GST ruling: Manpower services to Govt not nil-rated; subject to 18% GST

The Authority for Advance Ruling (AAR) determined that the applicant's provision of manpower services to State and Central Government Departments, although considered "pure services," does not qualify for the nil GST rate under Entry Number 3 of Notification No. 12/2017-Central Tax (Rate). The services were found not directly related to functions entrusted to Panchayats or Municipalities under the Constitution. Therefore, the services are subject to GST at 18% (9% CGST and 9% CGST) under SAC 998513, as per the ruling.

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Issues Involved:
1. Determination of GST liability and tax rate on the services of providing technical personnel, data operators, housekeeping, etc., to different State and Central Government Departments.
2. Applicability of Entry Number 3 of Notification Number 12/2017-Central Tax (Rate) dated 28/06/2017 to the services provided by the applicant.

Issue-wise Detailed Analysis:

1. GST Liability and Tax Rate on Services Provided:
The applicant, engaged in providing manpower services such as technical personnel, data operators, and housekeeping to various State and Central Government Departments, sought an advance ruling on the GST liability and applicable tax rate for these services. The applicant contended that these services should be exempt from GST under Entry Number 3 of Notification Number 12/2017-Central Tax (Rate) dated 28/06/2017, which provides a nil rate of tax for "pure services" provided to government entities in relation to functions entrusted to Panchayats under Article 243G or Municipalities under Article 243W of the Constitution.

2. Applicability of Entry Number 3 of Notification Number 12/2017-Central Tax (Rate):
The applicant argued that their services fall under the definition of "pure services" as they do not involve any composite supply of goods or works contract services. They believed that these services should be exempt from GST as per the aforementioned notification.

Analysis and Discussion:
The Authority for Advance Ruling (AAR) examined the provisions of the CGST Act and the CGGST Act, 2017, noting that they are similar unless specified otherwise. The AAR analyzed the relevant clauses of Notification No. 12/2017-CT(R) dated 28-06-2017, which exempts certain "pure services" provided to government entities from GST, provided they are related to functions entrusted to Panchayats or Municipalities under Articles 243G and 243W of the Constitution, respectively.

The AAR referred to the definitions of "Government," "local authority," "governmental authority," and "government entity" as provided under the CGST Act, 2017, and the relevant notifications. The functions entrusted to Panchayats and Municipalities under Articles 243G and 243W were also examined to determine if the applicant's services fall within these categories.

The AAR concluded that the applicant's services of providing manpower, including technical personnel, data operators, and housekeeping, do not have a direct and proximate relationship with any of the activities listed under Articles 243G or 243W. Therefore, these services cannot be considered as performing sovereign functions as envisaged under these articles.

The AAR cited the Supreme Court's rulings on the interpretation of exemption notifications, emphasizing that such notifications should be interpreted strictly, and the burden of proving applicability lies with the assessee. In cases of ambiguity, the benefit cannot be claimed by the assessee and must be interpreted in favor of the Revenue.

Conclusion:
The AAR ruled that the applicant's services of providing manpower to various State and Central Government Departments, although being "pure services," do not qualify for the nil rate of GST under Entry Number 3 of Notification No. 12/2017-Central Tax (Rate). These services are not related to functions entrusted to Panchayats or Municipalities under Articles 243G and 243W of the Constitution. Consequently, the services are subject to GST at the rate of 18% (9% CGST and 9% CGGST), classified under SAC 998513.

Order:
The ruling concluded that the manpower services provided by the applicant to various Central and State Government departments are liable for GST at the applicable rate of 18% and are not eligible for the nil rate of tax under Entry Number 3 of Notification No. 12/2017-Central Tax (Rate) dated 28-6-2017.

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