2025 (2) TMI 95 - AAAR - GST

Exemption from GST - Services provided to the Panchayat Service Board amounts to services provided to the Panchayat and covered under entries 3 and 3A of the Notification or not - services provided to the Gujarat Public Service Commission amounts to services provided to the State Government covered under entries 3 and 3A of the Notification or not - services provided to the Gujarat Technological University amounts to services provided to the Government Entity or Government Authority eligible for tax exemption under entry 3 and 3A of the notification or not. Whether the services provided by the appellant to the Gujarat Panchayat Service Selection Board (GPSSB) qualify as services provided to a Panchayat and are exempt from Goods and Services Tax (GST) under entries 3 and 3A of Notification No. 12/2017-CT (R)? - HELD THAT - As is evident in terms of the serial no. 3 of notification No. 12/2017-CT (R) as amended pure services excluding works contract services or other composite services involving supply of any goods provided to a Central Government State Government Union territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G or to a Municipality under article 243W of the Constitution of India is exempt. Likewise in terms of serial no. 3A of notification ibid composite supply of goods and services in which the value of supply of goods constitutes not more than 25% of the value of the said composite supply provided to the Central Government State Government or Union territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G or to a Municipality under article 243 W of the Constitution are exempt. While dealing with an exemption notification an exemption notification is to be strictly interpreted in terms of the judgement of the Constitution Bench of the Hon ble SC in the case of Dilip Kumar and Company 2018 (7) TMI 1826 - SUPREME COURT (LB) wherein it was held that Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. It was also held that When there is ambiguity in exemption notification which is subject to strict interpretation the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. The services provided to the Panchayat Service Board amounts to services provided to the Panchayat and is covered under entries 3 and 3A of the notification and is hence exempted from GST. GPSSB is neither a Central/State Government nor a Union territory. Further as far as Local authority is concerned the term having been defined under the CGST Act there appears to be no need to borrow it from elsewhere. On going through each of the clauses from a to g of the definition of local authority it is found that the GPSSB does not fall within the ambit of either of the sub-clauses. Thus GPSSB is neither a Central Government State Government Union Territory or a local authority. The primary condition of the composite services having been provided to a Central Government State Government Union territory or local authority not having been satisfied the appellant is not eligible for the benefit of the notification. Whether the services provided to the Gujarat Public Service Commission (GPSC) are considered services provided to the State Government and are therefore exempt from GST under the same notification entries? - HELD THAT - The contention of the appellant that GPSC a constitutional body managed financed by the State Government which has 100% control is liable to be classified as the State Government not agreed upon. The appellant is not eligible for the benefit of the exemption notification ibid in respect of the services provided to GPSC. Conclusion - i) GPSSB is neither a Central Government State Government Union Territory or a local authority. The primary condition of the composite services having been provided to a Central Government State Government Union territory or local authority not having been satisfied the appellant is not eligible for the benefit of the notification. ii) The contention of the appellant that GPSC a constitutional body managed financed by the State Government which has 100% control is liable to be classified as the State Government not agreed upon. The appellant is not eligible for the benefit of the exemption notification ibid in respect of the services provided to GPSC.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

(i) Whether the services provided by the appellant to the Gujarat Panchayat Service Selection Board (GPSSB) qualify as services provided to a Panchayat and are exempt from Goods and Services Tax (GST) under entries 3 and 3A of Notification No. 12/2017-CT (R).

(ii) Whether the services provided to the Gujarat Public Service Commission (GPSC) are considered services provided to the State Government and are therefore exempt from GST under the same notification entries.

ISSUE-WISE DETAILED ANALYSIS

1. Services Provided to GPSSB

Relevant Legal Framework and Precedents: The appellant contends that the services provided to GPSSB should be exempt from GST under entries 3 and 3A of Notification No. 12/2017-CT (R), which exempts pure services and certain composite supplies provided to government entities or local authorities. The appellant argued that GPSSB is a local authority as defined under the CGST Act and the General Clauses Act.

Court's Interpretation and Reasoning: The Court examined the definition of "local authority" under section 2(69) of the CGST Act, which includes entities such as Panchayats and Municipalities. It determined that GPSSB does not qualify as a local authority under this definition, as it does not fall under any of the specified categories.

Key Evidence and Findings: The Court noted that GPSSB is not a Central Government, State Government, Union Territory, or local authority. The appellant's reliance on the General Clauses Act was deemed unnecessary because the CGST Act provides a specific definition.

Application of Law to Facts: Given that GPSSB does not meet the criteria of being a local authority, the services provided do not qualify for the GST exemption under entries 3 and 3A.

Treatment of Competing Arguments: The appellant's argument that GPSSB is part of the Panchayat system and thus a local authority was rejected based on the specific definition in the CGST Act.

Conclusions: The Court upheld the GAAR's decision that services provided to GPSSB are not exempt from GST under the specified notification entries.

2. Services Provided to GPSC

Relevant Legal Framework and Precedents: The appellant argued that services provided to GPSC should be exempt from GST, claiming GPSC is a constitutional body controlled by the State Government, thus qualifying as a State Government entity.

Court's Interpretation and Reasoning: The Court referred to the definition of "State Government" under the General Clauses Act but found that GPSC does not fit this definition. The Court emphasized that GPSC, although a constitutional body, is not equivalent to the State Government.

Key Evidence and Findings: The Court found no evidence to classify GPSC as a State Government entity. The appellant's argument that the services provided are pure services was also considered, but the exemption is contingent on the recipient being a qualified government entity.

Application of Law to Facts: Since GPSC is not classified as a State Government, the services provided do not qualify for the GST exemption under entries 3 and 3A.

Treatment of Competing Arguments: The appellant's reliance on precedents and definitions from other legal contexts was dismissed, as the CGST Act provides specific definitions applicable to this case.

Conclusions: The Court concurred with the GAAR's ruling that services provided to GPSC are not exempt from GST under the specified notification entries.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: The Court reiterated the principle from the Dilip Kumar and Company case that exemption notifications must be interpreted strictly, with the burden of proof on the assessee to demonstrate eligibility for exemption.

Core Principles Established: The judgment reinforced the necessity of adhering to specific legal definitions provided within the CGST Act when determining eligibility for tax exemptions. It emphasized strict interpretation of exemption notifications.

Final Determinations on Each Issue: The Court upheld the GAAR's ruling, denying GST exemption for services provided to both GPSSB and GPSC under entries 3 and 3A of Notification No. 12/2017-CT (R).