2026-VIL-125-AAR
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SGST Advance Ruling Authority

GST – Odisha AAR - Forest land diversion – Payment of Net Present Value and Compensatory Afforestation charges – Activity in relation to electricity transmission and construction of transmission lines – Applicant was required to obtain forest clearance certificate for diverting forest land to undertake construction of electrical transmission infrastructure. As a mandatory condition for obtaining such forest clearance under the Forest (Conservation) Act, 1980 and the Compensatory Afforestation Fund Act, 2016 - Whether statutory deposits of Net Present Value (NPV), Compensatory Afforestation, Dwarf Plantation, Site Specific Wildlife Conservation Plan and other CAMPA-related charges required for obtaining forest clearance certificate constitute a consideration against supply of services under Section 7 of the CGST Act, 2017 – HELD – The diversion of forest land for non-forest purposes is prohibited except with prior approval under the Forest (Conservation) Act, 1980. The State holds natural resources in public trust. When a business entity requests diversion of forest land for commercial activities, the State evaluates the application and grants specific permission enabling the otherwise prohibited activity. The grant of approval by Government is not a passive sovereign act but a specific activity undertaken in favour of an identified applicant in furtherance of business - The deposits of NPV and other compensatory afforestation charges are not voluntary but mandatory conditions imposed for obtaining forest clearance. Without such deposits, approval would not be granted and forest land could not be delivered. Therefore, granting clearance or permission to use forest land is an activity performed in the furtherance of business and falls within the definition of service under Section 2(102) of CGST Act. The payment is intrinsically linked with the grant of approval. Under the definition of consideration in Section 2(31) of CGST Act, such payments constitute consideration as they are made in respect of, in response to, or for inducement of the supply of goods or services. The grant of permission therefore constitutes a supply of service by Government within the meaning of Sections 7 and 2(31) of the Act - The deposits towards Net Present Value (NPV), Compensatory Afforestation, Dwarf Plantation, Site Specific Wildlife Conservation Plan, Plantation of Dwarf Species and other CAMPA-related charges constitute consideration for supply of service under Section 7 of CGST Act, 2017. The same are not exempt under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and GST is payable under RCM in terms of Entry No. 5 of Notification No. 13/2017-CT (Rate) dated 28.06.2017, with the value on which GST is payable being the amount of NPV and other CAMPA-related charges deposited as consideration for obtaining permission for diversion of forest land – Ordered accordingly - Whether NPV and other CAMPA-related charges are exempt from GST under Entry Nos. 4 and 5 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 – HELD - The exemption notifications are in the nature of exceptions to charging provisions and must be construed strictly, with the burden lying upon the person claiming exemption to establish that the transaction squarely falls within the language of the exemption entry. Entry Nos. 4 and 5 of Notification No. 12/2017-CT (Rate) exempt specified services provided by Governmental authorities in relation to functions entrusted to Municipalities under Article 243W and Panchayats under Article 243G of the Constitution. The present transaction concerns diversion of forest land for a commercial transmission project, which is a statutory regulatory function exercised under the Forest (Conservation) Act, 1980 and the Compensatory Afforestation Fund Act, 2016, and not a municipal or panchayat function. Therefore, the services do not fall within the ambit of the exemption entries - Liability under Reverse Charge Mechanism – HELD - The Entry No. 5 of Notification No. 13/2017-Central Tax (Rate) provides that in respect of services supplied by the Central Government, State Government, Union Territory or local authority to a business entity located in the taxable territory, the liability to pay GST shall be discharged by the recipient under reverse charge mechanism, except in respect of certain specifically excluded services. All essential ingredients of Entry No. 5 are satisfied. The mere fact that consideration is deposited into the CAMPA Fund rather than directly retained by a particular Government department does not alter the nature of the transaction, as taxability under GST law is determined by examining the existence of a supply and the consideration paid in relation thereto, and the subsequent destination, accounting treatment or utilization of the amount received is not determinative of taxability.
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