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GST Update on taxability of services provided by government entity to other Government Department 115/2020-21

GST Update on taxability of services provided by government entity to other Government Department 115/2020-21
It is assumed that services provided by government entities are usually not liable to tax but it is not true and the exemptions contained in the Notification are very specific and the benefit of exemption is available only if the parameters mentioned in the entry are satisfied. The issue regarding confusion as regards admissibility of exemption on services provided by Atal Bihari Vajpayee Institute of Good Governance & Policy Analysis (AIGGPA) to other government departments was recently placed before the Madhya Pradesh Authority of Advance Ruling (AAR) wherein it was asked whether the exemption contained in entry No. 3 or entry no. 8 of Notification No 12/2017 CTR dated 28th June 2017 was available to them .
The Applicant, Atal Bihari Vajpayee Institute of Good Governance & Policy Analysis (AIGGPA) is established as a Society, registered under the MP Society Registrikaran Act 1973. It is a part of the Department of Public Service Management Department, Government of Madhya Pradesh. The Institute’s Governing Council is the apex body and is presided over by the Chief Minister of Madhya Pradesh. The Governing Body of the Institute comprises senior cabinet ministers from different departments of Government of MP, Chief Secretary, and other Principal Secretaries. For carrying on research work, the institute engages experts of different domains, provide them all the requisite resources, and facilitate remuneration and entitlements as per government rules. Such experts are hired from IIM, IIT, subject matter specialists from different fields, and experienced retired senior officers. The applicant sought the advance ruling on the issue of whether the amount recovered by the applicant from other government departments for doing research work and study, which helps them make policies or understand its impact, is chargeable to GST. It was asked that whether they were entitled to benefit of entry no. 3 or entry no. 8 of Notification No. 12/2017 Central Tax (Rate) dated 28th June 2017.
The AAR ruled that as the entry no. 3 provides exemption to pure services except works contract services or other composite supplies involving supply of goods when provided to government department for any activity in relation to function entrusted to Municipalities under Article 243 W and to panchayats under Article 243G of the Constitution. Accordingly, it was held that the benefit of exemption would be available to the applicant if the said services are falling under the Articles stated thereon. However, as regards availing benefit of Entry No. 8 of Notification No 12/2017 CTR dated 28th June 2017, it was held that exemption is available only to services provided by a government or local authority. As the applicant does not fall within the definition of Government or local authority, benefit contained in entry no 8 is not available to them.

It is to be worth noting that in case of Ex service Resettlement Society-[2019] 101 taxmann.com 477 (AAR-WEST BENGAL), AAR clarified that pure service is not defined in the GST Act. However, it appears from the context that services involving no supply of goods are considered as pure service. Hence, in order to claim exemption under entry no. 3, it is necessary parameter that the services provided should fall under Article 243G and Article 243W of the Constitution of India for classifying as pure services. This judgement is yet another example that exemption notifications are to be strictly interpreted and each parameter needs to be fulfilled in order to claim the benefit of exemption.
This is solely for educational purpose. 
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