2020 (3) TMI 444 - AAR - GST

Pure services or not - supply and distribution of electricity - work of distribution of electricity and electrification work in rural area also - exempt services or not - Government Entity or not - Applicability of provision of S. No. 3 of the table of Notification no. 12/2017, Central Tax (Rate), Dated - 28/06/2017 - HELD THAT - Exemption from GST is granted under Serial No 3 to the 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 or a Governmental authority or a Government Entity by way of any activity in relation to an function entrusted to a Panchayat under article 243G of the Constitution or in relation to an function entrusted to a Municipality under article 243W of the Constitution - Pure service is not defined in the GST Act. However, it appears from the context that services involving no supply of goods are considered as pure service. The Applicant claims that the service received from M/s. Primeone work force private limited does not involve supply of any goods while provisioning the services. Thus services are therefore, classifiable as pure service. The Government of Madhya Pradesh is having full control over the applicant M/S M.P. Paschim Kshetra Vidyut Vitran Co. Ltd. and the applicant is covered under the definition of Government Entity. The work entrusted to the applicant as mentioned above is covered under the article 243G of the constitution as the function entrusted to the Panchayat i.e., Rural Electrification including distribution of Electricity. However, the applicant work is not covered under Article 243W of the constitution as the function entrusted to the municipality. It is concluded that the services received by the applicant from M/s. Primeone work force Pvt. Limited fulfills the requisite criteria mentioned in S. No. 3 of the notification no. 12/2017 - Central Tax (Rate), Dated - 28/06/2017 as amended from time to time and eligible for claiming benefit available under the said provision. But the benefit can be availed only in case of where services mentioned in S. No. 3 is received in area covered under Panchayat limits as the entrusted work is covered under article 243G of the constitution and not under article 243W of the constitution.

Issues Involved:
1. Applicability of S. No. 3 of Notification No. 12/2017 - Central Tax (Rate) on services received by the applicant.
2. Classification of services received as "Pure services".
3. Determination of the applicant as a "Government Entity".
4. Examination of functions under Article 243G and 243W of the Constitution.
5. Limitation of exemption to services received in areas covered under Panchayat limits.

Issue-Wise Detailed Analysis:

1. Applicability of S. No. 3 of Notification No. 12/2017 - Central Tax (Rate) on services received by the applicant:
The applicant sought clarity on the applicability of S. No. 3 of Notification No. 12/2017 - Central Tax (Rate), dated 28/06/2017, regarding services received from M/s. Primeone Workforce Private Limited. The notification exempts pure services provided to government entities related to functions entrusted under Article 243G or 243W of the Constitution. The ruling confirmed that the applicant is eligible for this exemption, provided the services are received in areas covered under Panchayat limits.

2. Classification of services received as "Pure services":
The term "pure services" is not explicitly defined in the GST Act. However, it is interpreted as services that do not involve the supply of goods. The applicant claimed that the services received from M/s. Primeone Workforce Private Limited did not involve any supply of goods, thus classifying them as pure services. The ruling agreed with this classification, noting that the services provided were indeed pure services.

3. Determination of the applicant as a "Government Entity":
The ruling examined whether the applicant qualifies as a government entity under Notification No. 32/2017 - Central Tax (Rate), dated 13/10/2017. The definition includes entities with 90% or more government participation or control, established to carry out functions entrusted by the government. The applicant, Madhya Pradesh Paschim Kshetra Vidyut Vitran Company Limited (MPPKVVCL), is a wholly-owned subsidiary of M.P. Power Management Co. Ltd., which is entirely owned by the Government of Madhya Pradesh. Therefore, the ruling concluded that the applicant qualifies as a government entity.

4. Examination of functions under Article 243G and 243W of the Constitution:
The ruling analyzed whether the functions performed by the applicant fall under the scope of Article 243G or 243W of the Constitution. Article 243G pertains to functions entrusted to Panchayats, including rural electrification. The applicant's work in distributing electricity and electrification in rural areas aligns with these functions. However, the functions do not fall under Article 243W, which pertains to municipalities. The ruling confirmed that the applicant's work is covered under Article 243G but not under Article 243W.

5. Limitation of exemption to services received in areas covered under Panchayat limits:
The ruling specified that the benefit of exemption under S. No. 3 of Notification No. 12/2017 is limited to services received in areas covered under Panchayat limits. Since the applicant's work is related to rural electrification, which is a function entrusted to Panchayats under Article 243G, the exemption applies only within Panchayat jurisdictions.

Conclusion:
The ruling determined that the provision of S. No. 3 of Notification No. 12/2017 - Central Tax (Rate), as amended, applies to the services received by the applicant from M/s. Primeone Workforce Private Limited, provided these services are pure and related to functions under Article 243G. The exemption is limited to services received in areas covered under Panchayat limits. The ruling remains valid unless declared void under Section 104 (1) of the GST Act.

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