Security services to Municipal Corporations not exempt from GST under Notification 12/2017 without constitutional function proof

AAR Maharashtra ruled that security services provider cannot claim blanket GST exemption under Notification 12/2017 for services to Municipal Corporations. The exemption under Sr. No. 3 applies only when pure services relate to functions specifically entrusted to municipalities under Article 243W of the Constitution. Since the applicant failed to specify which constitutional functions the security services supported and provided no transaction details, purchase orders, or activity-wise breakdowns, the authority held that exemption is unavailable for services related to non-constitutional activities like leasing grounds for exhibitions or marriages.

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Issues:
1. Applicability of Exemption Notification No. 12/2017 to Security Services provided to Municipal Corporations.

Analysis:
The application sought an advance ruling on whether Chapter No. 99, Sr. No. 3 of Exemption Notification No. 12/2017 applies to the provision of Security Services by the applicant to Municipal Corporations, exempting them from GST. The applicant, a corporation owned by the Government of Maharashtra, argued that the security services provided to Municipal Corporations are pure services exempt from GST under the mentioned notification. They contended that the services were in relation to functions entrusted to Municipalities under Article 243W of the Constitution, thus meeting the conditions for exemption. The applicant cited a similar case where the Authority for Advance Ruling ruled in favor of the applicant, supporting their claim for exemption.

The concerned officer merely reproduced a previous GST ARA Order in response to the applicant's contentions. The hearings involved submissions from the applicant and jurisdictional officers. The applicant was asked to provide detailed transaction information and the nature of services provided to prove their eligibility for exemption under the notification. The observations and findings of the Authority focused on whether the security services were pure services provided to Municipal Corporations in relation to functions entrusted to them under Article 243W of the Constitution.

The Authority analyzed the relevant provisions of Exemption Notification No. 12/2017 and emphasized that for the exemption to apply, the services must be pure services provided to local authorities in relation to functions entrusted to a Municipality under Article 243W of the Constitution. The Authority noted that while the applicant claimed their services were pure and related to functions under Article 243W, they failed to provide specific details or evidence during the hearings. Without clear evidence of the nature of functions performed by the Municipal Corporations, the Authority concluded that the exemption would only apply if the services were indeed provided in relation to functions entrusted to a Municipality under Article 243W. Therefore, the Authority ruled that the exemption under the notification is available to the applicant only if the pure services are supplied to Municipal Corporations in relation to functions entrusted to them under Article 243W of the Constitution.

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