2019 (10) TMI 949 - AAR - GST

Applicability of GST - man power services provided to Karnataka Rural Road Development Agency - pure services or not - entry no. 3 of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017 - Government or local authority or a Governmental Authority - whether the KRRDA is a Governmental Authority and whether the contract given by KRRDA to the applicant is in relation to the function entrusted to a Panchayat under article 243G of the Constitution or in relation to the function entrusted to a Municipality under article 243W of the constitution? HELD THAT - The KRRDA is a Governmental Authority as it is involved in the creation of rural infrastructures like Roads in the villages which is a function entrusted to a Panchayat under Article 243W of the Constitution and is established by the Government - The words in relation to is defined in the Oxford Dictionary as to mean in the context of or in connection with . When two activities are directly linked to each other, then they are said to be in connection with or in the context of. The activity of providing manpower like Data Entry Operators, Field Engineers, Diploma Field Engineers, Senior Software Professionals, Software Engineers for IT Cell, Graduate Assistant, Office Assistant, Peon and Watchman are to manage the back end work and managing the offices of the KRRDA and hence are not involved directly in the activity of maintaining or construction of roads. This activity is not directly connected to the work entrusted to a Panchayat under Article 243G of the Constitution, is only for a support service which is not project specific and hence cannot be considered to be by way of an activity in relation to a function entrusted . The contract of the applicant with KRRDA cannot be covered under the entry no. 3 of the Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017.

Summary

Issues Involved:
1. Applicability of GST on manpower services provided to Karnataka Rural Road Development Agency.

Analysis:
The applicant, a proprietary concern providing manpower services, sought an advance ruling on the GST applicability for services rendered to the Karnataka Rural Road Development Agency (KRRDA). The applicant contended that as per Notification No. 12/2017 - Central Tax (Rate), the services provided should be exempt from GST. The Authority for Advance Ruling examined the contract and determined that it involved pure services without the supply of goods. The crucial issue was whether KRRDA qualified as a Governmental Authority as defined in the GST Act. The KRRDA, a society registered under the Societies Registration Act, was found not to be a Central or State Government entity. The definition of "governmental authority" was analyzed, and the objectives of KRRDA were scrutinized to ascertain if they aligned with functions entrusted to a Panchayat under the Constitution.

The ruling delved into the functions entrusted to a Panchayat under the Constitution, emphasizing that the services provided by the applicant were not directly linked to these functions. It was established that the KRRDA, while involved in rural infrastructure development, did not engage the applicant's services for activities directly related to Panchayat functions. The ruling clarified that the services of Data Entry Operators, Engineers, and other personnel were for back-end support and office management, not directly connected to the core activities of the KRRDA. Consequently, the contract between the applicant and KRRDA was deemed ineligible for exemption under the relevant notification.

In conclusion, the Authority for Advance Ruling determined that the manpower services provided by the applicant to the KRRDA were not covered under the exemption specified in Notification No. 12/2017 - Central Tax (Rate). Therefore, the ruling stated that these services were not exempt from GST, affirming the applicability of GST on the manpower services rendered to the Karnataka Rural Road Development Agency.