Municipal corporations' advertisement space supply in print media deemed pure service, exempt from GST under Section 2(69) and Notification 12/2017 Entry 3.

AAR Maharashtra ruled that supply of selling space for advertisement in print media by municipal corporations constitutes pure service, not composite supply, as no property in goods transfers to the recipient who only receives advertising space. PMC and PCMC qualify as local authorities under GST Act Section 2(69). Advertisement for recruitment of medical officers relates to functions entrusted to municipalities under Article 243W regarding health and education. The service falls under Entry No. 3 of Exemption Notification 12/2017 and is exempt from tax.

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Issues Involved:
1. Whether the supply of selling space for advertisement in print media is classified as a pure service.
2. Whether the supply of selling space for advertisement in print media is a composite supply of goods and services.
3. Whether Pune Municipal Corporation (PMC) and Pimpri Chinchwad Municipal Corporation (PCMC) are local authorities.
4. Whether the content of the advertisement has a connection to the functions entrusted to a panchayat under Article 243G or a municipality under Article 243W of the Constitution.
5. Whether the supply of service of selling space for advertisement for recruitment of doctors for hospitals and medical colleges run by the respective corporation is in relation to the functions entrusted to the Panchayat under Article 243G and 243W of the Constitution.

Issue-wise Detailed Analysis:

1. Pure Service Classification:
- Applicant's Submission: The applicant argued that the sale of space for advertisement in print media involves both goods and services, as materials like paper and ink are used, thus not qualifying as "pure services."
- Authority's Findings: The authority determined that the supply of selling space in print media is a pure service. The recipient of the service only gets the right to publish advertisements in the specified publication, and no property in goods (newspaper or print media) is transferred to the recipient. Therefore, the supply is classified as pure service under Entry No. 3 of the Exemption Notification.

2. Composite Supply of Goods and Services:
- Authority's Findings: Since the services are held to be pure services, the decision on whether the supply is a composite supply of goods and services becomes redundant.

3. Local Authorities Classification:
- Applicant's and Officer's Admission: Both the applicant and the jurisdictional officer agreed that PMC and PCMC are local authorities as per the definition in Section 2 (69) of the GST Act.
- Authority's Findings: The authority confirmed that both PMC and PCMC are local authorities constituted under the Maharashtra Municipal Corporations Act, 1949, and satisfy the definition of a 'Local Authority' as defined in Section 2 (69) of the GST Act.

4. Connection to Functions Entrusted to Panchayat or Municipality:
- Facts and Findings: The advertisements in question were for the recruitment of medical officers and professors for hospitals run by PMC and PCMC. The recruitment rules of these corporations mandate the publication of such advertisements. The authority concluded that the activity of placing advertisements for recruitment has some connection, whether direct, indirect, or remote, to the functions entrusted to a panchayat under Article 243G or a municipality under Article 243W of the Constitution.

5. Relation to Functions Entrusted to Panchayat or Municipality:
- Applicant's Submission: The applicant contended that selling space for advertisement in print media is not an activity covered under the Eleventh and Twelfth Schedules of Articles 243G and 243W of the Constitution, nor is it a pure service.
- Officer's Submission: The officer argued that the service of selling space for advertisement is not in relation to the functions entrusted to the municipality by Article 243W.
- Authority's Findings: The authority referred to various judgments and circulars explaining the broad scope of the phrase "in relation to." It concluded that the activity of publishing advertisements for recruitment of doctors is in relation to the constitutional functions stated in Article 243G and 243W, as it is mandatory for recruitment and necessary for providing health services.

Final Decision:
- The authority ruled that the supply of selling space for advertisement in print media, being pure services provided to the Municipal Corporations, is covered by Entry No. 3 of the Notification 12/2017-Central Tax (Rate) dated 28th June 2017, and is exempt from tax.

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