2020 (7) TMI 474 - AAR - GST

Recovery from gov't for research exempt from GST under Entry No. 3, not services to gov't.

In Re: M/s. Atal Bihari Vajpayee Institute of Good Governance & Policy Analysis

The amount recovered by the applicant from other government departments for research work and studies, aiding in policy-making, is exempt from GST under ... Levy of GST - amount recovered by the applicant from other government departments for doing research work and study, which help them make policies or understand its impact - Pure services or not - Services provided by the applicant to other government department - entry no 8 of Exemption Notification No. 12/2017 Central Tax (Rate) dated 28th June 2017. HELD THAT:- The applicant has attached the list of works undertaken by it, mentioning the item no of respective Schedule of Constitution of India against the each work being executed, in relation to which the pure services are being provided by the applicant to other government departments or local authority or a Governmental authority or a Government Entity - the works of pure services undertaken by applicant are covered in clauses of the Eleventh and Twelfth Schedule referred in article 243G and 243W of the Constitution. The of works being undertaken by the applicant is in relation to the functions entrusted to Municipalities under article 243W and to Panchayats under article 243G of the Constitution, and, therefore, it is exempt from tax being covered in Sr. No. 3 of Notification No. 12 of 2017-Central Tax (Rate), dated 28-6-2017 (as amended from time to time) issued under Central Goods and Services Tax Act, 2017 (CGST/Act), and corresponding notifications issued under Madhya Pradesh Goods and Services Tax Act, 2017. Whether Services provided by the applicant to other government department are covered under the entry no 8 of Exemption Notification No. 12/2017 Central Tax (Rate) dated 28th June 2017? - HELD THAT:- Entry No. 8 prescribe for Services provided by the Central Government, State Government, Union territory or local authority to another Central Government, State Government, Union territory or local authority - this entry grants exemption to services provided by Central Government, State Government, Union territory or local authority only. Hence to qualify for the exemption granted under Entry No 8 service provider must be government or local authority. The Word government has been defined under the GST laws and the definition government covers Central Government and State Governments only. Here it is pertinent to note that the application is a society registered under MP Societies Registrikaran Act 1973 and has its own governing body being presided over by Chief Minister of State of Madhya Pradesh. Hence the applicant does not fall within the definition of Government or local Authority - the applicant falls within the ambit of definition of Government Entity as defined under clause (zfa) of notification no 12/2017. Entry no 8 of Notification no 12/2017 CT(R) covers services provided by government or local authority only however the applicant does not cover within the definition of Government or Local Authority hence Services provided by the applicant to other government department are not covered under the entry no 8 of Exemption Notification No. 12/2017 Central Tax (Rate) dated 28th June 2017. Issues Involved:1. Whether the amount recovered by the applicant from other government departments for doing research work and study, which help them make policies or understand its impact, is chargeable to GST.2. Whether services provided by the applicant to other government departments are covered under entry no. 8 of Exemption Notification No. 12/2017 Central Tax (Rate) dated 28th June 2017.Issue-wise Detailed Analysis:Issue 1: GST Applicability on Amount Recovered for Research WorkThe applicant, Atal Bihari Vajpayee Institute of Good Governance & Policy Analysis (AIGGPA), sought clarity on whether the amount recovered from other government departments for research work and studies, which assist in policy-making or understanding impacts, is chargeable to GST. The relevant exemption notification is Notification No. 12/2017 CT(R) dated 28th June 2017, particularly Entry No. 3.Key Conditions for Exemption under Entry No. 3:- Pure Service: The services must be pure, excluding works contract service or composite supplies involving goods.- Service Recipients: The services must be provided to the Central Government, State Government, Union territory, local authority, governmental authority, or a government entity.- Activity Relation: The services must relate to any function entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution.The contracts awarded to the applicant by various government departments are for impact evaluation, research works, and policy analysis, which qualify as pure services. These services are not excluded under the works contract or composite supplies clause. The applicant provided a list of 63 projects indicating that services are rendered to government departments, local authorities, or government entities.Constitutional Provisions:- Article 243G: Pertains to the powers and responsibilities of Panchayats, including economic development and social justice plans.- Article 243W: Relates to the powers and responsibilities of Municipalities, including urban planning and public health.The services provided by the applicant are in relation to functions listed in the Eleventh and Twelfth Schedules of the Constitution, thus satisfying the conditions under Entry No. 3 of Notification No. 12/2017 CT(R). Therefore, the amount recovered by the applicant for these services is exempt from GST.Issue 2: Coverage under Entry No. 8 of Exemption Notification No. 12/2017The applicant also questioned whether their services to other government departments fall under Entry No. 8 of Exemption Notification No. 12/2017 CT(R).Key Conditions for Exemption under Entry No. 8:- Service Providers: The services must be provided by the Central Government, State Government, Union territory, or local authority to another similar entity.The applicant, being a society registered under the MP Societies Registrikaran Act 1973 and governed by a body presided over by the Chief Minister of Madhya Pradesh, does not qualify as the Central Government, State Government, or local authority. However, it falls within the definition of a 'Government Entity' as per clause (zfa) of Notification No. 12/2017, which includes entities with 90% or more participation by way of equity or control by the government to carry out a function entrusted by the government.Since Entry No. 8 specifically covers services provided by the government or local authorities only, and the applicant does not meet this criterion, services provided by the applicant to other government departments are not covered under Entry No. 8 of Exemption Notification No. 12/2017 CT(R).Ruling:1. Question 1: The amount recovered by the applicant from other government departments for research work and study, which assists in policy-making or understanding its impact, is exempt from GST, provided all conditions under Entry No. 3 of Notification No. 12/2017 CT(R) are satisfied.2. Question 2: Services provided by the applicant to other government departments are not covered under Entry No. 8 of Exemption Notification No. 12/2017 CT(R) as the applicant does not qualify as the Central Government, State Government, or local authority.This ruling is valid subject to the provisions under section 103 (2) until declared void under Section 104(1) of the GST Act.