GOVERNMENT AUTHORITY & GOVERNMENT ENTITY- DIFFERENCE

[Sadanand Bulbule]

Dear experts

Notification No.12/2017-Central Tax (Rate) dated 28/06/2017 exempts the following services. Further definition attached to this notification also defines the meaning of ' Government Authority' for the purpose of Article 243G & 243W under 2[zf] and Government Entity under 2[zfa] in general.

So whether the Metro Rail Services offered under the joint venture in urban areas and being registered under the Companies Act, which also supplies services like leasing of commercial space, advertisement, naming of stations etc., for consideration fall under the category of ' Government Authority or ' Government Entity?

Further whether such metro rail companies are entitled for tax exemption on supply of services of lease of commercial space, advertisement, naming of stations etc.,?

4	Chapter 99	Services by governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution.	Nil	Nil
5	Chapter 99	Services by a Governmental Authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution.

[Sadanand Bulbule]

Dear experts

I have re-visited my above query. In terms of Sl. No. 3 of the Notification No. 12/2017-CTR[supra], the following core services provided by Metro Rail Company, being Government Entity are exempt. 

However the other non-core supply of services like leasing of space, advertisement, naming of stations etc., being purely commercial activities for considerations are taxable @ 18% GST as these are not akin to the functions entrusted under Article 243G or 243W covered by the above notification.

Experts are solicited to offer comments.

3

Chapter 99

Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.

Nil

Nil

[YAGAY andSUN]

Metro Rail Companies established as joint ventures between Central and/or State Governments and registered under the Companies Act may qualify as “Government Entities” or “Government Authorities” as defined under clauses 2(zfa) and 2(zf) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, provided they are either set up by an Act of Parliament/State Legislature or are owned 90% or more by the Government. These entities are generally entrusted with public functions such as operation and maintenance of metro rail systems in urban areas.

In terms of Sl. No. 3 of the said Notification, pure services (excluding works contracts or composite supplies involving goods) provided to the Central Government, State Government, Union Territory or Local Authority in relation to any function entrusted to a Municipality under Article 243W of the Constitution are exempt from GST. Core services like construction, operation, and maintenance of metro transport systems fall within the scope of Article 243W, and hence, when provided by Metro Rail Companies acting as Government Entities or Authorities, these services are eligible for GST exemption.

However, services such as leasing of commercial space, advertisement rights, naming or branding of metro stations, etc., are commercial in nature and are not considered functions entrusted under Article 243W or 243G. These non-core services are rendered for consideration and fall outside the purview of the exemption available under the said notification. As such, they are subject to GST at the applicable rate, which is generally 18%.

Therefore, while Metro Rail Companies may claim exemption for core services linked to public functions under Article 243W, they are not entitled to exemption on commercial activities like leasing, advertising, and branding, which remain taxable under GST.

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[Sadanand Bulbule]

Dear Sir

Thanks for your quick validation. 

AI Summary

Metro Rail Companies qualify as Government Entities but only core services exempt from GST, commercial activities taxable A GST discussion forum addressed whether Metro Rail Companies operating as joint ventures qualify as 'Government Authority' or 'Government Entity' under GST exemption notifications. The query concerned exemptions for core metro services versus commercial activities like leasing space and advertising. Participants concluded that while Metro Rail Companies may qualify as Government Entities if 90% government-owned or established by legislative act, only core services related to constitutional functions under Articles 243G/243W are exempt. Commercial activities like leasing, advertising, and station naming remain taxable at 18% GST as they fall outside constitutional municipal functions and are purely commercial in nature.