guidelines). A copy of the revised guidelines is enclosed as Annexure-E. Under its revised guidelines also, the Government has stressed upon the fact that the 'Outright Purchase Basis' or 'Direct Procurement of Hardware' by the State Governments would be the last resort. Moreover, the State Government(s) opting t
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he focus under the BOOT model and the present agreement of the Applicant with the State of Maharashtra is on the provision of quality computer training for 5 years and not creation / supply of infrastructure.
The Applicant is not providing operation or maintenance services
51. It is to be noted that in terms of the agreement, during the period of contract (i.e. 5 years), the operation and maintenance of the entire IT infrastructure, equipment is to be carried out by the Applicant on its own Cost. It is to be noted that during this period, the ownership of the equipment and infrastructure remains with the Applicant. This can be inferred from the following terms of the contract:
a. during the period of contract, the equipment, infrastructure, etc. are to be repaired by the Applicant at its own costs.
b. it is the responsibility of the Applicant to obtain necessary insurance6 for the equipment, infrastructure, etc. Thus, for the entire contract period, the risk remains with the Appl
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NNAI wherein, the Hon'ble Tribunal has held that the maintenance or repair services undertaken by CMS cannot be taxed under 'Management, Maintenance or Repair service' in as much as the same are undertaken in respect of the self-owned goods and would amount to self-service. This view of the Tribunal is upheld by the Hon'ble Supreme Court in CCE, Pondicherry vs. CMS (I) operations and Maintenance co. Pvt. Ltd. = 2017 (11) TMI 442 – SUPREME COURT.
55. Thus, in view of the above discussion it is clear that the entire infrastructure is owned by the Applicant and the repair and maintenance activities undertaken by the Applicant are in regard to the self-owned equipment. Therefore, there is no supply of maintenance or operation services by the Applicant.
56. In fact, the repair and maintenance of the equipment and infrastructure is performed by the Applicant so that it may continue to provide computer training during the contract period in a smooth manner without any obstruction.
Th
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ing service. As discussed above, the basic idea of the ICT project implementation is provision of computer training to specific schools in the state of Maharashtra and not procurement of equipment / mere creation of infrastructure.
60. In view of the above discussion, it is abundantly clear that the Applicant is responsible for provision of computer training for five years using the newly built infrastructure. Entry No. 72 of Notification No. 12/2017 requires that the services must be provided under a training programme. It is important to analyse if the services of provision of computer training by the Applicant can be considered to have been provided under a training programme.
61. It is pertinent to note that the term 'training' 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/SGST Act as well as CGST/SGST Rules. Therefore, it is necessary to refer to the dictionary meaning of the term
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. a course of diet and exercise for developing physical strength, endurance or dexterity;
(v) Oxford Dictionary of English, third edition
Training means the action of teaching a person or animal a particular skill or type of behaviour
62. On a careful perusal of the above referred dictionary meaning. it can be understood that in common parlance, training is generally used to refer to practical instruction or learning process. It also means practical guidance given for developing skills or the action of teaching or giving instruction in a particular subject to enhance skills.
63. It is to be noted that under the erstwhile service tax regime, the services in the nature of commercial training and coaching provided by commercial training and coaching institutes were taxable and the term 'commercial training and coaching' was also not defined under the Finance Act (both under the positive and negative regime). Further, the courts had, at various occasions, interpreted the term 'train
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'ble Mumbai Tribunal in the case of CCE, Pune – III vs. Mitcon Consultancy and Engg. Services Ltd. = 2017 (6) TMI 379 – CESTAT MUMBAI. Wherein, the Hon'ble Mumbai Tribunal has held that the term education includes training.
66. In the instant case, the Applicant is engaged in imparting computer skills to the students as well as teachers. As far as students are concerned, they are taught computer as a subject wherein, various skills viz. operation of computers, using MS-Office, internet, etc. are given to them. Besides that, even teachers and headmaster/ headmistress are given skills in regard to computer-aided learning.
67. It is to be noted that the activities of the Applicant are restricted to providing skills to teachers as well as students in a particular subject i.e. computer. Thus, these activities, being narrow in scope, would qualify as training services.
68. Further, in the decision of Great Lake Institute of Management Ltd. (Great Lake Institute of Management Ltd. vs. CST,
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Thus, it is abundantly clear that the services provided by the Applicant viz. computer related training to the students as well as teachers under ICT Project would squarely fall within the ambit of term 'training' used in Entry No. 72 of Notification No. 12/2017 irrespective of the tenure, syllabus, content, etc. of the Project.
71. In view of the above discussion, it can be inferred that the first pre-requisite of the Entry No. 72 of the Notification No. 12/2017 is fulfilled.
The services are provided to Government of State of Maharashtra
72. The second pre-requisite of Entry No. 72 of Notification No. 12/2017 is that the services are to be provided to the Central or State or Union Territory administration. In the instant case, the agreement pertaining to implementation of ICT Project is entered into between the Applicant and DE(S&HS).
73. School Education Department of the State of Maharashtra is working as an Administrative Department with several Directorates under its control
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reement has been entered into by the Director of Education on behalf of the State of Maharashtra.
75. It is also apparent from the definition clause of the agreement which provides that director means the Director of Education (Secondary and Higher Secondary), Maharashtra State that is acting on behalf of the Government of Maharashtra as the implementing officer in respect of ICT Project in the State of Maharashtra. Therefore, it is clear that the DE(S&HS) is an implementing authority acting on behalf of the State of Maharashtra for implementation of ICT Project. Thus, the Applicant is providing services to the Government of State of Maharashtra.
76. In view of the above, it is abundantly clear that the Applicant is engaged in providing computer training services to the Government of Maharashtra. Therefore, the second pre-requisite of the Entry No. 72 of Notification No. 12/2017 is also fulfilled.
The entire expenditure is borne by the Central Government and the State Government of
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Entry No. 72 of Notification No. 12/2017?
Applicant's Understanding:
The Applicant is providing computer training services to the Government of Maharashtra and the whole expenditure in regard to such training programme, is borne by the Central Government as well as the Government of Maharashtra, Thus, the services provided by the Applicant would fall within the scope of Entry No. 72 of Notification No. 12/2017 and thus, leviable to CGST and SGST at Nil rate.
03. CONTENTION – AS PER THE CONCERNED OFFICER
No submissions have been made by the department.
04. HEARING
The case was taken up for preliminary hearing on dt. 18.04.2018, with respect to admission or rejection of the application when Sh. Kapil Sharma, Advocate along with Ms. Jyoti Pal, Advocate and Sh. Vinesh Khanna, AVP, Sh. Amitabh Jain, CEO and Sh. Srinivas, SVP appeared and requested for admission of application as per their contentions made in ARA. The jurisdictional officer, Sh. Rishikesh Wagh, Asstt. Commissioner o
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econdary schools in ten identified regions in the State of Maharashtra,
5.3 We therefore take up the issue of interpretation of afore-mentioned Entry No. 72 of the said Notification to the subject activity of the applicant for discussion and are reproducing the said Entry No which is as under:-
Sl.No.
Chapter, Section, Heading, Group or Service Code (Tariff)
Description of Services
Rate (per cent)
Conditions
(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
5.4 We observe that as per Entry No 72 pertaining to 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 a
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ernment/government aided higher secondary schools under the ICT Project. The applicant in their submissions have stated that they are engaged in single supply of computer training services to the state of Maharashtra” in the form of installation, commissioning, site maintenance, operation, etc. to implement ICT Projects in the government secondary and higher secondary schools in the state of Maharashtra. They have also submitted that the ICT project is sourced from them by the DE(S&HS) for providing computer training to specific number of schools in Maharashtra for five years and further, to be able to impart such computer training, the Applicant is also made responsible for creating the infrastructure in such schools as required, which will be used by the Applicant for first five years and thereafter, by the respective schools.
We find that the applicant has referred to the provisions of Entry No 72 of Notification No. 12/2017 mentioned above. A plain reading of the said provisions m
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the contracts clearly envisage a situation of supply of both goods and services and not services only. For the contract to fall under “Services provided to…” there should be only services rendered and no supply of goods which is not so in this case.
To summarise, the applicant has entered into a contract with Maharashtra State, for a period of 5 years, for implementation of the ICT @ school project in Government and Government aided higher secondary schools across the State of Maharashtra. In the preamble of the contract it is mentioned that “In its pursuit to improve the quality of education in Secondary and Higher Secondary schools of Maharashtra, the supply of computer hardware, software and connected accessories, Faculty and provision of IT Education Services in Government Secondary and Higher Secondary schools in the State of Maharashtra on Build, Own, Operate and Transfer (BOOT) Model is envisaged under the ICT @school scheme under Public Private partnership'.
As seen in the
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posite supply of Goods i.e. hardware and network equipments, printers, scanners, power equipments, and also imparting training on use of such equipments as per the syllabus prescribed (The said tender was for the supply of computer hardware, software and connected accessories along with the site preparation (i.e. vinyl flooring, furniture and fixtures, electrical fittings, power backup facilities, LAN, etc.), maintenance of equipment and provision of computer training services for 5 years in the various schools). Thus, it will be incorrect to dub the entire project as a training programme. It is rather a composite supply of goods and services, not naturally but artificially bundled having distinctly separate components with distinct value attributable to each of the components.
B. SERVICES SHOULD BE PROVIDED TO CENTRAL GOVERNMENT STATE GOVERNMENT UNION TERRITORY ADMINISTRATION UNDER ANY TRAINING PROGRAMME
From the foregoing discussions we find that the applicant is not just providin
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ills to the students as well as teachers Also we see that the contract is for the supply of computer hardware, software and connected accessories along with the site preparation (i.e. vinyl flooring, furniture and fixtures, electrical fittings, power backup facilities, LAN, etc.), maintenance of equipment and provision of computer training services for 5 years in 1590 Govt, and Govt. aided high schools of Maharashtra under ICT @ school project for a certain contract value. Thus, the contract is clearly for supply of goods and services including training.
It is a composite supply having distinctly identifiable components with distinct value attributable to each of the components. There is no doubt that the applicant has provided computer training service as part of the contract, but the said service is not the pre-dominant/ principal supply. In fact as seen above the contracted supply has many distinct supply components out of which training is a small component. It is also seen from t
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reading of the terms of the contract that payment for the work done is to be made by DE(S&HS) which is a department of the State Government. Thus the source of funding the expenditure is the State Government. Thus there is no dispute in respect of fulfillment of this condition but as per discussions above, the other two conditions of Notification are not satisfied.
5.7 Thus we find that when the language of a taxing statute is clear, if the conditions of supply falls within the four corners of statute allowing exemption, it is to be exempted. If not, tax is to be levied. In the present case all the conditions of Entry No 72 of the Notification No. 12/2017 have not been fulfilled and therefore there is no question the applicant being eligible for exemption on the basis of the said Entry.
06. In view of the extensive deliberations as held hereinabove, we pass an order as follows :
ORDER
(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Se
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