Is a local authority covered under the definition of body corporate as per Companies Act, 2013

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CA Ashwini Seeram (Querist)
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06 June 2021 Would a local authority be covered under the definition of a body corporate as per Companies Act, 2013, as tax on vehicle hire charges are liable to be paid under RCM if the service recipient is a body corporate. If the recipient is a local authority, is it required to pay tax under RCM?
The definition of body corporate is:
“body corporate” or “corporation” includes a company incorporated outside India, but does not include—

(i) a co-operative society registered under any law relating to co-operative societies; and

(ii) any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification, specify in this behalf.
Since the definition is inclusive in nature, can it be said that local authority is covered in the def of body corporate?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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09 July 2024 Under the Companies Act, 2013, the term "body corporate" is defined broadly and includes various entities, but excludes certain types like co-operative societies unless specified otherwise by the Central Government. Specifically, a "local authority" is not explicitly mentioned within the definition provided under the Act.

Here’s how it breaks down:

1. **Definition of Body Corporate**: As per Section 2(11) of the Companies Act, 2013, "body corporate" or "corporation" includes a company incorporated outside India but excludes co-operative societies and any other body corporate not defined as a company under this Act, unless specified otherwise by the Central Government.

2. **Inclusiveness of Definition**: While the definition is inclusive and covers various entities under the term "body corporate," it does not explicitly mention local authorities.

3. **Implication for GST**: Under the Goods and Services Tax (GST) regime in India, the liability under Reverse Charge Mechanism (RCM) for services provided by unregistered suppliers to a body corporate applies. However, for services provided to a local authority, RCM is generally not applicable, as local authorities are treated differently under GST regulations.

4. **GST and Local Authorities**: Local authorities are generally exempt from GST under certain provisions or may have specific treatment under RCM rules. They are often treated separately from other entities like body corporates in terms of tax liability.

5. **Conclusion**: While the Companies Act's definition of "body corporate" is broad and inclusive, it does not explicitly categorize local authorities within its scope. Therefore, for the purposes of tax liability under GST, including under RCM, local authorities are typically treated differently from body corporates, and RCM may not apply to transactions involving local authorities.

In summary, local authorities are not considered "body corporates" under the Companies Act, 2013, and they generally have different tax implications under GST compared to entities falling under the definition of body corporate. It’s advisable to consult with a tax professional or legal advisor familiar with GST laws to ensure compliance with specific tax obligations related to services provided to local authorities.