There has been a lot of discussion about the levy of GST on fees paid to Registrar of Companies under Reverse Charge. The article discusses the question and how far it is correct to treat the fees paid to Registrar of Companies as a supply for being the same being liable to GST under reverse charge?
The activity is filing form as prescribed under the Companies act, 2013 using the MCA Webportal. The person who is uploading the form has to be pay prescribed fees before submission of the requisite Form. Let’s for simplification take an example wherein M/s ABC Limited has to file form SH-7 for alteration in share capital.
Reference to Statutory Provisions of Companies act, 2013
E Form SH-7 is required to be filed pursuant to Section 64 (1) of the Companies Act, 2013 and rule 15 of Companies (Share Capital & Debentures) Rules, 2014-Rule 15 of Companies (Share Capital & Debentures) Rules, 2014 is being reproduced herewith for ready reference
For the purposes of sub-section (1) of section 64, where a company alters its share capital in any manner specified in sub-section (1) of section 61, or an order is passed by the Government increasing the authorized capital of the company in pursuance of sub-section (4) read with subsection (6) of section 62 or a company redeems any redeemable preference shares, the notice of such alteration, increase or redemption shall be filed by the company with the Registrar in Form No. SH-7 along with the fee.
It would be pertinent to observe here that the Rule 15 provides that notice of alteration, increase or redemption shall be filed by the company with the Registrar in Form No. SH-7 along with the fee. That the fee is prescribed under the Rules itself.
Fees chart for filing up the form
|Nominal Share Capital||Fixed||For every 10,000 or part thereof|
|Up to 1, 00, 000 5,000||5000||NA|
|More than 1,00,000 up to 5,00,000||5000+||400|
|More than 5,00,000 up to 10,00,000||21000+||300|
|More than 10,00,000 up to 50,00,000||36000+||300|
|More than 50,00,000 up to 1,00,00,000||156000+||100|
|More than 1,00,00,000||206000+||75|
Further, it has been provided in the instruction part that for increasing the authorized share capital, the difference between fee applicable on the increased share capital and fee applicable on existing authorized capital, at the rates prevailing on the date of filing the notice, shall be payable. For this purpose, the rates will be same as specified above.
E.g. In case the authorized capital is increased by public company from Rupees 10,00,000 to Rupees 60,00,000, the fee payable will be calculated as:
|Fees payable on Rupees 60,00,000||Rupees 166,000||As per the rates prevailing on the date of filing|
|Less: Fees payable on Rupees 10,00,000||Rupees 36,000||As per the rates prevailing on the date of filing|
|Fee payable will be||Rupees 1, 30,000|
Section 404 of Companies Act, 2013
It would apt to highlight provisions of Section 404 of Companies Act, 2013 which provides as follows-
All fees, charges and other sums received by any Registrar, Additional, Joint, Deputy or Assistant Registrar or any other officer of the Central Government in pursuance of any provision of this Act shall be paid into the public account of India in the Reserve Bank of India.
The Section provides that the fees paid under any of the provision of the Act shall be paid into the public account of India in the Reserve Bank of India.
Rule 7 of e Companies (Registration Offices and Fees) Rules, 2014 which provides for e-filing of the forms is as under-
7. Manner and conditions of filing- Every application, financial statement, prospectus, return, declaration, memorandum, articles, particulars of charges, or any other particulars or document or any notice, or any communication or intimation required to be filed or delivered or served under the Act and rules made there under, shall be filed or delivered or served in computer readable electronic form, in portable document format (pdf) or in such other format as has been specified in any rule or form in respect of such application or form or document or declaration to the Registrar through the portal maintained by the Central Government on its web-site or through any other website notified by the Central Government.
Rule 12 of e Companies (Registration Offices and Fees) Rules, 2014 which provides for payment of fees is as follows
(1)The documents required to be submitted, filed, registered or recorded or any fact or information required or authorised to be registered under the Act shall be submitted, filed, registered or recorded on payment of the fee or on payment of such additional fee as applicable, as mentioned in Table annexed to these rules.
Reference to Section 7(2) of CGST Act, 2017
It would be worthwhile to highlight provision of Section 7(2) of CGST Act, 2017-
Notwithstanding anything contained in sub-section (1)–
(a) ……; 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.
However, again the fact is anything which is covered under Section 7(1) is being overridden by a non-obstinate clause. This again is not a deeming fiction that everything provided by Central Government and State Government is supply and only that excluded by Section 7(2) is overridden. It only says that what is included in Supply by virtue of Section 7(1) will be taken out of the purview of Section 7(1) by exercising powers under this section.
The question is what is included in Section 7(1) of CGST Act, 2017 as what is included in Section 7(1) can be taken out by Section 7(2).
Process of Identifying whether and how particular activity or transaction is taxable under GST and what is included in Section 7(1)(a) of CGST Act, 2017 to constitute a “Supply” and how the statute proceeds therefrom for identifying “Supply of Goods” or “Supply of Service”
Before moving on to Section 7(1) and identify supply, it would be interesting to identify what is the process which is coming out from the statute for the purpose of arriving at whether and how particular activity or transaction is taxable under GST. The lead is being given by Section 7(1A) of the CGST Act, 2017 which is being reproduced hereunder-
“Where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II”
The flow of identifying the taxability as coming out of the above provisions can be marked as below-
- Identify the activity or the transaction in hand.
- Whether such activity or transaction constitute a supply in accordance with the provisions of Section 7(1).
- If yes, then identify whether such activity or transaction is excluded from the purview of Supply by virtue of provisions of Section 7(2).
- If No, then identify whether such activity or transaction has to be treated as Supply of Goods or Supply of Service with reference to Schedule II if mentioned therein and read with definition of “composite supply” and “mixed supply” and “goods” and “service” provided under Section 2 of CGST Act, 2017.
- Once identified regarding the activity or transaction being “supply of goods” or “supply of services”, relevant provisions for “place of supply”, “time of supply” and tax rate can be identified an applied.
The above process gains more strength from the fact that Section 7(1)(a) starts with the phrase-
For the purposes of this Act, the expression “supply” includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal.
Thus, what is included in “supply” is all forms of “supply of goods or services or both” without any distinction whether it is “supply of goods” or “supply of services” as it is immaterial at this stage of identify whether it is supply of goods or services as long as such activity of transaction fulfils the three ingredients for supply of goods or services or both to be covered under the scope of Section 7(1)(a) of CGST Act, 2017-
a) Activity or Transaction should be made or agreed to be made for a consideration.
b) Activity or Transaction should be made by a person.
c) Activity or Transaction should be in the course or furtherance of business.
Hon’ble Karnataka High Court in the matter of Bangalore Turf Club Limited vs The State Of Karnataka on 2 June, 2021 held that
“In terms of Section 7 the taxable event is supply i.e., supply of goods for consideration and in course of furtherance of business. All three events must concur for a taxable event to occur.”
In light of the above discussion, lets discuss whether filing of form and in turn payment of amount to ROC constitutes a “Supply” in GST?
Whether Fees paid to ROC constitutes a “Supply”
a) Condition-1-Activity or Transaction should be made by a person- That when form SH-7 is being filed in case of alteration of the share capital by a company, there are two persons involve in the transaction i.e. Company filing the form and Central Government irrespective of the fact that Rule 7 of the Companies (Registration Offices and Fees) Rules, 2014 provide that the filing of the form can be through the portal maintained by the Central Government on its web-site or through any other website notified by the Central Government. The activity of filing the form is between the company and the Central Government and the portal is an intermediary whether the portal maintained by the Central Government or any other portal notified by the Central Government. Even if it’s a portal notified by the Central Government, portal will be providing service to the government as it’s the statutory duty of the Government to provide Portal and not at the option or choice of the person using the platform whether he wants to use the same or not. The company using the platform for filing of the form does not have a say whether the service provider is good or not or whether they want another service provider. Further the interaction on using the portal would be between the government and the company only.
It would be worthwhile to mention that by way of Clause 2(84)(k) of CGST Act, 2017, Central Government has been covered under the definition of the “Person”. Further by way of Article 2(84)(c) of the CGST Act, 2017, a company is also covered under the definition of “person”.
b) Condition-2-Activity or Transaction should be in the course or furtherance of business-
Definition of “Business” as per Clause 2(17)(i) of CGST Act includes any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities.
c) Condition-3-Activity or Transaction should be made or agreed to be made for a consideration.
The question is when amount is being paid to ROC, whether it can be can be called consideration against supply of services. The “term” consideration” has been defined under Section 2(31) of CGST Act, 2017 as follows-
(31) ―consideration‖ in relation to the supply of goods or services or both includes–
- any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;
- the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:
Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;
It is to be noted that merely the fact that an activity has been covered under the definition of “business” does not itself ipso facto satisfies the condition that there is presence of consideration. The condition has to be satisfied separately and cannot be lost sight of. In light of the above lets try to decipher presence of consideration in case of fees paid to Registrar of Companies.
It was held by Hon’ble Apex Court in the matter of S.P. Goel vs Collector of Stamps, Delhi on 8 December, 1995 Equivalent citations: 1996 AIR 839, 1996 SCC (1) 573 observed about the duties being carried out by Registrars or Sub- Registrar while registering the document on the payment of stamp duty. Hon’ble Apex Court held that
They only perform their statutory duties (some of which, as earlier indicated, are judicial or, at least, quasi-judicial in nature) to raise and collect the State revenue which is a part of the sovereign power of the State.
Hon’ble Orissa High Court in the matter of Regional Transport Officer vs Arun Kumar Behera And Others on 5 February, 2020 observed about the Regional Transport Officer and held that
As such, granting of permit and collection of tax from motor vehicle are all statutory in nature and the said functions are not discharged for consideration.
It would be apt reproduce circular dated 18th December, 2006 bearing No. 89/7/2006 wherein it was clarified from the point of view of presence of consideration involved in sovereign function-
The Board is of the view that the activities performed by the sovereign/public authorities under the provision of law are in the nature of statutory obligations which are to be fulfilled in accordance with law. The fee collected by them for performing such activities is in the nature of compulsory levy as per the provisions of the relevant statute, and it is deposited into the Government Treasury. Such activity is purely in public interest and it is undertaken as mandatory and statutory function. These are not in the nature of service to any particular individual for any consideration. Therefore, such an activity performed by a sovereign/public authority under the provisions of law does not constitute provision of Taxable Service to a person and, therefore, no Service Tax is leviable on such activities.
That again it is highlighted that amount paid for services performed under statuary obligations are devoid of character of “consideration” or does not partake the nature of “Consideration”.
Before Moving ahead, it would be apt to highlight the relevant extract of the judgement in the matter of Commissioner of Service Tax Vs Repco Home Finance Ltd. (CESTAT Chennai) wherein it was held that for being considered as consideration amount received has to be “consideration to the contract” rather than “condition to a contract”.
22. A Larger Bench of the Tribunal in Bhayana Builders (P) Ltd. vs Commissioner of Service Tax observed that “implicit in the legal architecture is the concept that any consideration whether monetary or otherwise, should have flown or should flow from the service recipient to the service provider and should accrue to the benefit of the latter.” In the said decision, the Larger Bench made reference to the concept of “consideration”, as was expounded in the decision pertaining to Australian GST Rules, wherein a categorical distinction was made between “conditions” to a contract and “consideration”. It has been prescribed under the said GST Rules that certain “conditions” contained in the contract cannot be seen in the light of “consideration” for the contract and merely because the service recipient has to fulfil such conditions would not mean that this value would form part of the value of the taxable services that are provided.
It was further observed that
27. What follows from the aforesaid decisions is that “consideration” must flow from the service recipient to the service provider and should accrue to the benefit of the service provider and that the amount charged has necessarily to be a consideration for the taxable service provided under the Act. It should also be remembered that there is marked distinction between “conditions to a contract” and “considerations for the contract”. A service recipient may be required to fulfil certain conditions contained in the contract but that would not necessarily mean that this value would form part of the value of taxable services that are provided.
It was concluded that
35. The “expectation interest” is a popular measure for damages arising out of breach of contract. The foreclosure charges, therefore, are not a consideration for performance of lending services but are imposed as a condition of the contract to compensate for the loss of “expectations interest” when the loan agreement is terminated pre-maturely. In fact, fore-closure charges seek to deter the borrowers from switching over to cheaper available sources of loan, as has been so clearly stated in the Circular dated 26 June, 2012 issued by the Reserve Bank of India.
The question is whether the fees paid to ROC is against any service or whether the quid-pro-quo is absent and it is a regulatory fee and thus the essential ingredients of consideration are thus absent.
Initially there were Judgements which held that levy of fee should be for a consideration of certain services which the individual accept or the fee may generally be defined as a charge for a special service rendered to individuals by some governmental agency.
In the matter of The Commissioner, Hindu Religious Endowments, Madras vs. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt (1954 SCR 1005) it was held that a fee may generally be defined as a charge for a special service rendered to individuals by some governmental agency. The amount of fee levied is supposed to be based on the expenditure incurred by the Government in rendering the services.
The Chief Commissioner, Delhi & Anr. v. The Delhi Cloth & General Mills Co. Ltd. & Ors.- Levy of fee should be in consideration of certain services which the individuals accept either willingly or unwillingly and secondly the collection from such levy should not be set apart or merged in the general revenue of the State to be spent for general public purposes but should be appropriated for the specific purpose for which the levy is being made.
Om Parkash Agarwal & Ors. v. Giri Raj Kishori & Ors. (1986 (1) SCC 722) wherein it was held that wherein this Court held that when the money collected by the levy of fee is to be deposited in a fund which was to vest in the State Government and not in the Municipality or a Marketing Committee or any other local authority having limited functions specified in the enactment under which the fund was constituted and was empowered to be expended by the State Government virtually on any object which the State Government considered to be the development of rural areas, that levy could not be treated as a fee because it was more in the nature of a tax primarily in view of the fact that the collection so made was being utilised not for fulfilling the objects of the Act under which the collection was authorised but for the general requirement of the States functions.
However, in the case of B.S.E. Brokers Forum, Bombay & … vs Securities & Exchange Board Of … on 1 February, 2001, referring to the above judgements, it was held that
A lot of ice has melted in the Himalayas after rendering the judgments in the above-cited cases so also there has been see changes in the judicial thinking as to the difference between a tax and a fee since then.
The court referred to many judgements but the one in the matter of In Vam Organic Chemicals Ltd. & Anr. v. State of U.P. & Ors. (1997 (2) SCC 715), it was held that there is a distinction between a fee charged for licence, that is regulatory fees and fees for services rendered as compensatory fees. In the case of regulatory fees, Court held that like the licence fees, existence of quid pro quo is not necessary although the fee imposed must not be, in the circumstances of the case, excessive, keeping in view the quantum and nature of the work involved in the required supervision.
Hon’ble Court also referred to In Secunderabad Hyderabad Hotel Owners Association & Ors. v. Hyderabad Municipal Corporation, Hyderabad & Anr. (1999 (2) SCC 274) wherein it was held that, this Court after considering the earlier judgments, to some of which we have already made reference, held that a licence fee may be either regulatory or compensatory. When a fee is charged for rendering specific services, a certain element of quid pro quo must be there between the service rendered and the fee charged so that the licence fee is commensurate with the cost of rendering the service although the exact arithmetical equivalence is not expected. It held, however, that is not the only kind of fee which can be charged. Licence fees can also be regulatory when the activities for which a licence is given require to be regulated or controlled. The fee which is charged for regulation of such activity would be validly classifiable as a fee and not a tax although no service is rendered. An element of quid pro quo for levy of such fee is not required although such fees cannot be excessive.
The Hon’ble court observed that
From a conspectus of the ratio of the above judgments, we find that so far as the regulatory fee is concerned, the service to be rendered is not a condition precedent and the same does not lose the character of fee provided the fee so charged is not excessive.
It further observed that
If we apply the test as laid down by this Court in the abovesaid judgments to the facts of the case in hand, it can be seen that the Statute under Section 11 of the Act requires the Board to undertake various activities to regulate the business of the securities market which requires constant and continuing supervision including investigation and instituting legal proceedings against the offending traders, wherever necessary. Such activities are clearly regulatory activities and the Board is empowered under Section 11(2)(k) to charge the required fee for the said purpose, and once it is held that the fee levied is also regulatory in nature then the requirement of quid pro quo recedes to the background and the same need not be confined to the contributories alone.
It was finally held that
Once we come to the conclusion that the fee in question is primarily a regulatory fee then the argument that the service rendered by the Board should be confined to the contributories alone, cannot be accepted. What the Court has to investigate while examining a challenge of this nature is to see what is the primary object of the Regulations for which the fee is being collected and find out whether the Regulation in question is in public interest or not. Once the levy is in public interest and connected with the larger trade in which the contributories are involved then confining the services only to the contributories does not arise. As has been held by this Court in City Corporation of Calicut (supra). Applying the said principle, we are of the opinion that since the amount collected under the impugned levy is being spent by the Board on various activities of the stock and securities market with which the petitioners are directly connected, the fact that the entire benefit of the levy does not accrue to contributories i.e. the petitioners would not make the levy invalid.
In the matter of Sona Chandi Oal Committee & Ors vs State of Maharashtra on 16 December, 2004, the matter was regarding levy of inspection fees under Bombay Money Lenders Act, 1946 it was observed that
A three Judge Bench of this Court in B.S.E. Brokers’ Forum, Bombay and Others v. Securities and Exchange Board of India and Others [(2001) 3 SCC 482], after considering a large number of authorities, has held that much ice has melted in Himalayas after the rendering of the earlier judgments as there was a sea change in the judicial thinking as to the difference between a tax and a fee since then. Placing reliance on the following judgments of this Court in the last 20 years, namely, Sreenivasa General Traders Vs. State of Andhra Pradesh, (supra); City Corporation of Calicut Vs. Thachambalath Sadasivan, (1985) 2 SCC 112; Sirsilk Ltd. Vs. Textiles Committee, (1989) Supp. 1 SCC 168; Commissioner & Secretary to Government Commercial Taxes & Religious Endowments Department Vs. Sree Murugan Financing Corporation Coimbatore, (1992) 3 SCC 488; Secretary to Government of Madras Vs. P.R.Sriramulu, (1996) 1 SCC 345; Vam Organic Chemicals Ltd. Vs. State of U.P., (1997) 2 SCC 715; Research Foundation for Science, Technology & Ecology Vs. Ministry of Agriculture, (1999) 1 SCC 655 and Secunderabad Hyderabad Hotel Owners’ Association Vs. Hyderabad Municipal Corporation, Hyderabad, (1999) 2 SCC 274, it was held that the traditional concept of quid pro quo in a fee has undergone considerable transformation. So far as the regulatory fee is concerned, the service to be rendered is not a condition precedent and the same does not loose the character of a fee provided the fee so charged is not excessive. It was not necessary that service to be rendered by the collecting authority should be confined to the contributories alone. The levy does not cease to be a fee merely because there is an element of compulsion or coerciveness present in it, nor is it a postulate of a fee that it must have a direct relation to the actual service rendered by the authority to each individual who obtains the benefit of the service. The quid pro quo in the strict sence was not always a sine qua non for a fee. All that is necessary is that there should be a reasonable relationship between the levy of fee and the services rendered. It was observed that it was not necessary to establish that those who pay the fee must receive direct or special benefit or advantage of the services rendered for which the fee was being paid. It was held that if one who is liable to pay, receives general benefit from the authority levying the fee, the element of service required for collecting fee is satisfied.
The Court finally held that
This apart the fee charged is regulatory in nature to control and supervise the functioning of the money lending business to protect the debtors the vast majority of which are poor peasants, tenants, agricultural labourers and salaried workers who are unable to repay their loans. The object of the Act is to control the money lending business and protect the debtors from the malpractices in the business by detecting illegal money lending. This exercise is a must to carry out the object of the Act for which lot of infrastructure is required. The duty of the staff and the officers of the Department is to visit the places of money lending business, inspect the accounts and other matters relating to the business, to find out illegal money lending, carry out raids in suspicious cases and do regular inspection as provided in the Act. The Act serves a larger public interest.
Thus, it can be seen from the above that levy of fees can be regulatory in nature and once the levy of fees is regulatory in nature, the service to be rendered cannot be a condition precedent. The primary object for which fees is being charged can be in the public interest and can be or the regulation of the field for which the statute has been enacted. As was observed in the matter of Sona Chandi Oal Committee&Ors vs State Of Maharashtra on 16 December, 2004 by the Hon’ble Apex Court that inspection fee charged is regulatory in nature to control and supervise the functioning of the money lending business to protect the debtors the vast majority of which are poor peasants, tenants, agricultural labourers and salaried workers who are unable to repay their loans.
Statement of Objects of Companies Bill 2009
The Statement and Objects of Companies Bill 2009 provides about the object of Companies Act. 4. However, in view of large amendments to the Companies Bill, 2009 arising out of the recommendations of the Parliamentary Standing Committee on Finance and suggestions of the stakeholders, the Central Government decided to withdrew the Companies Bill, 2009 and introduce a fresh Bill incorporating therein the recommendations of Standing Committee and suggestions of the stakeholders as Companies Bill, 2011.However the broader objective for repealing the Companies Act, 1956 are as follows-
3. The expansion and growth of the Indian economy has also generated considerable interest in the international investing community. However, there is a need for sustaining growth in a globalised and competitive environment. The increasing options and avenues for international business, trade and capital flows have made it imperative for the growing Indian economy to not only harness its entrepreneurial and economic resources efficiently but also to be competitive in attracting investment to sustain the impressive growth recorded by it in recent years. Many investors are also looking towards the statutory and regulatory framework for the corporate sector in the country while deciding on their investment options. Modernisation of corporate regulation, governing various aspects of setting up of enterprises, structures for sharing of risk and reward, their governance and accountability to stakeholders, financial procedures and responsibility for disclosures, procedures for rehabilitation, liquidation and winding up is, therefore, critical to the perceptions of investors and determining their business and investment decisions.
4. In the background of the above developments and recognising that the competitive and technology driven business environment today require the corporate entities to be provided greater autonomy of operation and innovation with reasonable process requirements and compliance costs, a need was felt to help sustain the growth of the Indian corporate sector by enabling a new legal framework that would be compact, amenable to clear interpretation, and respond in a timely and appropriate manner to meet the requirements of ever evolving economic activities and business models, while fostering a positive environment for investment and growth. In addition, there is also a need to avoid overlapping and conflict of jurisdiction in the area of sectoral regulations. Therefore, piecemeal re-engineering of the corporate regulatory framework was not considered adequate to enable the systemic changes required. Hence, a comprehensive review of the Companies Act, 1956, and introduction of a revised statutory framework in the form of a new Companies Bill has been considered essential to achieve the desired reform.
That one of the objectives of Companies Act, 2013 is to provide statutory and regulatory framework for the corporate sector and the levy of fees for filing of various forms not only ensures controlling and supervising the functioning of corporates to protect the interest of the investors or the shareholders but at the same time puts a check on the corporate sector to perform the compliances which are mandatory under the statute. The filing of various forms ensures supervision of the activities of the company and at the same time curb the malpractices if any. The levy of additional fees is required not to generate the source of revenue but to force compliances from the corporate sector so that if any compliance which are mandatory in nature to control and regulate the activities of the company are not fulfilled, they might be done so. Therefore, fees being levied is nothing but a regulatory fee which does not satisfy the condition of quid-pro-quo and when fees is being collected under Companies Act, 2013 for the purpose of filing of form, the element of consideration is absent as the fees is regulatory in nature rather than for the purpose of rendering of service. There is no quid pro quo or reciprocity when the amount is paid as the amount is not compensatory in nature but regulatory in nature.
The argument gains more emphasis since the fact that payment of additional fees for alteration of share capital from Rs 1 Lakh to 10 Lakh or from Rs 1 Lakh to 1 Crore does not provide any additional benefit from the regulator to the company like additional facility on portal being given or special treatment being afforded. The levy of additional fees is regulatory in nature and also acts as deterrent to the non-serious concerns or malpractices as alteration of share capital for increase in authorised capital allows the company to raise additional funds from the investors. Now comparing it against payment of additional charges for booking a room in 5-Star Hotel as compared to a 3 Star Hotel, it has its own additional facilities which are absent in case payment of additional fees for alteration of the share capital. That the payment of fees is a condition for filing of the form and not a consideration for filing of the form. The primary requirement for filing of the form is not for earning revenue but to regulate compliance.
In addition to the above, taking a cue from Income Tax Act, 1961 wherein an amount has to be paid for filing of Income Tax Appeal under Section 246A. The right to appeal is a statutory and a constitutional right and cannot be taken away and to say that appeal fees of Rs 500/- is a consideration for allowing the appeal to be filed would tantamount to the fact that had there been no appeal fees, there would have been no appeal. The payment of appeal fees is regulatory in nature and part of a statutory process rather than act as a consideration for providing justice to the aggrieved. That having a right against the action of the State is a constitutional right and money charged as appeal fees cannot be taken as a consideration for that constitutional right but is in the nature of regulatory framework.
Taking the example further, a fee of Rs 100/- had to be deposited under the Rajasthan Value Tax Act, 2003 before filing application for reopening of ex-parte assessment. Subsequently the Government of Rajasthan scrapped the fees. So whether by way of scrapping of fees, it meant that justice was now available free of cost or without any amount being paid or previously justice was available at the payment of Rs 100/- as consideration. Neither the intention of the Government was to earn from that Rs 100/- and nor was there any fact of reciprocity present therein. The only intention of the government when Rs 100/- was levied to regulate the manner in which the applications are being filed and as a condition of filing the form.
Therefore, the condition “consideration to a contract” is absent in the transaction wherein amount is paid to Registrar of Companies for filing of form since the amount paid is regulatory in nature rather than being paid as a consideration for the services being rendered. The payee might be a beneficiary as part of the public as the statute is for the purpose of protecting public interest but the amount paid does not relates to any specific service being received by him. Thus, the amount paid cannot be held to be in respect of, in response to, or for the inducement of, the supply of goods or services or both. It is not a consideration flowing to the Central Government but it is a condition for filing the form without which the form cannot be filed.
Conclusion-That since the third condition regarding presence of consideration is absent in the above case of payment of amount to ROC for filing of form, the same cannot be held to be supply of service by Government to the Company and since it is not a supply, therefore in the humble but firm view, tax is not required to be paid under reverse charge.