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TMI BlogFAQ for Government Services dated 18-08-2017X X X X Extracts X X X X X X X X Extracts X X X X ..... services by a governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution. Question 2 : Are Government or local authority or governmental authority liable to pay tax? Answer : Yes. The Government or a local authority or a governmental authority is liable to pay tax on supply of services other than the services notified as exempt or notified as neither a supply of goods nor a supply of services under clause (b) of sub-section (2) of section 7 of the CGST Act, 2017. In respect of services other than - (i) renting of immovable property; (ii) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government; and (iii) services in relation to an aircraft or a vessel, inside or outside the precincts of an airport or a port, the service recipients are required to pay the tax under reverse charge mechanism. Question 3 : What is the meaning of Government ? Answer : As per section 2(53) of the CGST Act, 2017, Government means the Central Government. As per clause (23) of section 3 of the General ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chedule to the Constitution; Development Board constituted under article 371 of the Constitution; or Regional Council constituted under article 371A of the Constitution; Question 5 : Are all local bodies constituted by a State or Central Law regarded as local authorities for the purposes of the GST Acts? Answer : No. The definition of local authority is very specific and means only those bodies which are mentioned as local authorities in clause (69) of section 2 of the CGST Act, 2017. It would not include other bodies which are merely described as a local body by virtue of a local law. For example, State Governments have setup local developmental authorities to undertake developmental works like infrastructure, housing, residential commercial development, construction of houses, etc. The Governments setup these authorities under the Town and Planning Act. Examples of such developmental authorities are Delhi Development Authority, Ahmedabad Development Authority, Bangalore Development Authority, Chennai Metropolitan Development Authority, Bihar Industrial Area Development Authority, etc. Such developmental authorities formed under the Town and Planning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by - (i) railways in a class other than - (a) first class; or (b) an air-conditioned coach; (ii) metro, monorail or tramway; (iii) inland waterways; (iv) public transport, other than predominantly for tourism purpose, in a vessel between places located in India; and (v) metered cabs or auto rickshaws (including E-rickshaws) are exempt from tax. Question 9 : Are various corporations formed under the Central Acts or State Acts or various government companies registered under the Companies Act, 1956/2013 or autonomous institutions set up by special Acts covered under the definition of Government ? Answer : No. The corporations formed under the Central or a State Act or various companies registered under the Companies Act, 1956/2013 or autonomous institutions set up by the State Acts will not be covered under the definition of Government and therefore, services provided by them will be taxable unless exempted by a notification. Question 10 : Are various regulatory bodies formed by the Government covered under the definition of Government ? Answer : No. A regulatory body, also called regulatory agency, is a public authority or a governmental body which exerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services provided by the Department of Posts mentioned in the Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017? Answer : The Department of Posts also provides services like distribution of mutual funds, bonds, passport applications, collection of telephone and electricity bills on commission basis. These services are in the nature of intermediary and generally called agency services. In these cases, the Department of Posts is liable to pay tax without application of reverse charge. Question 14 : Would services received by Government, a local authority, a governmental authority from a provider of service located outside India be taxable? Answer : No tax is payable on the services received by the Government/local authority/governmental authority from a provider of service located outside India. However, the exemption is applicable to only those services which are received for the purpose other than commerce, industry or any other business or profession. In other words, if the Government receives such services for the purpose of business or commerce, then tax would apply on the same. Question 15 : Whether the exemption is applicable to online infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all scale industries, including food processing industries. (ix) Khadi, village and cottage industries. (x) Rural housing. (xi) Drinking water. (xii) Fuel and fodder. (xiii) Roads, culverts, bridges, ferries, waterways and other means of communication. (xiv) Rural electrification, including distribution of electricity. (xv) Non-conventional energy sources. (xvi) Poverty alleviation programme. (xvii) Education, including primary and secondary schools. (xviii) Technical training and vocational education. (xix) Adult and non-formal education. (xx) Libraries. (xxi) Cultural activities. (xxii) Markets and fairs. (xxiii) Health and sanitation, including hospitals, primary health centres and dispensaries. (xxiv) Family welfare. (xxv) Women and child development. (xxvi) Social welfare, including welfare of the handicapped and mentally retarded. (xxvii) Welfare of the weaker sections, and in particular, of the Scheduled Castes and the Scheduled Tribes. (xxviii) Public distribution system. (xxix) Maintenance of community assets. Question 18 : What is the significance of services provided by Government or a local authority by way of tolerating non-performance of a contract for which consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chedule to the Constitution which have been entrusted to Municipalities under Article 243W of the Constitution, when provided by governmental authority are exempt from payment of tax. Question 20 : Whether fines and penalty imposed by Government or a local authority for violation of a statute, bye-laws, rules or regulations liable to tax? Answer : No. This gets covered under the exemption by way of tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable to the Government or the local authority. Question 21 : Whether services provided by Government or a local authority to a business entity located in a special category State are subject to tax? Answer : The expression special category States provided in Explanation (iii) to section 22 of the CGST Act, shall mean the States as specified in sub-clause (g) of clause (4) of Article 279A of the Constitution. As per the said clause, the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand have been given the status of special category States for the purpose of G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immovable property; (ii) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government; (iii) services in relation to an aircraft or a vessel, inside or outside the precincts of an airport or a port; (iv) transport of goods or passengers. Thus, the recipient of supply of goods or services is liable to pay the entire amount of tax involved in such supply of services or goods or both. Question 25 : What is the scope of pure services mentioned in the exemption notification No. 12/2017-Central Tax (Rate), dated 28-6-2017? Answer : In the context of the language used in the notification, supply of services without involving any supply of goods would be treated as supply of pure services . For example, supply of man power for cleanliness of roads, public places, architect services, consulting engineer services, advisory services, and like services provided by business entities not involving any supply of goods would be treated as supply of pure services. On the other hand, let us take the example of a governmental authority awarding the work of maintenance of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and is also required to furnish a certificate to the deductee by mentioning the details of the amount deducted and payment of such deducted amount. Illustration : ABC Ltd. supplies the service valued at ₹ 3,00,000/- excluding tax to Government department. The department while making the payment of ₹ 3,00,000/- should deduct ₹ 3000/- on account of CGST and ₹ 3000/- on account of SGST and make a net payment of ₹ 2,94,000/- to ABC Ltd. Thereafter, the department shall pay the amount of ₹ 3,000/- to the Central Government and ₹ 3,000/- to the State Government and furnish a certificate to the deductee, containing the details of such deduction including the details of such deductee. Question 29 : Whether the deductee can claim the input tax credit on the deduction of tax at source amount? Answer : No. The tax deducted at source is not input tax credit. However, the amount deducted shall be credited to the electronic cash ledger (upon being accepted by the deductee in his Form GSTR-2A) of the deductee and can be utilized for payment of output tax. Question 30 : Whether an amount in the form of royalty or any other form pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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