GST Applicability on Manpower Services for KRRDA: AAR ruling clarifies exemption criteria

The Authority for Advance Ruling concluded that the manpower services provided by the applicant to the Karnataka Rural Road Development Agency were not exempt from GST as per Notification No. 12/2017 - Central Tax (Rate). The ruling clarified that the services offered were not directly linked to functions entrusted to a Panchayat under the Constitution, as the KRRDA did not engage the applicant for activities related to Panchayat functions. Therefore, the contract between the parties was deemed ineligible for exemption, affirming the applicability of GST on the services provided.

---

---

Issues Involved:
1. Applicability of GST on manpower services provided to Karnataka Rural Road Development Agency.

Analysis:
The applicant, a proprietary concern providing manpower services, sought an advance ruling on the GST applicability for services rendered to the Karnataka Rural Road Development Agency (KRRDA). The applicant contended that as per Notification No. 12/2017 - Central Tax (Rate), the services provided should be exempt from GST. The Authority for Advance Ruling examined the contract and determined that it involved pure services without the supply of goods. The crucial issue was whether KRRDA qualified as a Governmental Authority as defined in the GST Act. The KRRDA, a society registered under the Societies Registration Act, was found not to be a Central or State Government entity. The definition of "governmental authority" was analyzed, and the objectives of KRRDA were scrutinized to ascertain if they aligned with functions entrusted to a Panchayat under the Constitution.

The ruling delved into the functions entrusted to a Panchayat under the Constitution, emphasizing that the services provided by the applicant were not directly linked to these functions. It was established that the KRRDA, while involved in rural infrastructure development, did not engage the applicant's services for activities directly related to Panchayat functions. The ruling clarified that the services of Data Entry Operators, Engineers, and other personnel were for back-end support and office management, not directly connected to the core activities of the KRRDA. Consequently, the contract between the applicant and KRRDA was deemed ineligible for exemption under the relevant notification.

In conclusion, the Authority for Advance Ruling determined that the manpower services provided by the applicant to the KRRDA were not covered under the exemption specified in Notification No. 12/2017 - Central Tax (Rate). Therefore, the ruling stated that these services were not exempt from GST, affirming the applicability of GST on the manpower services rendered to the Karnataka Rural Road Development Agency.

---