In Indian Institute of Management, Tiruchirappalli (“IIMT/ the Applicant”) vide order no. 20/AAR/2021 dated June 18, 2021 the Hon’ble Tamil Nadu Authority for Advance Ruling (“TAAR”) held that, Applicant is a government entity liable to TDS provisions u/s 51 of CGST Act, 2017 and is also liable to pay tax under Reverse Charge Mechanism (“RCM”) in respect of legal services received by them.
Questions on which advance ruling is sought:
- Whether IIMT is a Government Entity and if so, whether TDS provisions are applicable to them.
- Whether IITM is liable to pay GST under RCM on legal services received by it.
Discussion and findings:
- As per the facts, IITM was initially and also afterwards has been receiving funds from the Central Government (“CG”) which substantiates the requirement of more than 90% financial participation from the central or state Government. Thus, the IIMT satisfies the conditions prescribed to be held as ‘Government entity’ under the CGST Act, 2017 which states that, “Government Entity” means an authority or a board or any other body including a society, trust, corporation, (i) set up by an Act of Parliament or State Legislature; or (ii) established of any Government, with 90 percent or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Territory or a local authority.”
- As per Section 51 of CGST Act, 2017 inter alia, TDS provision is applicable to 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 fifty-one per cent or more participation by way of equity or control, to carry out any function.
- As per Sl. No. 2 of Notification No. 13/2017 dated June 28, 2017 taxes on legal services are to be paid by recipient, being any business entity located in the taxable territory, where such legal services are provided by an individual advocate including senior advocate or firm of advocates.
Conclusion:
Basis the observations discussed supra, the Hon’ble TAAR opined that, IIMT is a Government Entity and shall be liable to TDS provisions contained in Section 51 of CGST Act, 2017 provided other conditions are fulfilled.
Further, IIMT shall be liable to discharge GST liability under RCM in respect of legal services received by it.
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