The High Court ruled that the petitioner qualifies as a 'Government Entity,' thereby eligible for tax exemption under the Karnataka GST Act due to 100% government control and funding.

ORDER :

M.NAGAPRASANNA, J.

The petitioner – M/s. Bagalkot Nirmithi Kendra is at the doors of this Court seeking a direction to declare the petitioner to be a ‘Government Entity’ as defined under Clause (zfa) of the notification dated 13.10.2017 issued by the Government of Karnataka and consequently, declare that the petitioner is entitled to tax exemption under Entry No.9B of the said notification and has also called in question a communication dated 07.07.2021 issued by the fourth respondent.

2. Heard Sri Girish A. Yadawad, learned counsel for the petitioner, Sri M.B.Kanavi, learned Central Government Standing Counsel for respondent Nos.1 and 5, Sri Girish S. Hulmani, learned counsel for respondent Nos.2 to 4 and Smt. Kirtilata R. Patil, learned High Court Government Pleader for respondent Nos.6 and 7.

3. Facts in brief, germane, are as follows:

The petitioner is a Society registered under the Karnataka Societies Registration Act, 1960, which comes into existence in terms of a government order dated 05.09.1990. It is the claim of the petitioner that it is an entity established by the Government of Karnataka. The establishment of the petitioner is said to be under the National Network Programme of Building Centres Scheme, by the Housing and Urban Development Corporation of the Government of India, in furtherance of the Scheme notified. The petitioner is exclusively engaged in civil construction works for the State and Central Governments. The rules and regulations of the petitioner are all said to necessitate approval from the hands of the State. Copies of Memorandum of Association of the petitioner and the Rules governing the petitioner are all appended to the petition.

4. On 29.06.2017, a notification is issued by the fifth respondent – the Ministry of Finance, the Government of India exempting tax liability on certain entities for supply of services after the emergence of GST regime. On 13.10.2017, a notification is issued by the State, Finance Department, amending the definition of ‘Government Entity’ by including Clause (zfa). Between the audit period from July, 2017 and March, 2018, an audit was conducted of the petitioner by the fourth respondent – the Assistant Commissioner of Central Excise. The third respondent – the Commissioner of Central Excise seeks certain documents for the period between July, 2017 and March, 2018. It is the claim of the petitioner that the petitioner has submitted all the requisite documents as stipulated in the communication for an ongoing enquiry, on 14.09.2020. As a result of the aforesaid communication, on 13.01.2021, the fourth respondent addresses a communication to the petitioner, based on the documents submitted by the petitioner. On 15.02.2021, the petitioner replies to the said communication, which results in the impugned communication dated 07.07.2021, indicating that the petitioner cannot be exempted from tax liability. The petitioner has clarified by e-mail to the fourth respondent, contending that the petitioner fall into the category of a ‘Government Entity’ as notified in the notification dated 13.10.2017, as the petitioner is controlled by the State Government and no other person has any control whatsoever on the petitioner.

5. On 17.08.2021, the fourth respondent communicates the eighth respondent to direct the petitioner to comply with the GST liability, since other Nirmithi Kendras in the State of Karnataka are also complying with the GST liabilities accrued to them. It is the aforesaid observation or aforesaid opinion of the fourth respondent that the petitioner cannot be declared to be a ‘Government Entity’, has driven the petitioner to this Court in the subject petition.

6. Learne