2025 (2) TMI 336 - AAR - GST

Classification of services provided to Government entities - pure services or not - exempted services or not - N/N. 12/2017 Central Tax (Rate) dated 28.06.2017 - HELD THAT - The work has been awarded by the PHED to Webel Technology Limited for rendering manpower services to them for JJM project. It is thus evident that WTL has received the work order from the Public Health Engineering Department Government of West Bengal. WTL subsequently has engaged the applicant to provide the aforesaid manpower services. Pure services or not - HELD THAT - The term pure services has not been defined under the GST Act. However a bare reading of the description of services as specified in entry serial number 3 of the N/N. 12/2017-Central Tax (Rate) dated 28.06.2017 as amended denotes supply of services which does not involve any supply of goods can be regarded as pure services - the supply of services as provided by the applicant is pure services. Whether the applicant provides services to the Central Government State Government or Union Territory or local authority? - HELD THAT - In the instant case the applicant has been awarded the contract by WTL for which WTL is liable to pay the consideration to the applicant. So there can be no dispute that the applicant is supplying the services to WTL. Thus the second condition i.e. the applicant provides services to the Central Government State Government or Union Territory or local authority does not get satisfied in the instant case. Conclusion - The applicant provides services to Webel Technology Limited and not to the Public Health Engineering Department Government of West Bengal. The instant supply of services would not qualify to be an exempted supply under serial number 3 of the N/N. 12/2017-Central Tax (Rate) dated 28.06.2017 as amended.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this case were:

1. Whether the services provided by the applicant to Government entities under the Jal Jeevan Mission are correctly classified as exempted services.

2. Whether these services are exempt under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of Services as Exempted

Relevant Legal Framework and Precedents: The legal framework involves the interpretation of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, which provides exemptions for certain services, particularly pure services provided to the government or local authorities in relation to functions entrusted under articles 243G and 243W of the Constitution.

Court's Interpretation and Reasoning: The Tribunal examined whether the services provided by the applicant could be classified as exempt under the specified notification. The key consideration was whether the services were pure services provided directly to the government or a local authority.

Key Evidence and Findings: The applicant provided manpower services to Webel Technology Limited (WTL), which in turn had a contract with the Public Health Engineering Directorate of the Government of West Bengal. The Tribunal found that the applicant's services were not provided directly to the government but to WTL.

Application of Law to Facts: The Tribunal applied the definition of "recipient" under Section 2(93) of the GST Act to determine that WTL, not the government, was the recipient of the applicant's services. This determination was crucial in deciding the applicability of the exemption.

Treatment of Competing Arguments: The applicant argued that the services should be exempt as they were ultimately for a government project. However, the Tribunal focused on the direct contractual relationship, which was between the applicant and WTL.

Conclusions: The Tribunal concluded that the services did not qualify as exempted under the notification because they were not provided directly to the government or a local authority.

Issue 2: Exemption Under Notification No. 12/2017

Relevant Legal Framework and Precedents: The notification exempts pure services provided to the government or local authorities for functions under articles 243G and 243W of the Constitution.

Court's Interpretation and Reasoning: The Tribunal analyzed whether the services provided fell under the category of pure services and whether they were provided to the appropriate governmental body.

Key Evidence and Findings: The services involved manpower supply, which did not include any supply of goods, thus qualifying as pure services. However, the recipient of these services was WTL, not the government.

Application of Law to Facts: The Tribunal determined that the exemption could not apply as the services were not provided directly to the government or a local authority, failing the second condition for exemption.

Treatment of Competing Arguments: The applicant's claim that the services were ultimately for a government project was insufficient to meet the exemption criteria, as the direct recipient was not a government entity.

Conclusions: The Tribunal concluded that the services were not exempt under Notification No. 12/2017 because they did not meet all the necessary conditions.

SIGNIFICANT HOLDINGS

Core Principles Established: The ruling clarified that for services to be exempt under Notification No. 12/2017, they must be provided directly to the government or a local authority, not through an intermediary like WTL.

Final Determinations on Each Issue: The Tribunal held that the applicant's services to WTL did not qualify for exemption under the notification as they were not directly provided to a government entity. The ruling emphasized the importance of the direct contractual relationship in determining the applicability of GST exemptions.

Verbatim Quotes of Crucial Legal Reasoning: The Tribunal stated, "The applicant provides services to Webel Technology Limited and not to the Public Health Engineering Department, Government of West Bengal. The instant supply of services would not qualify to be an exempted supply under serial number 3 of the notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended."