AMTS ruled as 'Local Authority' exempt from GST on security services, but liable for GST on advertisement services

The judgment ruled that the Applicant, AMTS, qualifies as a 'Local Authority' under the CGST Act, 2017. AMTS is not liable to pay GST on procurement of security services under reverse charge mechanism. However, the service recipients of AMTS are required to pay GST under reverse charge mechanism on advertisement services. Additionally, AMTS is required to register as a Deductor under GST as per Section 24 of the CGST Act.

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Issues Involved:
1. Qualification of AMTS as a 'Local Authority' under the CGST Act, 2017.
2. Liability of AMTS to pay GST on procurement of security services under reverse charge mechanism.
3. Liability of AMTS or service recipient to pay GST on advertisement services under reverse charge mechanism.
4. Requirement for AMTS to register as a Deductor under GST as per Section 24 of the CGST Act.

Issue-wise Detailed Analysis:

Part A: Qualification as 'Local Authority'

Classification as Local Authority:
The applicant, AMTS, argued that it is managed by AMC under the GPMC Act and thus qualifies as a 'Local Authority' under Section 2(69) of the CGST Act. The definition includes entities like a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to manage a municipal or local fund. AMTS, being established and managed by AMC, performs functions entrusted to a municipality under Article 243W of the Constitution, such as providing urban amenities and public conveniences. The judgment referenced the ruling in Union of India vs. R.C. Jain, which outlines criteria for an entity to be considered a 'local authority,' including separate legal existence, functioning in a defined area, power to raise funds, autonomy, and being entrusted with governmental functions.

Judgment:
AMTS fulfills the criteria for a 'local authority' under Section 2(69)(c) of the CGST Act, as it is a statutory authority established to carry out functions entrusted to a Municipality under Article 243W of the Constitution.

Part B: Liability to Pay GST on Procurement of Security Services

Exemption Analysis:
The applicant contended that security services procured by AMTS should be exempt from GST under Sl. No. 3 of Notification No. 12/2017 - Central Tax (Rate), which exempts pure services provided to a local authority in relation to functions entrusted under Article 243W. The term 'in relation to' was interpreted broadly to include services necessary for performing municipal functions, such as security services for transportation.

Judgment:
AMTS, being a 'local authority,' is not liable to pay GST under reverse charge mechanism on procurement of security services, as these services are considered 'in relation to' the performance of municipal functions and thus exempt under Notification No. 12/2017 - Central Tax (Rate).

Part C: Liability to Pay GST on Advertisement Services

Reverse Charge Mechanism:
The applicant provides advertising services and argued that under Notification No. 13/2017 - Central Tax (Rate), services supplied by a local authority to a business entity are subject to reverse charge, meaning the service recipient should pay the GST.

Judgment:
The service recipients of AMTS are required to pay GST under reverse charge mechanism on advertisement services, as AMTS qualifies as a 'local authority' under Section 2(69) of the CGST Act.

Part D: Requirement to Register as a Deductor under GST

TDS Provisions:
The applicant argued that as a 'local authority,' AMTS is required to deduct tax at source (TDS) under Section 51 of the CGST Act and thus must register as a Deductor.

Judgment:
AMTS, being a 'local authority,' is required to obtain registration as a GST TDS deductor in terms of Section 51 of the CGST Act, 2017.

Ruling Summary:
1. AMTS qualifies as a 'Local Authority' under the CGST Act, 2017.
2. AMTS is not liable to pay GST on procurement of security services under reverse charge mechanism.
3. The service recipients of AMTS are required to pay GST under reverse charge mechanism on advertisement services.
4. AMTS is required to register as a Deductor under GST as per Section 24 of the CGST Act.

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