2021 (8) TMI 356 - AAR - GST

Tax Exemption for Government Services: Pure services to specific entities exempt under Notification No. 12/2017-Central Tax

The case analyzed whether the pure services provided by a contractor to various government entities qualified for exemption under Notification No. ... Exemption from GST - pure services - manpower services provided to Zilla Panchayat, City Corporations, Education institutions and Rural Water Supply Divisions - exempted under Article 243G and 243W or not? - HELD THAT:- The applicant is providing Manpower Services like Drivers and cleaners for solid waste management system to City Corporation / Municipalities. This is in relation to function entrusted to a municipality under article 243W of the constitution which is covered by 6th entry of twelfth schedule which says ‘Public health, sanitation conservancy and solid waste management’ - The applicant also provides manpower services like Data Entry Operator, Drivers “D” Group etc to Zilla Panchayat departments. But these manpower services are not provided by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. Hence provision of such manpower services is liable to tax at 18%. The Provision of man power services to Zilla Panchayat, City Corporation/Municipalities are exempted only when they are provided in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution - The Provision of manpower services like cleaning staff, cook, assistant cook, teachers, staff nurse and watchman to hostels and residential schools working under Social welfare department is exempted as it satisfies both the conditions mentioned under entry no.3 of the Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017. These manpower services are provided to Social Welfare Department which is a department of State Government - These manpower services are provided to socially backward people, scheduled caste and scheduled tribe which is in relation to function entrusted to a Panchayat under article 243G of the constitution which is covered by 27th entry of eleventh schedule which says ‘Welfare of the weaker sections, and in particular, of the Scheduled Castes and the Scheduled Tribes’. The applicant also provides manpower services like clerical staff (FDA, SDA) and Typists to district and taluk offices of Social welfare department. Even though the manpower services are provided to Social Welfare Department which is a Department of State Government the manpower services are not provided by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. Hence provision of such manpower services is liable to tax at 18%. Issues Involved:1. Whether the pure services provided to Zilla Panchayat, City Corporations, Education institutions, and Rural Water Supply Divisions are exempted under Article 243G and 243W of the Constitution.Issue-wise Detailed Analysis:Admissibility of the Application:The application is admissible under Section 97(2)(b) of the CGST Act 2017 as it pertains to the 'applicability of a notification issued under the provisions of this Act.'Brief Facts of the Case:The applicant, a contractor providing manpower services such as 'D' Group, Data Entry Operators, Cooks, Assistant Cooks, Security Guards, cleaning staff, and clerical staff to Zilla Panchayat, City Corporation, Educational institutions, and Rural Water Supply Divisions, claims exemption from GST under SI.No.3 of Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017, as pure services.Comments from Tax Authorities:The Assistant Commissioner of Central Tax, Hubballi, and the Assistant Commissioner of Commercial Taxes, LGSTO-320, Hubballi, provided comments indicating that the exemption under Notification No. 12/2017-Central Tax (Rate) is applicable depending on the nature of services and conditions of the service contract. If services involve other facts apart from pure services, they are subject to tax at 18%.Findings & Discussion:The provisions of CGST Act, 2017 and KGST Act, 2017 are similar. The applicant provides manpower services to various government entities. The core issue is whether these services qualify for exemption under entry no.3 of Notification No. 12/2017-Central Tax (Rate), which exempts pure services provided to government entities in relation to functions entrusted to Panchayats under Article 243G or Municipalities under Article 243W of the Constitution.Analysis of Notification No. 12/2017-Central Tax (Rate):- Pure Services: Excludes works contract service or other composite supplies involving any goods.- Government Entities: Includes Central Government, State Government, Union territory, local authority, or a Governmental authority.- Entrusted Functions: Must relate to functions listed under Article 243G (Panchayats) or Article 243W (Municipalities).Specific Findings:1. Manpower Services for Solid Waste Management: Services like drivers and cleaners for solid waste management provided to City Corporation/Municipalities are exempt as they relate to public health, sanitation conservancy, and solid waste management under Article 243W.2. Manpower Services to Zilla Panchayat: Services like Data Entry Operators, Drivers, and 'D' Group staff to Zilla Panchayat do not relate to any function under Article 243G or 243W and hence are taxable at 18%.3. Manpower Services to Social Welfare Department: Services like cleaning staff, cooks, assistant cooks, teachers, staff nurses, and watchmen to hostels and residential schools under the Social Welfare Department are exempt as they relate to the welfare of weaker sections, including Scheduled Castes and Scheduled Tribes under Article 243G.4. Clerical and Typist Services: Services like clerical staff (FDA, SDA) and Typists to the Social Welfare Department are taxable at 18% as they do not relate to any function under Article 243G or 243W.Ruling:- Exempted Services: Manpower services for solid waste management and services to hostels and residential schools under the Social Welfare Department are exempt from GST.- Taxable Services: Manpower services like Data Entry Operators, Drivers, 'D' Group staff to City Corporation/Municipalities/Zilla Panchayat, and clerical/typist services to the Social Welfare Department are taxable at 18% (CGST @ 9% and KGST @ 9%).This detailed analysis ensures that the legal terminology and significant phrases from the original text are preserved, providing a thorough understanding of the judgment.