Manpower services to local bodies taxable at 18% unless serving weaker sections under Article 243G

AAR Karnataka ruled on GST exemption for manpower services provided to local government bodies. The applicant's manpower services (FDA, SDA, typists, drivers, data entry operators) to Zilla Panchayat/Taluk Panchayat were held taxable at 18% as they don't relate to functions under Article 243G. However, manpower services (cleaning staff, cooks, teachers, nurses, watchmen) to hostels and residential schools run by Social Welfare Department were exempted, satisfying conditions under Notification 12/2017-Central Tax as they serve weaker sections including scheduled castes/tribes, falling under Article 243G's eleventh schedule entry 27.

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Issues Involved:
1. Exemption of manpower services provided to Zilla Panchayat and Taluk Panchayat.
2. Applicability of GST on different types of manpower services.

Summary:

Issue 1: Exemption of manpower services provided to Zilla Panchayat and Taluk Panchayat

The applicant, M/s. Manish Manpower Agency, sought an advance ruling on whether their supply of manpower services to Zilla Panchayat (Social Welfare Department) and Taluk Panchayat are exempt from GST under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) as Pure Services.

The Authority for Advance Rulings examined whether the manpower services provided by the applicant qualify as "Pure Services" under the said notification. According to the notification, to claim exemption, the services must be:
1. Pure Services (excluding works contract service or other composite supplies involving any goods) provided to the Central Government, State Government, Union territory, local authority, or a Governmental authority.
2. 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.

The Authority concluded that while Zilla Panchayat and Taluk Panchayat are covered under local authorities, the manpower services provided by the applicant to these entities do not qualify as activities in relation to any function entrusted to a Panchayat under Article 243G or a Municipality under Article 243W. Thus, these services are liable to tax at 18% (9% CGST and 9% SGST).

Issue 2: Applicability of GST on different types of manpower services

The Authority further analyzed the specific types of manpower services provided by the applicant:
- Exempted Services: The supply of manpower services such as cleaning staff, cook, assistant cook, teachers, staff nurse, and watchman to hostels and residential schools/colleges run by the Social Welfare Department is exempted from GST. These services are considered as activities in relation to functions entrusted to a Panchayat under Article 243G, specifically the welfare of weaker sections, including Scheduled Castes and Scheduled Tribes, as listed in the Eleventh Schedule of the Constitution.

- Taxable Services: The supply of manpower services like Data Entry Operator, Drivers, "D" Group staff, FDA, SDA, and Typists to Zilla Panchayat/Taluk Panchayat/Social Welfare Department/Backward Classes Welfare Department does not qualify for exemption. These services are not considered activities in relation to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W. Consequently, these services attract GST at the rate of 18% (9% CGST and 9% SGST).

Ruling:

1. Manpower services like cleaning staff, cook, assistant cook, staff nurse, teachers, and watchman provided to hostels and residential schools/colleges run by the Social Welfare Department are exempt from GST.
2. Manpower services like Data Entry Operator, Drivers, "D" Group staff, FDA, SDA, and Typists provided to Zilla Panchayat/Taluk Panchayat/Social Welfare Department/Backward Classes Welfare Department are subject to GST at the rate of 18%.

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