Exemption scope for pure services: services to a Government Entity are not covered; exemption limited to specified government recipients.

Security services supplied to FCI were held to be pure services (no transfer of goods) and FCI qualifies as a Government Entity established by statute under central control; however, serial no. 3 of Notification No. 12/2017 exempts pure services only when supplied to the recipients expressly described (Central Government, State Government, Union territory or local authority) and does not extend to a body merely classified as a Government Entity under the notification as presently worded, so the exemption does not apply to the supplies to FCI; temporal applicability of the exemption was confined to the earlier amended period.

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Issues: (i) Whether security services supplied to Food Corporation of India (West Bengal region) qualify as "pure services" provided to a Government Entity in relation to functions entrusted under Article 243G/243W of the Constitution and are exempt from GST under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended?

Analysis: The authority examined (a) whether security services constitute pure services and held that supply of security personnel involves no transfer of goods and thus amounts to pure services; (b) whether FCI qualifies as a Government Entity under paragraph 2 (clause (zfa)) of Notification No. 12/2017 and concluded that FCI, being established by an Act of Parliament and under Central Government control, is a Government Entity; (c) whether the security services are in relation to functions entrusted under Article 243G, observing that serial no. 28 of the Eleventh Schedule (Public Distribution System) covers PDS activities and that security of depots and related activities are incidental or ancillary activities in relation to the PDS functions; (d) the scope and beneficiaries of serial no. 3 of Notification No. 12/2017, noting that the description expressly refers to services provided to Central Government, State Government, Union territory or local authority, and that the expressions "Governmental Authority" and "Government Entity" were previously included by amendment but were omitted with effect from 01.01.2022 by Notification No. 16/2021-Central Tax (Rate); and (e) temporal applicability, distinguishing the periods when exemption applied (25.01.2018 to 31.12.2021) and the periods when services were taxable. The authority applied these provisions to the facts and concluded that although the services are pure and connected to Article 243G functions and FCI is a Government Entity, the exemption in serial no. 3 is limited to the specified recipients in the description and thus does not extend to a Government Entity for the purpose of that entry as presently worded.

Conclusion: The security services supplied to FCI, West Bengal region, do not qualify for exemption under serial no. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended; the claim for exemption is rejected.

Ratio Decidendi: Serial no. 3 of Notification No. 12/2017-Central Tax (Rate) exempts pure services only when supplied to the specified recipients listed in the entry (Central Government, State Government, Union territory or local authority) as so described; a body classified as a "Government Entity" under paragraph 2 is not covered by that description and therefore the exemption does not apply to supplies made to such Government Entity under the notification as worded.

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