ORDER

At the outset, we would like to make it clear that the provisions of both the CGST Act and the RGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the RGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / RGST Act would be mentioned as being under the “GST Act”.

The issue raised by M/s Lakhlan & Quereshi Construction Company, 402, 4th Floor, Diamond Tower, Ajmer Road, Jaipur-302021, Rajasthan – (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (b)&(e) given as under:-

(b) applicability of a notification issued under the provisions of this Act.

(e) Determination of the liability to pay tax on any goods or services or both.

A. SUBMISSION AND INTERPRETATION OF THE APPLICANT:

1. Brief facts of the case :

> M/s Lakhlan & Qureshi Construction Co. (hereinafter referred to as “LQCC” or “the Applicant”) (a partnership firm) is a civil contractor and is engaged in the business of construction of roads, buildings, civil structures or various other civil works as awarded from various governmental and non-governmental organisations.

> M/s Jaipur Smart City Limited (hereinafter referred to as “JSCL”), having their premises at, Pandit Deen Dayal Upadhyay Bhawan, Municipal Corporation Jaipur, Lal kothi, Tonk Road, Jaipur is a Special Purpose Vehicle (SPV) formed on 12.03.2016, to operate as a nodal agency to take up works proposed under the smart city proposal according to Smart City mission launched by the government of India. The SPV is governed by the board of directors and is answerable to Jaipur Municipal corporation.

> The work of installation of “Firefighting system with pump house in ABD Area & Purohit ji ka Katia, including 5 years O&M” in Jaipur city was awarded to M/s Lakhlan & Qureshi Construction co. vide Letter of acceptance no. JSCL/XEN-III/2020-21/1743 dated 18.02.2021 (Total contract price ₹ 5,14,74,250/- excluding GST) and NTP No. JSCL/XEN-III/2020-21/1852 dated 26.02.2021. The project commencement and completion dates are 08.03.2021 and 07.02.2022 respectively. The project would involve design, erection, installation, operation and maintenance of the Fire Fighting system.

> Further as per Section V -Procuring Entity’s Requirements of RFP, the detailed specifications are as under:-

5.1 Project Background

5.1.3 Need of the project

From Fire and Life safety point of view the market has no permanent system of its own, like modern marketplaces called mall.

5.2 Scope of work

1) For scope of work, bidder is expected to refer bidding document and also advised to visit the project site.

2) As per the space availability at Ghatgate fire station, it is proposed to construct 200 KL underground water tank and pump room. Civil and other finishing work shall be done by the Nagar Nigam fire department. Rest all works are in bidders scope.

3) O&M of fire detection and alarm system including Pressure Transmitters for 5 years is in bidders scope.

5.3 General Scope of work: –

No additional of separate cost will be paid to contractor (BOQ Based) for following works. All the works mention below are inclusive in the quoted price.

i. Carry out the topographical/total stations survey for required scope of work, mapping of installed equipment, Geo fencing as per directions of engineer in charge or any other work to make system efficient.

ii. Contractor to submit topographical survey map sheet with overlay of fire fighting system grid layout plan within 15 days of issue of NTP.

iii. All equipment and sensors supply, installation, testing and commissioning including 5 years O&M is in contractor scope.

iv. Contractor to take prior approval from the JSCL before bulk procurement of materials/equipment.

v. Excavation work including 20 KM carriage distance is in contractor scope.

vi. All drawing design and materials should conform to relevant IS Code. In case IS is not available should confer to ASTM, BS, sound industrials practice in this order.

vii. Electricity/ water bill during construction of Project up to Testing and hand over of project to the line agency.

viii. Any approval required from any line agency should be taken by the contractor in the name of entities. It is very clear that JSCL can only morally support to the contractor for liaising with respective department. It is very clear that morally support means to officially facilitate contractor to get the approval from concern Govt, department. If the line agency required any changes in technology/terms, the contractor shall change accordingly. No additional cost will be paid by Entity and NOC Charges shall be paid by the contractor and the same will be reimbursed to the contractor on submission of the invoice with the running bill.

ix. The bids shall address the complete scope of work. Any bid for part scope of work or related services shall be held non-responsive and shall summarily be rejected.

x. All the tests for welding (including but not limited to pressure test and spray penetration test) or any other work as desired by JSCL engineer-in-charge and as per technical requirements.

xi. Bidders are requested to propose a single optimal solution and should refrain from suggesting multiple solutions or options that may lead to rejection of the bid.

xii. All the civil/ mechanical/Electrical works required to complete the job are in scope of contractor.

xiii. Third party inspection/ test from IIT/MNIT/ any other agency as per direction of JSCL Engineer-in-charge of all the materials and works (as per directions of Engineer-in-charge) is to be got done by the successful bidder. Cost of inspection/test is to be paid by the bidder and the same will be reimbursed to the bidder on submission of invoice of the same along with the running bill.

xiv. Any other item Which has not been specifically mentioned in specification but are necessary for the completion of the project as per good engineering practice, safety norms and successful operation and guaranteed performance of the entire project shall be deemed to be included within scope of work and shall be provide by the contractor without any extra cost to the employer.

xv. It will be contractor’s responsibility to protect all the property in the vicinity ‘ of the project site from any damage due to execution of project. Any measure to be taken for the protection of such property is the sole responsibility of the contractor. Damage to any public or private property’ is solely contractors liability.

xvi. All of the material to be supplied under this Contract shall be of reputed manufacturers and should be from list of Category 1/A of RUIDP.

xvii. All type (as applicable) of routine and acceptance tests on all the material shall be conducted in accordance with the latest applicable IS Standards in the presence of Employer’s Representative as required or a designated Third-Party Inspector as appropriate. All costs for the tests shall be borne by the Contractor. Test reports require in the Contract and requested by the Employer’s Representative shall be submitted by the Contractor to the Employer’s Representative. Third-party inspector bill is to be paid by the contractor and will be reimbursed to the contractor on submission of Invoice of the same along with running bill.

xviii. All the relevant certificates of the items procured from manufacturer or any other agency are to be submitted by the contractor.

> Further, as per clause no. (viii) of point no. 1 of the general scope of work as mentioned under heading 5.3 of Section V – Procuring Entity’s Requirements of RFP is as mentioned below –

“viii. Any approval required from any line agency should be taken by the contractor in the name of entities. It is very clear that JSCL can only morally support to the contractor for liaising with respective department. It is very clear that morally support means to officially facilitate contractor to get the approval from concern Govt, department. If the line agency required any changes in technology/terms, the contractor shall change accordingly. No additional cost will be paid by Entity and NOC Charges shall be paid by the contractor and the same will be reimbursed to the contractor on submission of the invoice with the running bill.”

> In respect of the above-said clause, the applicant is required to obtain NOC from Jaipur Nagar Nigam (JNN) for cutting of roads to install pipelines for firefighting system upon payment of certain fees firstly from their own pocket and then the same shall be reimbursed by JSCL to them upon submitting of invoices.

> In order to execute the work, the applicant has made an application to obtain permission from JNN. JNN has considered the application and permission is granted subject to the payment of the fees. A copy of letter no. F-29()/XEN/NNJ/2020/332 dated 26lh March 2021 issued by Jaipur Nagar Nigam to the applicant for road cutting permission fees is attached.

> Notification number 24/2017 of Central Tax (Rate) dated 21st September 2017 was issued to amend the original rate Notification 11/2017 dated 28lh June 2017 to insert an item number (vi) in Column (3) of serial number 3 in the abovesaid notification and the said service shall be chargeable to CGST at the rate of 6%. This new introduced item states that “Services provided to the Central Government, State Government, Union Territory, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out. repair, maintenance, renovation, or alteration of-

a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession.

b) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or(iii) an art or cultural establishment; or

c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Services Tax Act, 2017.

> Similarly, according to item number (vii) in Column (3) of serial number 3, of Notification number 11/2017 as amended by 24/2017, if any construction service which does not fall between the item number (i) to (vi) of the said notification it shall be chargeable to CGST at the rate of 9%.

> In respect of services provided by Jaipur Nagar Nigam to the applicant, sub-section (2) of section 7 of CGST Act, 2017 states that –

“Notwithstanding anything contained in sub-section (1),-

(a) activities or transactions specified in Schedule III: or

(b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services.

> In light of the clause (b) of sub-section (2) of section 7 of CGST Act, 2017, CBIC has notified through notification number 14/2017 of central tax (rate) dated 28th June 2017 which was later amended by notification number 16/2018 dated 26th July 2018, wherein the activities or transactions undertaken by the central government or state government or union territory or any local authority in relation to functions entrusted through article 243G or 243W of the constitution are considered as neither supply of goods nor supply of services.

> Considering the fact that the construction services provided by LQCC to JSCL are chargeable to GST, it wishes to understand whether the GST rate according to item number (vi) in Column (3) of serial number 3 of Notification No. 11/2017 as amended by notification number 24/2017 is applicable in relation to transactions with JSCL.

> Further, considering the fact that the services provided by Jaipur Nagar Nigam in form of granting approval for road cutting to the applicant are in the capacity of public authority and service is in relation to a function entrusted to them under article 243 W of the constitution, it wishes to understand whether the service provided by JNN to applicant is a supply of service or not as per section 7 of CGST Act, 2017, in the light of notification number 14/2017 of Central Tax (Rate) dated 28th June 2017 as amended by notification number 16/2018 of Central Tax (Rate) dated 26th July 2018.

> Additionally, applicant also wishes to understand that if the service provided by JNN to applicant is not covered under sub-section (2) of section 7 of CGST Act, 2017 then whether the applicant is liable to pay tax under RCM on the amount of fees paid by the applicant to JNN for obtaining NOC.

Further, applicant also wishes to understand, whether the reimbursement by JSCL to the applicant for the amount paid to JNN for obtaining NOC is liable to GST or not.

STATEMENT CONTAINING APPLICANT’S INTERPRETATION OF LAW IN RESPECT OF THE QUESTION RAISED IN ANNEXURE – 1

1. APPLICABILITY OF NOTIFICATION NUMBER 11/2017 OF CENTRAL TAX (RATE) DATED 28TH JUNE 2017.

1.1 Abstract from Notification Number 11/2017 of Central Tax (rate) dated 28th June 2017 as amended by 24/2017 of Central Tax (rate) dated 21st September 2017 for item number (vi) of column (3) of serial number 3 (Construction services).

1.1.1 The relevant provision pertaining to services provided to the Central Government, State Government, Union Territory, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration is contained under Notification Number 11/2017 of Central Tax (Rate) as amended by 24/2017. The same is reproduced herein below:

SI. No.	Chapter, Section or Heading	Description of service	Rate (percent)	Condition
(1)	(2)	(3)	(4)	(5)
3	Heading 9954 (Construction Services)	“(vi) Services provided to the Central Government, Slate Government, Union Territory, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of – (a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; (b) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or(iii) an art or cultural establishment; or (c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Services Tax Act, 2017.	6	–

1.1.2 As per the aforesaid notification, a registered person (registered under CGST Act) shall be entitled to charge CGST at the rate of 6% when providing the abovesaid services to Central Government, State Government, Union Territory, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of civil work or any other work as mentioned in the notification.

1.1.3 The scope of services provided by M/s Lakhlan & Qureshi Construction Co. to Jaipur Smart City Limited fall within the scope of clause (a) of item number (vi) of construction services i.e. services provided to the Central Government, State Government, Union Territory, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession.

1.2 Consideration of Jaipur Smart City Limited (JSCL) as Governmental Authority

1.2.1 Governmental Authority has been defined through an explanation to Section 2(16) of IGST Act, 2017. The same has been reproduced below’ –

Governmental authority” means an authority or a board or any other body,-

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government,

with ninety per cent or more participation by way of equity or control, to carry out any function entrusted to a Panchayat under article 243G or to a municipality under article 243 W of the Constitution.

The functions entrusted to a municipality under the Twelfth Schedule to article 243W of the Constitution are as under:-

(a) Urban planning including town planning.

(b) Regulation of land-use and construction of buildings.

(c) Planning for economic and social development.

(d) Roads and bridges.

(e) Water supply for domestic, industrial and commercial purposes.

(f) Public health, sanitation conservancy and solid waste management.

(g) Fire services.

(h) Urban forestry, protection of the environment and promotion of ecological aspects.

(i) Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded.

(j) Slum improvement and up gradation.

(k) Urban poverty alleviation.

(I) Provision of urban amenities and facilities such as parks, gardens, playgrounds.

(m) Promotion of cultural, educational and aesthetic aspects.

(n) Burials and burial grounds; cremations, cremation grounds; and

(o) Cattle pounds; prevention of cruelty to animals.

(p) Vital statistics including registration of births and deaths.

(q) Public amenities including street lighting, parking lots, bus stops and public conveniences.

(r) Regulation of slaughter houses and tanneries.

1.2.2 Jaipur Smart City Limited is a government of Rajasthan Undertaking as mentioned in their charter. It is submitted that government of Rajasthan has floated Jaipur smart city limited for the development of Jaipur as smart city as a Special purpose Vehicle (SPV).

The SPV will be owned by the state government and the Jaipur Municipal Corporation on 50:50 ratio. The SPV will be governed by a board of directors and is answerable to union and state governments, Jaipur Municipal Corporation and all other stakeholders. The paid-up capital of the Special Purpose of Vehicle will be ₹ 200 crores divided into 20 crores equity shares of ₹ 10/- each. The share holding pattern of Jaipur smart city limited, as received from JSCL is as under:

S.No.	Name of Shareholders	Shareholding (No. of Shares)
1	Secretary to Government, Local Self Government, Rajasthan, Jaipur (Nominee of Government of Rajasthan)	1
2	Commissioner, Jaipur Development Authority, Jaipur (Nominee of Government of Rajasthan)	I
3	Commissioner, Municipal Corporation, Jaipur (Nominee of Urban Local Body)	9,99,99,998 (4,998 initially & 9,99,95,000 further allotted)
4	Director and ex-officio Special Secretary, Local Bodies, Rajasthan, Jaipur (Nominee of Government of Rajasthan)	9,99,99,997 (4,997 initially & 9,99,95,000 further allotted)
5	Additional Commissioner (Head Quarter), Municipal Corporation, Jaipur (Nominee of Urban Local Body)	1
6	Chief Accounts Officer cum, FA, DLB (Nominee of Government of Rajasthan)	1
7	Chief Engineer, JMC (Nominee of Urban Local Body)	1
Total		20,00,00,000

1.2.3 As per the applicant’s understanding, the functions performed by Jaipur Smart City Limited are covered under Article 243 W of the constitution of India to be defined as governmental authority.

1.2.4 Jaipur Smart City Limited seems to satisfy both the conditions required to be classified as governmental authority.-

a. JSCL is established by Rajasthan government with 90% or more control on the basis of the shareholding pattern as mentioned above.

b. JSCL is performing activities as entrusted under the Article 243 W of the constitution.

1.3 Relied on the recent Advance ruling in the case of M/s Zigma Glogal Environment Private Limited

1.3.1 We would like to submit that; we have relied upon the ruling of Hon’ble Advance Ruling Authority of Andhra Pradesh in case Zigma Global Environment Solutions P Ltd. AAR No.10/AP/GST/2020 dated 05.05.2020. It is in context to Tirupati Smart city corporation limited, a special purpose vehicle (SPV) created by the Government of Andhra Pradesh for the development of Tirupati city vide G.O.M.S. No. 258, Municipal Administration and Urban development CUBS) department dated 21.10.2016. Where the hon’ble AAR of Andhra Pradesh has held that TSCCL was a governmental authority as defined in the explanation to clause (16) of section 2 of the IGST Act, 2017.

1.3.2 Also, they have referred to following website of Smart Cities Mission, of Ministry of Housing and Urban Affairs, Government of India, ref: https://smartcities.gov.in/node/132, where yourselves can find the name of Jaipur and all the projects undertaken to make Jaipur as smarty city under smarty city mission. Here the project undertaken by the applicant is also listed on the website.

1.3.3 Jaipur Smart City Limited will be governed by board of directors and is answerable to Jaipur Municipal corporation. It is mentioned that Mr. Manjit Singh, Principal Secretary, LSGD, Government of Rajasthan, Jaipur was unanimously appointed as the Chairman of the Company which means that, it is working on direction and control of state government and directors are government employees, in this case equity and control both are with state government. The applicant also states that from the above, it is very much clear that, condition of 90% or more participation by way of equity or control is with state government and therefore condition of both Government Authority and Government Entity are satisfied.

1.3.4 The applicant further submits that the findings and decisions taken by Hon’ble AAR in the case of Zigma Global Environ Solutions Private Limited, is squarely applicable to the instant case of Jaipur Smart City Ltd.; that from the above it is understood that Jaipur Smart City Ltd., squarely falls under the definitions of “government authority” as per explanation to clause (16) of Section 2 of the Integrated Goods and Services Tax Act, 2017. “

1.4 Conditions satisfied by the Applicant to apply rate of 6% CGST as mentioned in notification.

1.4.1 Based on the above provisions contained in Notification Number 11/2017 of Central Tax (Rate), it appears that the following conditions have been satisfied by the Applicant to charge CGST at the rate of 6% on the transactions with Jaipur Smart City Limited:-

a. The Applicant is registered under the CGST Act.

b. The Applicant is providing construction services to Jaipur Smart City Limited (JSCL) who is a governmental authority.

c. The construction services of installation of Fire Fighting system with pump house in the contracted area is covered under clause (a) of item number (vi) of Column number.

1.4.2 Therefore, all of the conditions contained in the notification have been complied with by the Applicant for the chargeability of CGST at the rate of 6%.

2. SERVICE PROVIDED BY JAIPUR NAGAR NIGAM TO THE APPLICANT IS NOT A SUPPLY OF SERVICE. HENCE APPLICANT IS NOT LIABLE TO PAY GST UNDER RCM ON THE FEES PAID FOR OBTAINING NOC FROM JNN.

2.1 Abstract from Notification Number 14/2017 of Central Tax (rate) dated 28th June 2017 as amended by 16/2018 of Central Tax (rate) dated 26th July 2018 for activities undertaken by government or local authority to be treated as neither supply of goods nor supply of services.

2.1.1 As per notification no. 14/2017 as amended by 16/2018 through power conferred from sub-section (2) of section 7 of CGST Act, 2017, activities undertaken by the central government or state government or union territory or local authority in which they are engaged as public authority and the services provided by them are in the nature of an activity in relation to functions entrusted to a Panchayat under article 243 G of the constitution or to a Municipality under article 243W of the constitution shall be treated as neither supply of goods nor supply of services.

2.1.2 Applicant submits that, the Jaipur Nagar Nigam is a municipality for Jaipur city and is engaged in the capacity of public authority.

2.1.3 The applicant further submits that, service provided by JNN is in nature of granting permission for road cutting so that the underground pipelines can be laid down for installation of firefighting system in the contracted area. The said service for granting approval is in relation to functions entrusted to them under article 243 W of the constitution.

2.1.4 In the light of the above, it is submitted that all the conditions clause (b) of sub-section (2) of section 7 of CGST Act, 2017 read with notification no. 14/2017 as amended by notification no. 16/2018 of central tax (rate) are being satisfied for the transactions between Jaipur Nagar Nigam and the applicant for payment of fees for road cutting rights for obtaining NOC. Hence, the services provided by JNN to LQCC are covered under clause (b) of sub section (2) of section 7 of CGST Act, 2017 and the said transaction is neither supply of goods nor supply of services. Therefore, GST is not applicable on the said transactions.

2.1.5 Since the abovesaid transactions are itself out from the ambit of the definition of supply as defined under section 7 of CGST Act, 2017, Hence, applicant is also not liable to pay GST under RCM on the said transactions with JNN.

3. REIMBURSEMENT BY JSCL OF AMOUNT PAID BY APPLICANT TO JNN FOR OBTAINING NOC IS NOT LIABLE TO GST.

3.1.1 Applicant submits that if the service from JNN to LQCC is not liable to tax, then the reimbursement of the same from JSCL to LQCC will also not attract GST as the primary service is out of the ambit of supply as per section 7 of CGST Act, 2017 and therefore its reimbursement from JSCL is also not taxable under GST.

3.1.2 Further, applicant submits that as per serial number 3 of notification no. 12/2017 of central tax (rate) dated 28th June 2017 as amended by notification no. 02/2018 of central tax (rate) dated 25th January 2018, pure services 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 them through article 243G or 243W of the constitution attracts nil rate of tax. In the light of the said notification, the reimbursement of amount by JSCL to the applicant for the NOC fees paid is in the nature of pure services provided in relation to activities mentioned in article 243W of the constitution and therefore its reimbursement from JSCL attracts nil rate of tax.

3.1.3 Without prejudice of the above, if the service provided by JNN to LQCC is taxable then in that case the applicable rate for the payment of tax will be as per the rate applicable on main contract i.e., GST rate applicable on construction services provided to JSCL for installation of firefighting system in the contracted area considering it is a composite supply where installation of firefighting system is a principal supply.

B. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT:-

1. Whether the service recipient i.e. M/s. Jaipur Smart City Limited is a “Governmental Authority” as defined in the explanation to clause (16) of section 2 of the IGST Act, 2017.

2. Whether Item number (vi) in Column (3) of serial number 3 of Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 24/2017- Central Tax (Rate) dated 21.09.2017 is applicable in respect of all payments related to work order for Fire Fighting System installation at contracted area between applicant and Jaipur Smart City Limited?

3. What will be the GST rate for the work undertaken by applicant for M/s Jaipur Smart City Limited under Bid Reference no. JSCL/Works/02/2020-21?

4. Whether the Applicant is liable to pay GST under RCM in respect of road cutting charges paid by them to Jaipur Nagar Nigam (JNN) on behalf of M/s. Jaipur Smart City Limited in relation to such contract? If the answer to the same is in affirmative, What will be the GST rate for such payment under RCM?

5. Whether recovery of such road cutting charges by the Applicant from M/s. Jaipur Smart City Limited liable to GST? If the answer is in affirmative, what will be the GST rate?

C. PERSONAL HEARING

In the matter personal hearing was granted to the applicant on 10.11.2021. Shri Aanurag Basu, CA (Authorised Representative) of applicant appeared for PH. During the PH, he reiterated the submissions already made in the written application. He requested for early disposal of the application.

D. COMMENTS OF THE JURISDICTIONAL OFFICER

Comments received from the Assistant Commissioner, CGST Div-G, Vidhyadhar Nagar, Jaipur vide letter dated 09.11.2021 are as under: –

1. In this regard, as per the conditions laid down in the sec 2(16) of the IGST Act, 2017 for an entity to be considered as government authority :

(16) “non-taxable online recipient” means any Government, local authority, governmental authority, an individual or any other person not registered and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory.

Explanation.-For the purposes of this clause, the expression “governmental authority” means an authority or a board or any other body,-

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government, with ninety per cent, or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243 W of the Constitution;

In this case JSC Ltd. has been established by the government (A Government of Rajasthan Undertaking) as evident from the share holding pattern of the authority (Copy enclosed). JSC Ltd is a Special Purpose Vehicle (SPV) formed on 12.03.2016, to operate as a nodal agency to take up works proposed under the smart city proposal according to Smart City mission launched by the government of India. Further, JSC Limited is required to carry out the functions entrusted to Municipal Corporation Jaipur such as fire fighting system which falls under the activities mentioned in article 243W of the constitution (Fire Fighting System at entry no. 243 W(g)). Therefore, in view of the above two conditions satisfied by the JSC Limited it appears that it can be considered as a government authority under Section Cause 16 of Section 2 of the IGST Act, 2017.

2 & 3: Item number (vi) in Column (3) of serial number 3 of Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017 as amended by Notification No.24/2017- Central Tax (Rate) dated 21.09.2017 will not be applicable in this case for the services provided to JSC by the applicant as the installation of fire fighting system does not fall in any of the item (vi) in column (3) and the entries relating thereto, in columns (3), (4) and (5) of the above said notification. The services provided by the applicant to the JSC should fall under item (vii) of the above said notification and the applicable GST rate is @9%.

4. In the instant case, the applicant is a service provider instead of the service recipient. However, the applicant does not fall under the category of ‘ Supplier of Service ‘ under Notification No. 13/2017-C.T. (Rate), dated 28-6-2017. Hence, RCM is not applicable in this case but they are liable to pay tax.

5. If the applicant fulfills the condition being a pure agent of M/s JSCL as per Rule 33 of CGST Rules, 2017 then there is no tax liability appears on the applicant in respect of recovery of such road cutting charges from M/s JSCL.

E. FINDINGS, ANALYSIS & CONCLUSION;

1. We have gone through the facts of the case and submission made by the applicant at the time of preliminary hearing.

2. From the record submitted, we find that the Applicant i.e. M/s Lakhlan & Qureshi Construction Company is a civil contractor which awarded the work of installation of “Fire fighting system with pump house in ABD Area & Purohit ji ka Katia, including 5 years Operation &Maintenance” in Jaipur city by the M/s Jaipur Smart City Limited (“JSCL”). As per Notice to proceed (NOP), the project commencement and completion dates are 08.03.2021 and 07.02.2022 respectively. The project would involve design, erection, installation, operation and maintenance of the Fire Fighting system.

3. The applicant in their written submission wants to seek clarity on questions as mentioned in aforesaid point B of this order.

4. Before we delve deep to decide the case, it would be proper in the fitment of justice to discuss the relevant provisions of the statute which are as under-

4.1 Governmental Authority has been defined through item No. ix (of paragraph 4) of an explanation to Notification No 11/2017-CT(R) dated 28.06.2017. The same has been reproduced below –

“Governmental authority ” means an authority or a board or any other body,-

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government,

with ninety per cent or more participation by way of equity or control, to carry out any function entrusted to a Panchayat under article 243G or to a municipality under article 243W of the Constitution.

Further, as per item No. ix (of paragraph 4) of an explanation to Notification No 11/2017-CT(R) dated 28.06.2017, the Governmental Authority has been defined as under:

“Governmental authority” means an authority or a board or any other body,-

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government,

with ninety per cent or more participation by way of equity or control, to carry out any function entrusted to a Panchayat under article 243G or to a municipality under article 243W of the Constitution.

The functions entrusted to a municipality under the Twelfth Schedule to article 243W of the Constitution are as under: –

(a) Urban planning including town planning.

(b) Regulation of land-use and construction of buildings.

(c) Planning for economic and social development.

(d) Roads and bridges.

(e) Water supply for domestic, industrial and commercial purposes.

(f) Public health, sanitation conservancy and solid waste management.

(g) Fire services.

(h) Urban forestry, protection of the environment and promotion of ecological aspects.

(i) Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded.

(j) Slum improvement and up gradation.

(k) Urban poverty alleviation.

(I) Provision of urban amenities and facilities such as parks, gardens, playgrounds.

(m) Promotion of cultural, educational and aesthetic aspects.

(n) Burials and burial grounds; cremations, cremation grounds; and

(o) Cattle pounds; prevention of cruelty to animals.

(p) Vital statistics including registration of births and deaths.

(q) Public amenities including street lighting, parking lots, bus stops and public conveniences.

(r) Regulation of slaughter houses and tanneries.

4.2 Notification No. 11/2017-CT (rate) dated 28.06.2017 as amended by Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 and 3/2019-Central Tax (Rate) dated 29.03.2019:-

In the said notification, in the Table, against serial number 3, for item (vi) in column (3) and the entries relating thereto, in columns (3), (4) and (5), the following shall be substituted, namely:-

SI.No.	Chapter, Section or Heading	Description of Service	Rate (per cent.)	Condition
(1)	(2)	(3)	(4)	(5)
3	Heading 9954 (Construction services)	“(vi)”Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, {“other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above”} provided to the Central Government, State Government, Union Territory, a local authority or a governmental authority or a government entity by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of – (a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; (b) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or(iii) an art or cultural establishment; or (c) a residential complex predominantly meant for selfuse or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Services Tax Act, 2017. [“Explanation. – For the purposes of this item, the term ‘business’ shall not include any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities.”.]	6	–
(“(xii) Construction services other than (i), (ia), (ib), (ic), (id), (ie), (if), (iii), (iv), (v), (va), (vi), (vii), (viii), (ix), (x) and (xi) above. Explanation. – For the removal of doubt, it is hereby clarified that, supply by way of services specified at items (i), (ia), (ib), (ic), (id), (ie) and (if) in column (3) shall attract central tax prescribed against them in column (4) subject to conditions specified against them in column (5) and shall not be levied at the rate as specified under this entry.”;	9	–

4.3 Exemption Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017:

SI.No.	Chapter, Section or Heading, Group or service code (Tariff)	Description of Service	Rate (per cent)	Condition
(1)	(2)	(3)	(4)	(5)
3	Chapter 99	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 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 243 W of the Constitution.	NIL	NIL
9	Chapter 99	Services provided by Central Government, State Government, Union territory or a local authority where the consideration for such services does not exceed five thousand rupees: Provided that nothing contained in this entry shall apply to- (i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers: Provided further that in case where continuous supply of service, as defined in sub-section (33) of section 2 of the Central Goods and Services Tax Act, 2017, is provided by the Central Government, State Government, Union territory or a local authority, the exemption shall apply only where the consideration charged for such service does not exceed five thousand rupees in a financial year.	NIL	NIL

4.4 Section 9(3) of the CGST Act, 2017 (RCM)

SECTION 9. Levy and collection.-

(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

4.5 Notification No. 13/2017-Central Tax (Rate) dated 28.06.2017:

The supply of services mentioned in column (2) of the Table below, supplied by a person as specified in column (3) of the said Table, the whole of central tax leviable under section 9 of the said Central Goods and Services Tax Act, shall be paid on reverse charge basis by the recipient of the such services as specified in column (4) of the said Table:-

SI.No.	Category of Supply of Services	Supplier of service	Recipient of Service
(1)	(2)	(3)	(4)
5	Services supplied by the Central Government, State Government, Union territory or local authority to a business entity excluding, – (1) renting of immovable property, and (2) services specified below- (i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers.	Central Government, State Government, Union territory or local authority	Any business entity located in the taxable territory.

4.6 Section 15 of the CGST Act, 2017:-

SECTION 15. Value of taxable supply.- (1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.

(2) The value of supply shall include,-

(c) incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services;

4.7 Rule 33 of the CGST Rules, 2017:-

RULE 33. Value of supply of services in case of pure agent: Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely,-

(i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation by such recipient;

(ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and

(iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account.

Explanation.- For the purposes of this rule, the expression- pure agent means a person who-

(a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both;

(b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply;

(c) does not use for his own interest such goods or services so procured; and

(d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account.

5. In the present case, as far as the question whether the service recipient i.e. M/s. Jaipur Smart City Limited is a “Governmental Authority” as defined in item No. ix (of paragraph 4) of an explanation to Notification No 11/2017CT(R) dated 28.06.2017 is concerned, on gone through the facts submitted by the applicant and relevant legal provisions, we are of the view that Jaipur Smart City Limited (JSCL)is a Special Purpose Vehicle (SPV) for development of Jaipur City.

As per ‘List of members of JSCL’ provided by the applicant, we find the share holding pattern as under:

S.No.	Name of shareholders	Shareholding (No. of shares)
3	Commissioner, Municipal Corporation, Jaipur (Nominee of Urban Local Body)	9,99,99,998
4	Director and ex-officio Special Secretary, Local Bodies, Rajasthan, Jaipur (Nominee of Government of Rajasthan)	9,99,99,997

As per data/documents provided by the applicant, we find that total authorized capital is ₹ 200 crores and the paid up capital is ₹ 200 crore of M/s JSCL. Further, in view of above shareholding pattern, we find that Nominee of Government of Rajasthan have only 9,99,99,997 shares in JSCL, which is almost 50% and not ninety per cent or more participation by way of equity. Further, the Commissioner, Municipal Corporation, Jaipur (Nominee of Urban Local Body) have9,99,99,998 shares in JSCL, which is almost 50%. The Municipal Corporation, Jaipur is not Government but it is a Local Authority. Thus, shareholding of State Government is almost 50% only in the JSCL. Therefore, M/s JSCL is not satisfying the conditions of item No. ix (of paragraph 4) of an explanation to Notification No 11/2017-CT(R) dated 28.06.2017 in respect of ‘Governmental Authority’.

6. With regard to applicability of Item number (vi) in Column (3) of serial number 3 of Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 24/2017- Central Tax (Rate) dated 21.09.2017&3/2019-Central Tax (Rate) dated 29.03.2019, we find that when M/s JSCL not qualified as Governmental authority then services provided to it by the applicant is also not considered as services provided to the governmental authority. Thus, Item number (vi) in Column (3) of serial number 3 of Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017 as amended time to time is not applicable on applicant in this case. In our view services provided by the applicant will be covered under Item number (xii) in Column (3) of serial number 3 of Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017 as amended time to time and is liable to GST @ 18% (i.e. 9% CGST & 9% SCGST).

7. Further, as far as applicability of GST under RCM in respect of road cutting charges paid by applicant to Jaipur Nagar Nigam (JNN) on behalf of M/s. Jaipur Smart City Limited in relation to such contract is concerned, let’s examine the issue in the light of legal provisions and facts of the case, we find that the Executive Engineer, Jaipur Nagar Nigam (JNN) i.e. municipality vide demand note dated 26.03.2021 (as provided by the applicant) raised a demand to the applicant for road cutting charges in respect of Fire Fighting pipeline. Further, as per clause no. (viii) of point no. 1 of the general scope of work as mentioned under heading 5.3 of Section V – Procuring Entity’s Requirements of RFP, any approval required from any line agency should be taken by the contractor in the name of entities. No additional cost will be paid by Entity and NOC Charges shall be paid by the contractor and the same will be reimbursed to the contractor on submission of the invoice with the running bill.

In the instant case road cutting charges are to be deposited by the applicant to the Jaipur Nagar Nigam (JNN) i.e. Local Authority and the same will be reimbursed by the JSCL on submission of running bill. Further, as per item No. 5 of the Notification No. 13/2017-CT(R) dated 28.06.2017, central tax leviable under section 9 of the said Central Goods and Services Tax Act, shall be paid on reverse charge basis by the recipient when Services supplied by the Central Government, State Government, Union territory or local authority to a business entity. Further, as per item No. 9 of the Notification No. 12/2017-CT(R) dated 28.06.2017, there is an exemption for Services provided by Central Government, State Government, Union territory or a local authority where the consideration for such services does not exceed five thousand rupees. In the present case, services of permission/fees of road cutting is provided by the Local Authority i.e. Jaipur Nagar Nigam (municipality) to the business entity i.e. M/s Lakhlan & Qureshi Construction Company (applicant) for the consideration of ₹ 3,85,10,775/-(i.e. more than Five thousand rupees). Hence, the applicant is liable to pay GST as a recipient for the charges paid or to be paid to the Jaipur Nagar Nigam under reverse charge mechanism. It is pertinent to mention here that activity of giving permission for road cutting charges is not mentioned in the list of works as provided under article 243 W of the constitution entrusted to a Municipality. Thus, clause (b) of sub-section (2) of section 7 of CGST Act, 2017 read with notification no. 14/2017 as amended by notification no. 16/2018 of central tax (rate) is not applicable in this case and the applicant is liable to pay GST as a recipient.

8. As far as liability of GST on recovery of such road cutting charges by the Applicant from M/s. Jaipur Smart City Limited (JSCL) is concerned, we are of the view that clause (c) of sub section (2) of Section 15 of the CGST Act, 2017 states that any incidental expenses charged by the supplier to the recipient and any other amount charged for anything done during the supply until the time of delivery of the goods or supply of the services shall be included in the value of the supply. Hence, any goods or services provided by the supplier, for which a consideration is charged from the recipient, shall be included in the transaction value and chargeable to tax. With regard to reimbursement of expenses incurred as a pure agent, Rule 33 of the CGST rules, 2017 provides that any expenditure incurred as a pure agent will be excluded from the value of supply, and hence, from the aggregate turnover as well. However, the supplier will need to satisfy the following conditions for the exclusion from the value of supply:-

(i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorisation by such recipient;

(ii) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and

(iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account.

Explanation.- For the purposes of this rule, the expression -pure agent means a person who-

(a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both;

(b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply;

(c) does not use for his own interest such goods or services so procured; and

(d) receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account.

In the instant case, as M/s JSCL is not a governmental authority therefore, serial number 3 of Notification No. 12/2017 of central tax (rate) dated 28th June 2017 as amended by Notification No. 02/2018 of central tax (rate) dated 25th January 2018 is not applicable on applicant. Further, as per demand note ……………………………………. dated 26.03.2021 issued by the Executive Engineer, Jaipur Nagar Nigam (JNN) (Kishanpol Zone), Jaipur, it is find that applicant (by name) was demanded ₹ 3,85,10,775/- for road cut approval by the JNN and nowhere the name of M/S JSCL mentioned in the said letter dated 26.03.2021. This shows that applicant i.e. LQCC hold the title to the services of road cut approval so procured from the JNN. Hence, the applicant does not satisfy the condition of pure agent and does not fall under the ambit of ‘Pure Agent’ as per Rule 33 of the CGST rules, 2017.As per clause (c) of Section 15(2) of CGST Act, 2017, recovery of such road cutting charges by the Applicant from M/s. Jaipur Smart City Limited will be included in the value of supply under GST. Thus, the applicant is liable to pay GST @18% (i.e.9%CGST+9%SGST) on recovery of such road cutting charges.

10. In view of the foregoing, we rule as follows: –

RULING

Question 1. Whether the service recipient i.e. M/s. Jaipur Smart City Limited is a “Governmental Authority” as defined in the explanation to clause (16) of section 2 of the IGST Act, 2017.

Answer 1 : No, M/s Jaipur Smart City Limited is not a “Governmental Authority”.

Question 2. Whether Item number (vi) in Column (3) of serial number 3 of Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 24/2017- Central Tax (Rate) dated 21.09.2017is applicable in respect of all payments related to work order for Fire Fighting System installation at contracted area between applicant and Jaipur Smart City Limited?

Answer 2 :NO.

Question 3. What will be the GST rate for the work undertaken by applicant for M/s Jaipur Smart City Limited under Bid Reference no. JSCL/Works/02/2020-21 ?

Answer 3 :The services provided by the applicant will be covered under Item number (xii) in Column (3) of serial number 3 of Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017 as amended time to time and attracts GST @18% (i.e. 9% CGST & 9% SCGST).

Question 4. Whether the Applicant is liable to pay GST under RCM in respect of road cutting charges paid by them to Jaipur Nagar Nigam (JNN) on behalf of M/s. Jaipur Smart City Limited in relation to such contract? If the answer to the same is in affirmative, what will be the GST rate for such payment under RCM?

Answer 4: Yes, the Applicant is liable to pay GST under RCM in respect of road cutting charges paid by them to Jaipur Nagar Nigam (JNN) on behalf of M/s. Jaipur Smart City Limited (JSCL) under Section 9 of CGST Act, 2017 read with No. 5 of the Notification No. 13/2017-CT(R) dated 28.06.2017 & No. 9 of the Notification No. 12/2017-CT(R) dated 28.06.2017. The rate of GST would be @ 18% (i.e. 9% CGST+9% SCGST).

Question 5. Whether recovery of such road cutting charges by the Applicant from M/s. Jaipur Smart City Limited liable to GST? If the answer is in affirmative, what will be the GST rate?

Answer 5 : Yes. As M/s JSCL is not a governmental authority therefore, serial number 3 of Notification No. 12/2017 of central tax (rate) dated 28th June 2017 as amended by Notification No. 02/2018 of central tax (rate) dated 25th January 2018 is not applicable on applicant. Further, as per clause (c) of sub section (2) of Section 15 of CGST Act, 2017, recovery of such road cutting charges by the Applicant from M/s. Jaipur Smart City Limited will be included in the value of supply under GST as the applicant is not qualified as a pure agent in the instant case. Thus, the applicant is liable to pay GST @18% (i.e.9%CGST+9%SGST).