Goods manufactured in Prison, sold at Arm’s Length for consideration are Taxable: AAR [Read Order]

Goods manufactured in prison which are sold at arm’s length for consideration are taxable, the Authority of Advance Ruling (AAR) Uttar Pradesh has ruled as above.

Superintendent Model J, Chandigarh is registered under the Goods and Service Act,2017. The applicant seeks advance ruling on the applicability of a notification issued under the provisions of the Act determination of the ability to pay tax on any goods or services or both and whether a particular thing done by the applicant concerning any goods and /or services amounts to results in a supply of goods and/or services within the meaning of that term

It was clear that a prison is a constitutional function of the state subject and overall supervision and management of jail are with the state government/UT administration. It was observed that the Model Jail Chandigarh appears to be under State Subject and would be covered under state authority.

The documents submitted by the applicant do not indicate that the society has been set up by an Act of Parliament or State Legislature or established by any government, with 90 per cent or more participation by way of equity or control, to carry out a function entrusted by t Central Government, State Government, Union Territory or local authority.

Prisoners Training, Rehabilitation and Welfare Society (Model fall vocational institute) Model Jail, Chandigarh cannot be treated as a government entity.

The authority accepted the view of the applicant only to the extent that business activity undertaken by the Model Jail Chandigarh in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall only be treated neither as a supply of goods nor a supply ofservices.

From the documents submitted by the applicants, it was evident that the Business activities undertaken by them nowhere are covered under the scope of Article 243G of the Constitution of India. It was observed that the applicantis already charging the CGST/UTGST/IGST as applicable on the supply of goods/ services and exemptiondoes not appear to be applicable under Notification No. 02/2017.

Additional Excise and Taxation Commissioner, Shri Rakesh Kumar Popli and Dr Puneeta Bedi, Joint Commissioner have held that the exemption is not applicable under Notification No. 02/2017.

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