2022 (8) TMI 146 - AAR - GST

Telecommunication Services to Municipal Corporations Deemed Taxable Under CGST Act, Direct Constitutional Function Link Required

AAR ruled telecommunication services provided to a municipal corporation are taxable under CGST Act. The services did not qualify for exemption under ... Taxable services under Section 9(1) of the CGST Act, 2017 - exemption for pure services provided in relation to functions entrusted to a municipality under Article 243W of the Constitution - interpretation of the expression 'in relation to' - functions listed in the Twelfth Schedule to the Constitution - Notification No. 12/2017 - exemption at Sr. No. 3 (Chapter 99) of the TableTaxable services under Section 9(1) of the CGST Act, 2017 - exemption for pure services provided in relation to functions entrusted to a municipality under Article 243W of the Constitution - Notification No. 12/2017 - exemption at Sr. No. 3 (Chapter 99) of the Table - interpretation of the expression 'in relation to' - Supply of telecommunication (data/voice) services by the applicant to the Greater Hyderabad Municipal Corporation is taxable and does not qualify for exemption under Sr. No. 3 (Chapter 99) of the Table to Notification No. 12/2017. - HELD THAT: - The exemption at Sr. No. 3 in Notification No. 12/2017 applies only to pure services that are provided 'in relation to' the functions entrusted to a municipality under Article 243W read with the Twelfth Schedule. The phrase 'in relation to' requires a direct and immediate link or association between the service and the municipal function, as explained by the cited precedents which treat 'relating to' or 'relate' as importing a connection or pertinence to the subject matter. The applicant's provision of data and voice telecommunication services to GHMC for general office and administrative use by employees does not have a direct relation to any specific function enumerated in the Twelfth Schedule. Because the services are not directly connected to the performance or implementation of a municipal function listed under Article 243W/Twelfth Schedule, they fall outside the scope of the exemption and are therefore taxable under the GST law. The Authority applied the principle that exemption must be directly related to the enumerated municipal functions and rejected a broad or incidental reading of 'in relation to,' concluding that general administrative telecommunications services do not satisfy that test. [Paras 7, 8]The supply of telecommunication services to the local authority is taxable and not exempt under Notification No. 12/2017 Sr. No. 3.Final Conclusion: The Advance Ruling holds that the applicant's supply of data/voice telecommunication services to the Greater Hyderabad Municipal Corporation, being for general administrative use and not directly connected to functions listed in the Twelfth Schedule under Article 243W, does not qualify for exemption under Notification No. 12/2017 and is taxable under the GST law. Issues:1. Interpretation of provisions of CGST Act and TGST Act for Advance Ruling application.2. Taxability of telecommunication services provided to a local authority under CGST Act.3. Exemption eligibility under Notification No. 12/2017 for services provided to a municipality.Analysis:1. The Advance Ruling Authority clarified that unless specified, provisions of CGST Act apply to TGST Act. The applicant's queries under Section 97 of the GST Act were accepted, supported by fee payment evidence, and not pending elsewhere, allowing the application.2. The applicant, a telecommunication service provider to a local authority, sought a ruling on taxability under Section 9(1) of the CGST Act and exemption under Notification No. 12/2017. The services were provided to Greater Hyderabad Municipal Corporation for general office and administrative purposes, not linked directly to functions under Article 243W of the Constitution of India Schedule 12, thus not qualifying for the exemption.3. The ruling stated that services provided by the applicant to the local authority do not meet the criteria for exemption under Notification No. 12/2017. The decision was based on legal interpretations from previous court cases defining the scope of 'in relation to' and 'relating to,' emphasizing the direct and immediate link required for exemption eligibility.Conclusion:The judgment determined that the supply of telecommunication services to a local authority is taxable under the CGST Act, as the services provided did not have a direct and immediate connection with the functions entrusted to the municipality under Article 243W of the Constitution of India. The ruling was based on legal interpretations and precedents, highlighting the importance of a clear link between services provided and functions specified for exemption eligibility under GST laws.