Municipal services exemption: services by government, local authorities or governmental authorities relating to municipal functions are exempt from service tax.

Services by government, a local authority or a governmental authority in relation to functions entrusted to municipalities are exempt from service tax. The exemption applies to activities such as regulation of land use and construction of buildings when performed by the specified public entities. Notification amendments inserted the words 'Government, a local authority or' into the exempting entry and redefined 'governmental authority' to include statutory bodies or bodies established by government with prescribed participation or control. A departmental circular affirms that municipal functions entrusted under the constitutional schedule are covered by the exemption when provided by these entities.

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