GST exemption for ICT project services denied where composite supply and Government-borne expenditure conditions were not met.

Services supplied under the ICT project did not qualify for GST exemption under Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) and the corresponding Odisha notification because the contract was entered into with Odisha Knowledge Corporation Limited, a separate body corporate, rather than with the Government or its administration. The supply comprised a composite arrangement of site preparation, hardware and software supply and installation, maintenance, commissioning and computer education services, and the training element was only one component of that wider supply. The Authority also found that payment was contractually due from OKCL, so ultimate Government funding did not satisfy the statutory requirement that the expenditure be borne by the Government. Strict construction of exemption provisions led to rejection of the exemption claim.

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Issues: Whether the services supplied under the ICT project were covered by Entry No. 72 of Notification No. 12/2017-Central Tax (Rate) and the corresponding Odisha notification so as to qualify for exemption from GST.

Analysis: Entry No. 72 exempts services provided to the Central Government, State Government or Union territory administration under a training programme, where the total expenditure is borne by such Government or administration. The contract, however, was found to be entered into with Odisha Knowledge Corporation Limited, which is a separate body corporate and not the Government. The supply under the contract comprised site preparation, supply and installation of hardware and accessories, software installation, maintenance, commissioning and computer education services. The Authority held that these activities constituted a composite supply with distinct and identifiable components, and that the training element was only one part of the overall arrangement rather than the exclusive or principal nature of the supply. It also held that payment was contractually payable by OKCL, and that the fact that funding ultimately came from Government sources did not satisfy the statutory requirement that the expenditure be borne by the Government in the manner contemplated by the exemption entry. Applying the principle that exemption provisions must be construed strictly, the Authority rejected the claim for exemption.

Conclusion: The services provided under the ICT project were not covered by Entry No. 72 and were not eligible for exemption from GST.

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