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. 3 of Notification 12/2017-Central Tax (Rate). The authority determined BWSSB is not a local authority since its members are appointed by state government rather than elected by local inhabitants, and lacks control over municipal funds. Additionally, the services were not related to constitutional functions under articles 243G or 243W. Both conditions for exemption remained unsatisfied, making the services taxable under GST.

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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.

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