2022 (3) TMI 790 - AAR - GST

Exemption from GST or not - supply of Security Services rendered to various sites of Municipal Corporations in relation to functions entrusted to it under Article 243 W of the Constitution of India - local authorities or not - pure services - applicability of Chapter No. 99, Sr. No. 3 of the Exemption Notification No. 12/2017 to MESCO Ltd. - HELD THAT - The applicant has not mentioned or enumerated the functions of the Municipal Corporations in relation to which the impugned services are provided. The applicant has made a sweeping and blanket submission that its services which are in the nature of pure services and are provided to the various Municipal Corporations in relation to functions entrusted to Municipality under Article 243 W of the Constitution. Further, inspite of having been asked during the course of the final hearing, the applicant has not provided details of transactions or exact nature of functions of the said Municipal Corporations, for which security is provided. They have not submitted copies of purchase orders, bills etc., party wise details, activity wise details (for what purpose security is provided) and other relevant details. The Municipal Corporations may also be involved in various performing functions, for example leasing of grounds/premises for exhibitions, marriages, etc. which are not functions entrusted to a Municipality under Article 243 W of the Constitution. Therefore, in such cases, the impugned security services without supply of material i.e pure services, rendered to the Municipal Corporations by the applicant will not be exempt under the provisions of Sr. No. 3 of Exemption Notification No. 12/2017 - Central Tax (Rate) dated 28/06/2017. The exemption under Sr. No. 3 of the Exemption Notification No. 12/2017 is available to the applicant for the pure services i.e. Security Services rendered to various sites of Municipal Corporations only if such pure services are supplied to the Municipal Corporations, in relation to functions entrusted to such Municipal Corporations under Article 243 W of the constitution of India.

Summary

Issues:
1. Applicability of Exemption Notification No. 12/2017 to Security Services provided to Municipal Corporations.

Analysis:
The application sought an advance ruling on whether Chapter No. 99, Sr. No. 3 of Exemption Notification No. 12/2017 applies to the provision of Security Services by the applicant to Municipal Corporations, exempting them from GST. The applicant, a corporation owned by the Government of Maharashtra, argued that the security services provided to Municipal Corporations are pure services exempt from GST under the mentioned notification. They contended that the services were in relation to functions entrusted to Municipalities under Article 243W of the Constitution, thus meeting the conditions for exemption. The applicant cited a similar case where the Authority for Advance Ruling ruled in favor of the applicant, supporting their claim for exemption.

The concerned officer merely reproduced a previous GST ARA Order in response to the applicant's contentions. The hearings involved submissions from the applicant and jurisdictional officers. The applicant was asked to provide detailed transaction information and the nature of services provided to prove their eligibility for exemption under the notification. The observations and findings of the Authority focused on whether the security services were pure services provided to Municipal Corporations in relation to functions entrusted to them under Article 243W of the Constitution.

The Authority analyzed the relevant provisions of Exemption Notification No. 12/2017 and emphasized that for the exemption to apply, the services must be pure services provided to local authorities in relation to functions entrusted to a Municipality under Article 243W of the Constitution. The Authority noted that while the applicant claimed their services were pure and related to functions under Article 243W, they failed to provide specific details or evidence during the hearings. Without clear evidence of the nature of functions performed by the Municipal Corporations, the Authority concluded that the exemption would only apply if the services were indeed provided in relation to functions entrusted to a Municipality under Article 243W. Therefore, the Authority ruled that the exemption under the notification is available to the applicant only if the pure services are supplied to Municipal Corporations in relation to functions entrusted to them under Article 243W of the Constitution.