2021 (11) TMI 860 - AAR - GST

Classification of services - telecom services provided by Airtel to Greater Hyderabad Municipal Corporation (GHMC) - Nil rated under GST as per the S. No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 or not - pure services - functions entrusted under article 243W - Invoices for telecommunication services are to be issued with (or) without GST - HELD THAT - Under serial no. 3 of Notification No. 12/2017 pure services provided in relation to any function entrusted to a municipality under Article 243W of the Constitution of India is eligible for exemption from GST. Clearly the exemption should be directly related to the functions enumerated under Article 243W of the Constitution of India i.e., Responsibilities specified at Sl No.(1) or those functions listed under 12th schedule. Hon ble Supreme Court of India in the case of HH. MAHARAJADHIRAJA MADHAV RAO JIWAJI RAOSCINDIA BAHADUR VERSUS UNION OF INDIA 1970 (12) TMI 87 - SUPREME COURT observed that the expression relating to means to bring into relation or establish a relation. It was further clarified that there should be a direct and immediate link with a covenant and that there cannot be any independent existence outside such covenant. Thus, the applicant is providing data and voice services to GHMC and to the employees of the municipalities and general purpose for office and administrative purposes. Thus there is no direct relation between the services provided by the applicant and the functions discharged by the GHMC under Article 243W read with schedule 12 to the Constitution of India. Therefore these services do not qualify for exemption under Notification No. 12/2017.

Summary

Issues:
1. Whether telecom services provided to the Greater Hyderabad Municipal Corporation are nil rated under GST as per Notification No. 12/2017?
2. Whether invoices for telecommunication services should be issued with or without GST?

Analysis:
1. The applicant, a telecommunication service provider, sought an advance ruling on the taxability of services provided to the Greater Hyderabad Municipal Corporation (GHMC) under Notification No. 12/2017. The applicant argued that the services qualified as pure services under Article 243W of the Constitution of India and should be exempt from GST. However, the Authority for Advance Ruling analyzed the functions entrusted to municipalities under Article 243W and Schedule 12 of the Constitution. The ruling referred to judicial interpretations of the phrase "in relation to," emphasizing a direct and immediate link with the specified functions. The ruling concluded that the services provided by the applicant to GHMC did not directly relate to the functions under Article 243W and, therefore, did not qualify for exemption under Notification No. 12/2017.

2. Regarding the issuance of invoices for telecommunication services, the ruling clarified that GST should be charged on the services provided. The ruling highlighted that the services in question did not meet the criteria for exemption under the relevant notification, indicating that GST should be levied on the invoices for telecommunication services provided to GHMC. The ruling provided a clear directive that invoices for such services should include GST, aligning with the tax implications determined through the advance ruling process.

This detailed analysis of the judgment provides insights into the interpretation of relevant legal provisions, the application of constitutional principles, and the specific tax treatment applicable to the services in question. The ruling serves as a guiding precedent for similar cases involving the taxability of services provided to municipalities and the issuance of invoices under the GST framework.