2025 (3) TMI 1293 - AAAR - GST

Applicability of Goods and Services Tax (GST) on the services provided by M/s Telangana State Technology Services Limited (TSTSL) to the State Government of Telangana - Supply of goods and services ot not - e-Procurement transaction fee collected on behalf of the Information Technology Electronics Communications (IT E C) Department of Telangana State Government - time limitation - HELD THAT - A careful reading of Entry 6 of N/N. 12/2017 dated 28.06.2017 reveals that this entry pertains to services provided by the Government and not services provided to the Government. The appellant is providing services to the Government. Therefore the services provided by the appellant to the Government are not exempt under this Notification. Further the services provided by the appellant on behalf of the Government to business entities is covered by the exception to the above entry therefore such services also are not exempt. Time limitation - HELD THAT - The date of communication of the AAR is 4.10.2021 and appeal filed on 1.11.2021 and hence filed within time. At the time of personal hearing on 17.2.2025 the authorised representatives upon being asked clarified that GST is being paid since inception on the subject service and there is no dispute. The order of the Authority for Advance Ruling is upheld.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment revolve around the applicability of Goods and Services Tax (GST) on the services provided by M/s Telangana State Technology Services Limited (TSTSL) to the State Government of Telangana. Specifically, the issues are:

Whether the e-Procurement transaction fee collected on behalf of the Information Technology, Electronics & Communications (IT E&C) Department of Telangana State Government constitutes a supply of goods or services under the GST framework.
Whether the tax liability arises on the e-Procurement transaction fee collected on behalf of the State Government Department.
Whether the services provided by the State Government Department fall under Entry No. 6 of the exemption Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017, thereby exempting them from GST.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Nature of e-Procurement Transaction Fee

Relevant Legal Framework and Precedents: The definition of "supply" under the Central Goods and Services Tax Act, 2017 (CGST Act), which is mirrored in the Telangana Goods and Services Tax Act, 2017 (TGST Act), is pivotal. The concept of supply includes all forms of supply of goods or services or both, such as sale, transfer, barter, exchange, license, rental, lease, or disposal made for a consideration by a person in the course or furtherance of business.
Court's Interpretation and Reasoning: The Advance Ruling Authority (AAR) concluded that the e-Procurement transaction fee collected by TSTSL on behalf of the IT E&C Department falls within the definition of "supply" as per the CGST Act. The reasoning is based on the fact that the service of managing e-Procurement transactions is provided for a consideration, fulfilling the criteria of supply.
Application of Law to Facts: TSTSL acts as a fund manager, collecting transaction fees for e-Procurement services, which are deemed to be in the course of business and for consideration, thus qualifying as a supply.
Conclusions: The e-Procurement transaction fee collected by TSTSL is considered a supply under the GST framework.

Issue 2: Tax Liability on e-Procurement Transaction Fee

Relevant Legal Framework and Precedents: The GST liability arises on any taxable supply of goods or services unless exempted by a specific notification.
Court's Interpretation and Reasoning: The AAR determined that since the transaction fee is a supply, it is subject to GST unless exempted. The appellant's argument that they act as a pure agent and that the service should not attract GST was not accepted.
Application of Law to Facts: The transaction fee collected is not exempt under any provision, leading to the conclusion that GST is applicable.
Conclusions: The transaction fee is liable to GST.

Issue 3: Exemption under Notification No. 12/2017

Relevant Legal Framework and Precedents: Entry No. 6 of Notification No. 12/2017 exempts certain services provided by the Government from GST. However, services provided to the Government or by the Government to business entities are generally not exempt.
Court's Interpretation and Reasoning: The AAR noted that the exemption applies to services provided by the Government, not to services provided to the Government. Additionally, services provided by the Government to business entities are explicitly excluded from the exemption.
Key Evidence and Findings: The services in question are provided by TSTSL to the Government and involve business entities, thus falling outside the scope of the exemption.
Conclusions: The services do not qualify for exemption under Entry No. 6 of Notification No. 12/2017.

SIGNIFICANT HOLDINGS

Core Principles Established: The judgment reinforces the principle that services provided to the Government are not exempt under the specific notification meant for services by the Government. It also clarifies the applicability of GST on services provided by third parties to government departments when such services are not explicitly exempted.
Final Determinations on Each Issue: The appellate authority upheld the AAR's ruling that the e-Procurement transaction fee is a taxable supply under the GST framework, subject to GST, and not exempt under the cited notification.

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