2024 (7) TMI 519 - AAR - GST

Professional tax return filing services to BWSSB taxable under GST as exemption under Notification 12/2017 SI No. 3 denied

AAR Karnataka ruled that professional services for corporate tax return filing assistance provided to BWSSB do not qualify for GST exemption under SI No. ... Exempt supply - pure services - local authority - activity in relation to any function entrusted to a Municipality under Article 243W - determination of liability to pay taxLocal authority - Municipality under Article 243W - Whether Bangalore Water Supply & Sewerage Board (BWSSB) qualifies as a 'local authority' or as a 'State Government' for the purpose of the exemption notification. - HELD THAT: - The Authority examined the statutory definitions of 'local authority' in Section 2(69) of the CGST Act and the constitutional definitions of 'Panchayat' and 'Municipality' under Articles 243/243B and 243P/243Q. The members of BWSSB are appointed by the State Government under the BWSSB Act, and it is not constituted as an institution of self-government with members elected by inhabitants of a defined area. BWSSB is also not a Municipal Committee, Zilla Parishad or District Board entrusted with control or management of a municipal or local fund. On these material features, BWSSB does not fall within the definition of 'local authority' and is not the 'State Government'. [Paras 11]BWSSB is neither a State Government nor a 'local authority' within the meaning of the CGST Act.Exempt supply - pure services - activity in relation to any function entrusted to a Municipality under Article 243W - Whether the professional services rendered by the applicant for assistance in filing corporate tax returns for BWSSB qualify as an exempt supply under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate) (as amended). - HELD THAT: - The exemption requires (i) the supply to be 'pure services' (not involving supply of goods), (ii) the recipient to be Central/State/Union Territory/local authority or governmental authority, and (iii) the service to be an activity in relation to a function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W. The Authority accepted that the services are 'pure services' and did not involve goods. However, since BWSSB was held not to be a 'local authority' or State Government, the second condition is not satisfied. Further, the services for assistance in filing corporate tax returns were not held to be an activity rendered 'in relation to' any function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W. Because the statutory conditions of the entry are conjunctive, failure to satisfy the recipient criterion and the requirement of relation to entrusted municipal/panchayat functions precludes the exemption. [Paras 10, 11, 12, 13]The professional services for assistance in filing corporate tax returns provided to BWSSB are not an exempt supply under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate).Final Conclusion: The advance ruling records that BWSSB does not qualify as a 'local authority' or State Government for the purposes of the exemption, and consequently the professional services for assistance in filing corporate tax returns provided to BWSSB are not exempt under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate). Issues Involved:1. Whether the professional services for assistance in filing corporate tax returns provided to BWSSB are exempt under SI No. 3 (chapter 99) of Notification 12/2017-Central Tax (Rate) dated 28 June 2017.Issue-wise Detailed Analysis:Admissibility of the Application:The question pertains to the 'determination of the liability to pay tax on any goods or services or both' and is admissible under Section 97 (2) (e) of the CGST Act 2017.Brief Facts of the Case:- The Applicant, engaged in auditing, accounting, and taxation services, entered into an agreement with BWSSB for assistance in filing corporate tax returns.- BWSSB, an autonomous body formed under the Bangalore Water Supply and Sewerage Board Act, 1964, is tasked with water supply and sewage disposal within Bangalore Metropolitan Area and other areas.- BWSSB operates on a 'no loss no profit basis' and is not involved in business operations.- The Applicant believes their services are exempt from GST under Notification No. 12/2017-Central Tax (Rate) dated 28 June 2017, as amended.Applicant’s Interpretation of Law:- The Applicant argues that their services qualify for exemption under Notification No. 12/2017-Central Tax (Rate) dated 28 June 2017, as amended by Notification No. 16/2021-Central Tax (Rate) and Notification No. 13/2023-Central Tax (Rate).- The exemption applies to 'Pure Services' provided to the Government or local authority for functions under the Constitution.- The Applicant asserts that their services meet the three conditions for exemption: they are pure services, provided to a local authority, and related to functions under Article 243W of the Constitution.Findings & Discussion:- The provisions of CGST Act, 2017 and KGST Act, 2017 are similar unless specified otherwise.- For exemption under entry No. 3 of Notification 12/2017-Central Tax (Rate), two conditions must be met:1. Services must be pure services provided to the Central Government, State Government, Union territory, or local authority.2. Services must be related to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution.Examination of Conditions:1. Pure Services:- The Applicant provides professional services for filing corporate tax returns, which qualify as pure services as they do not involve the supply of goods.2. Recipient of Services:- BWSSB is not the Central Government or Union Territory. It is an autonomous body under the Bangalore Water Supply and Sewerage Act, 1964, and not considered a State Government.- BWSSB does not qualify as a local authority as defined under Section 2 (69) of the CGST Act, 2017. Local authorities must have members elected by local inhabitants, whereas BWSSB members are appointed by the State Government.- BWSSB is not a Municipal Committee, Zilla Parishad, or District Board as it does not manage a municipal or local fund.3. Relation to Constitutional Functions:- The services provided by the Applicant do not relate to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution.- Filing corporate tax returns is not listed under the functions in the Eleventh or Twelfth Schedule of the Constitution.Conclusion:- BWSSB does not meet the criteria of a local authority, and the services provided do not relate to functions under Articles 243G or 243W.- Therefore, the professional services for assistance in filing corporate tax returns provided by the Applicant to BWSSB are not exempt under SI No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017.Ruling:The professional services for assistance in filing corporate tax returns provided by the Applicant to BWSSB are not an exempt supply as per SI No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017.