GST exemption for pure services denied where security services to a local authority were not linked to entrusted municipal functions.

Security services supplied to Bruhat Bengaluru Mahanagara Palike were held not to qualify for GST exemption under Notification No. 12/2017-Central Tax (Rate) because, although BBMP satisfied the recipient requirement as a local authority, the supply was not shown to be an activity in relation to any function entrusted under Articles 243G or 243W. The exemption for pure services applies only when both conditions are met, so the second statutory condition remained unfulfilled and the services were taxable.

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Issues: Whether security services provided to Bruhat Bengaluru Mahanagara Palike are exempt from GST under the entry for pure services supplied to a local authority in relation to functions entrusted under Articles 243G and 243W of the Constitution.

Analysis: Exemption under Notification No. 12/2017-Central Tax (Rate) applies only when the supply is pure services provided to the specified governmental recipient and the service is by way of an activity in relation to a function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W. BBMP was treated as a local authority, satisfying the recipient requirement. However, the supplied security services were not shown to be connected with any entrusted Panchayat or Municipal function listed in the constitutional schedules. The second statutory condition therefore remained unmet.

Conclusion: The security services supplied to BBMP are not exempt from GST.

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