2022 (8) TMI 146 - AAR - GST

Exemption from GST - Pure services - supply of telecommunication services to local authority (Greater Hyderabad Municipal Corporation) - taxable u/s 9(1) of the CGST Act, 2017 and/or exempted vide Sr. No. 3 (Chapter 99) of Table mentioned in Notification No. 12/2017- Central Tax (Rate) dated 28 June 2017? - 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., those functions listed under 12th schedule. Similarly the 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. The applicant is providing data and voice services to GHMC and to the employees of the municipalities and 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. Interpretation of provisions of CGST Act and TGST Act for Advance Ruling application.
2. Taxability of telecommunication services provided to a local authority under CGST Act.
3. Exemption eligibility under Notification No. 12/2017 for services provided to a municipality.

Analysis:
1. The Advance Ruling Authority clarified that unless specified, provisions of CGST Act apply to TGST Act. The applicant's queries under Section 97 of the GST Act were accepted, supported by fee payment evidence, and not pending elsewhere, allowing the application.

2. The applicant, a telecommunication service provider to a local authority, sought a ruling on taxability under Section 9(1) of the CGST Act and exemption under Notification No. 12/2017. The services were provided to Greater Hyderabad Municipal Corporation for general office and administrative purposes, not linked directly to functions under Article 243W of the Constitution of India Schedule 12, thus not qualifying for the exemption.

3. The ruling stated that services provided by the applicant to the local authority do not meet the criteria for exemption under Notification No. 12/2017. The decision was based on legal interpretations from previous court cases defining the scope of "in relation to" and "relating to," emphasizing the direct and immediate link required for exemption eligibility.

Conclusion:
The judgment determined that the supply of telecommunication services to a local authority is taxable under the CGST Act, as the services provided did not have a direct and immediate connection with the functions entrusted to the municipality under Article 243W of the Constitution of India. The ruling was based on legal interpretations and precedents, highlighting the importance of a clear link between services provided and functions specified for exemption eligibility under GST laws.