2021 (11) TMI 432 - AAR - GST

Classification of services - exempt services or not - pure services or not - services provided to the Government entities - supply of manpower services to various government and non-government organisations - exemption under Sl.No.3 of N/N. 12/2017 dated 28th June 2017 - HELD THAT - The applicant is providing manpower services like security guards, housekeeping staff and catering staff. But these manpower services are not provided 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. Hence provision of such manpower services are liable to tax at 18%.

Summary

Issues Involved:
1. Classification of services provided to Government entities as exempted services.
2. Claiming exemption under Sl.No.3 of Notification 12/2017 dated 28th June 2017 for the said services.

Issue-Wise Detailed Analysis:

1. Classification of Services Provided to Government Entities as Exempted Services:

Admissibility and Applicant's Business:
The applicant, a proprietorship concern registered under CGST and KGST Acts, provides manpower supply services to various government and non-governmental organizations. The applicant sought an advance ruling on whether their services to government entities are classified as exempted services.

Applicant's Interpretation:
The applicant claimed that their services are "pure services" provided to government agencies, which are eligible for exemption under Sl.No.3 of Notification 12/2017. They cited various contracts with government and public sector undertakings, arguing that these services fall under the functions listed in Article 243G and 243W of the Constitution.

Authority's Examination:
The authority examined whether the manpower services provided by the applicant to various organizations qualify for exemption under entry no.3 of Notification 12/2017. The entry specifies that pure services provided to government entities in relation to functions entrusted to Panchayats or Municipalities are exempt.

Conditions for Exemption:
Two conditions must be satisfied for exemption:
1. Pure services provided to a government entity.
2. Services related to functions entrusted to Panchayats under Article 243G or Municipalities under Article 243W.

Findings:
The applicant did not provide supporting documents to prove that the organizations they serve qualify as "Governmental Authority" or "Government Entity." The authority noted that even if the first condition is satisfied, the second condition—that the services must relate to functions entrusted to Panchayats or Municipalities—was not met. The manpower services provided (security guards, housekeeping staff, and catering staff) do not relate to the specified functions under Articles 243G and 243W.

Conclusion:
The authority concluded that the applicant is incorrect in classifying the manpower services as exempted services since they do not relate to any function entrusted to a Panchayat or Municipality.

2. Claiming Exemption Under Sl.No.3 of Notification 12/2017:

Applicant's Claim:
The applicant claimed exemption under Sl.No.3 of Notification 12/2017 for their services, arguing that they provide pure services to government entities.

Authority's Examination:
The authority reiterated the conditions for exemption under Sl.No.3 of Notification 12/2017 and examined whether the applicant's services meet these criteria.

Findings:
The authority found that the applicant's services do not meet the criteria for exemption under Sl.No.3 of Notification 12/2017. The services provided are not related to any function entrusted to a Panchayat or Municipality under Articles 243G and 243W.

Conclusion:
The authority ruled that the applicant is incorrect in claiming exemption under Sl.No.3 of Notification 12/2017 for the services provided, as they are not covered under the said entry and therefore are not exempted.

Ruling:
1. The applicant is incorrect in classifying the manpower services provided to the organizations/institutions as exempted services since the same is not provided 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.
2. The applicant is incorrect in claiming exemption under Sl.No.3 of Notification 12/2017 dated 28th June 2017 for the said services, since the services provided by the applicant are not covered under the said entry and therefore are not exempted.