GST Exemptions to Government (Central, State, Union Territory) & Local Authorities

In a country like India the government works more like a welfare agency than a regulator . The functions of government is  responsible for the upliftment of whole society . The government and its agencies are primarily entrusted with the task of administration, development , maintenance, upgradation etc. of basic facilities to the citizens like  electricity , water supply, medical , education, public transport , public health & safety, public distribution system etc.  The introduction of GST in the country had a great impact upon the functioning of such agencies/departments/ bodies/ authorities. The Government had exempted  some areas of its functioning  vide GST notifications . In the present article we will explain only specific exemptions available to Central Government , State Government , Union territory or local authority under the provisions of the GST law. The general exemptions which are available to all in general unless otherwise restricted by the law will be available  to Central Government , State Government , Union territory or local authority.

The GST Act had given various exemptions specifically to Central Government , State Government , Union territory or local authorities vide exemption notification no.12/2017 , Central Tax Rate , dated 28/06/2017 as amended by subsequent notifications. These exemptions have been summarized as under:

(1) The pure services (excluding work contract services or other composite supply involving goods) provided to Central Government , State Government or Union territory or local authority  or government authority or government entity ,  regarding the functions which are entrusted to,  in case of Panchayat under article 243 G and in case of Municipality under article 243 W of the Constitution. ( Functions entrusted under 243 G to Panchayats and 243 W to Municipality are described at the last of this article.)

(2) The composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent. of the value of the said composite supply provided to Central Government , State Government or Union territory or local authority  or government authority or government entity   .This exemption has been given by the government by amending the GST notification no. 12/2017 , C.T. Rate through the notification no. 02/2018 C.T. Rate , dated 25/01/2018.

Therefore with this amendment even the composite supply subject to the maximum 25 % of the value of goods , provided to the Panchayats  for functions entrusted to under article 243 G and Municipality under article 243 W of the constitution is exempted   . ( Functions entrusted under 243 G to Panchayats and 243 W to Municipality are described at the last of this article.)

(3) All the services provided  by the  Central Government , State Government or Union territory or local authority  or government authority   by way of any activity in relation to any function entrusted to under article 243 W and 243G of the Constitution .

(4) Services provided by  Central Government , State Government or Union territory or local authority  :

Sl. No.	Type of  Entity	Remarks
(a)	To a Business Entity {with an aggregate turnover of up to twenty lakh rupees (ten lakh rupees in case of a special category state)  in the preceding financial year}	Exemption will not apply to following mentioned services : (a) (i) by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory; (ii) in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) of transport of goods or passengers; and (b) services by way of renting of immovable property.
	To a Business Entity{with an aggregate turnover of exceeding twenty lakh rupees (ten lakh rupees in case of a special category state)  in the preceding financial year}	All services are taxable except otherwise mentioned in the exemption notification . In this case the business entity is liable to pay tax on reverse charge basis. Further in the following mentioned services the local authority is required to pay tax irrespective of the turnover of the recipient:- (i) 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 the Central Government, State Government, Union territory; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) services of transport of goods or passengers; and (iv)  services by way of renting of immovable property.
(b)	To the Central Government, State Government, Union territory or local authority	Exemption will not apply to following mentioned services : (i) by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory; (ii) in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) of transport of goods or passengers;
(c )	To any type of Entity ( which are otherwise not covered by the  exemption notification.)	(A) Where the consideration is neither received or nor receivable : Exempt (B) Where the consideration is received : The consideration for such services does not exceed five thousand rupees. Provided further that in case where continuous supply of service, as defined in sub-section (33) of section 2 of the Central Goods and Services Tax Act, 2017, is provided by the Central Government, State Government, Union territory or a local authority, the exemption shall apply only where the consideration charged for such service does not exceed five thousand rupees in a financial year. In the case of (A) mentioned above the exemption will not apply in relation to the following mentioned services : (i) by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory; (ii) in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) of transport of goods or passengers; (iv) any service , other than covered under entries (i) to (iii) above provided to business entity. Further in the case of (B) mentioned above the exemption will not apply in relation to the following mentioned services : (i) by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory; (ii) in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) of transport of goods or passengers;

(5) Supply of service by a government entity to Central Government , State Government or Union territory or local authority   or any person specified by Central Government , State Government or Union territory or local authority   against consideration received from local authority, in the form of grants.

(6) Services by an old age home run by Central Government, State Government or by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) to its residents (aged 60 years or more) against consideration upto twenty five thousand rupees per month per member, provided that the consideration charged is inclusive of charges for boarding, lodging and maintenance.

(7) Service provided by Fair Price Shops to Central Government, State Government or Union territory by way of sale of food grains, kerosene, sugar, edible oil, etc. under Public Distribution System against consideration in the form of commission or margin.

(8) Services provided to the Central Government, by way of transport of passengers with or without accompanied belongings, by air, embarking from or terminating at a regional connectivity scheme airport, against consideration in the form of viability gap funding:

Provided that nothing contained in this entry shall apply on or after the expiry of a period of three years from the date of commencement of operations of the regional connectivity scheme airport as notified by the Ministry of Civil Aviation.

(9) Services supplied by Central Government, State Government, Union territory to their undertakings or Public Sector Undertakings(PSUs) by way of guaranteeing the loans taken by such undertakings or PSUs from the financial institutions.

(10) Services provided to the Central Government, State Government, Union territory under any insurance scheme for which total premium is paid by the Central Government, State Government, Union territory.

(11) Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of thirty years, or more) of industrial plots or plots for development of infrastructure for financial business, provided by the State Government Industrial Development Corporations or Undertakings or by any other entity having 50 per cent. or more ownership of Central Government, State Government, Union territory to the industrial units or the developers in any industrial or financial business area.

Explanation.- For the purpose of this exemption, the Central Government, State Government or Union territory shall have 50 per cent. or more ownership in the entity directly or through an entity which is wholly owned by the Central Government, State Government or Union territory.

(12) Services provided by (a) an arbitral tribunal (b) a partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal services (c) a senior advocate by way of legal services to the Central Government, State Government, Union territory, local authority,Governmental Authority or Government Entity.

(13) Services provided by the Central Government, State Government, Union territory or local authority by way of-

(a) registration required under any law for the time being in force;

(b) testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, including fire license, required under any law for the time being in force.

(14) Services provided by the Goods and Services Tax Network to the Central Government or State Governments or Union territories for implementation of Goods and Services Tax.

(15) Services provided by Central Government , State Government or Union territory or local authority  by way of allowing a business entity to operate as a telecom service provider or use radio frequency spectrum during the period prior to the 1st April, 2016, on payment of licence fee or spectrum user charges, as the case may be.

(16) Services provided by Central Government , State Government or Union territory or local authority by way of issuance of passport, visa, driving licence, birth certificate or death certificate.

(17) Services provided by the Central Government , State Government or Union territory or local authority by way of tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable to the Central Government , State Government or Union territory or local authority under such contract.

(18) Services provided by Central Government , State Government or Union territory or local authority by way of assignment of right to use natural resources to an individual farmer for cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products.

(19) Services provided by the Central Government , State Government or Union territory or local authority by way of assignment of right to use any natural resource where such right to use was assigned by the Central Government, State Government, Union territory or local authority before the 1st April, 2016:

Provided that the exemption shall apply only to tax payable on one time charge payable, in full upfront or in installments, for assignment of right to use such natural resource.

(20) Services provided by the Central Government, State Government, Union territory by way of deputing officers after office hours or on holidays for inspection or container stuffing or such other duties in relation to import export cargo on payment of Merchant Overtime charges.

(21) Services supplied by a State Government to Excess Royalty Collection Contractor (ERCC) by way of assigning the right to collect royalty on behalf of the State Government on the mineral dispatched by the mining lease holders.

Explanation.- ‘mining lease holder’ means a person who has been granted mining lease, quarry lease or license or other mineral concession under the Mines and Minerals (Development and Regulation) Act, 1957 (67 of 1957), the rules made thereunder or the rules made by a State Government under sub-section (1) of section 15 of the Mines and Minerals (Development and Regulation) Act, 1957.

(22) Services provided to the Central Government, State Government, Union territory administration under any training programme for which total expenditure is borne by the Central Government, State Government, Union territory administration.

Therefore to sum up we can say that government has given vide range of exemptions however some more concessions are required in some areas to achieve the  greatest interest of the common people of the country.

Meaning of some important terms

Meaning of Local Authority :

The local authority has been defined u/s 2(69) of the CGST Act . According to Sec.2(69)  ‘local authority’ means”

(a) a ‘Panchayat’ as defined in clause (d) of article 243 of the Constitution;

(b) a ‘Municipality’ as defined in clause (e) of article 243P of the Constitution;

(c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund;

(d) a Cantonment Board as defined in section 3 of the Cantonments Act 2006;

(e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution;

(f) a Development Board constituted under article 371 of the Constitution;    or

(g) a Regional Council constituted under article 371A of the Constitution;

Meaning of Business Entity : According to the explanation given in the notification no. 12/2017 Central Tax Rate , dated 28/06/2017 , “any person carrying out business.”

Meaning of Government Authority: According to the explanation given in the notification no. 12/2017 Central Tax Rate , dated 28/06/2017 ,  ‘Governmental Authority’ means an authority or a board or any other body, –

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government,

with  90per cent. or more participation by way of equity or control, to carry out any function entrusted to a Municipality under article 243 W of the Constitution or to a Panchayat under article 243 G of the Constitution.

Meaning of Government Entity : According to the explanation given in the notification no. 12/2017 Central Tax Rate , dated 28/06/2017 , ‘Government Entity’ means an authority or a board or any other body including a society, trust, corporation,

(i) set up by an Act of Parliament or State Legislature; or

(ii) established by any Government,
with 90per cent. or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Territory or a local authority.

The  functions of Panchayat under article 243 G of the constitution are :

1. Agriculture, including agricultural extension.

2. Land improvement, implementation of land reforms, land consolidation and soil conservation.

3. Minor irrigation, water management and watershed development.

4. Animal husbandry, dairying and poultry.

5. Fisheries.

6. Social forestry and farm forestry.

7. Minor forest produce.

8. Small scale industries, including food processing industries.

9. Khadi, village and cottage industries.

10. Rural housing.

11. Drinking water.

12. Fuel and fodder.

13. Roads, culverts, bridges, ferries, waterways and other means of communication.

14. Rural electrification, including distribution of electricity.

15. Non-conventional energy sources.

16. Poverty alleviation programme.

17. Education, including primary and secondary schools.

18. Technical training and vocational education.

19. Adult and non-formal education.

20. Libraries.

21. Cultural activities.

22. Markets and fairs.

23. Health and sanitation, including hospitals, primary health centres and dispensaries.

24. Family welfare.

25. Women and child development.

26. Social welfare, including welfare of the handicapped and mentally retarded.

27. Welfare of the weaker sections, and in particular, of the Scheduled Castes and the Scheduled Tribes.

28. Public distribution system.

29. Maintenance of community assets.

30. Agriculture, including agricultural extension.

31. Land improvement, implementation of land reforms, land consolidation and soil conservation.

32. Minor irrigation, water management and watershed development.

33. Animal husbandry, dairying and poultry.

34. Fisheries.

35. Social forestry and farm forestry.

36. Minor forest produce.

37. Small scale industries, including food processing industries.

38. Khadi, village and cottage industries.

39. Rural housing.

40. Drinking water.

41. Fuel and fodder.

42. Roads, culverts, bridges, ferries, waterways and other means of communication.

43. Rural electrification, including distribution of electricity.

44. Non-conventional energy sources.

45. Poverty alleviation programme.

46. Education, including primary and secondary schools.

47. Technical training and vocational education.

48. Adult and non-formal education.

49. Libraries.

50. Cultural activities.

51. Markets and fairs.

52. Health and sanitation, including hospitals, primary health centres and dispensaries.

53. Family welfare.

54. Women and child development.

55. Social welfare, including welfare of the handicapped and mentally retarded.

56. Welfare of the weaker sections, and in particular, of the Scheduled Castes and the Scheduled Tribes.

57. Public distribution system.

58. Maintenance of community assets.

The functions of Municipality  under article 243 W of the constitution are:

1. Urban planning including town planning.

2. Planning of land- use and construction of buildings.

3. Planning for economic and social development.

4. Roads and bridges.

5. Water supply for domestic, industrial and commercial purposes.

6. Public health, sanitation conservancy and solid waste management.

7. Fire services.

8. Urban forestry, protection of the environment and promotion of ecological aspects.

9. Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded.

10. Slum improvement and up gradation.

11. Urban poverty alleviation.

12. Provision of urban amenities and facilities such as parks, gardens, playgrounds.

13. Promotion of cultural, educational and aesthetic aspects.

14. Burials and burial grounds; cremations, cremation grounds and electric crematoriums.

15. Cattle pounds; prevention of cruelty to animals.

16. Vital statistics including registration of births and deaths.

17. Public amenities including street lighting, parking lots, bus stops and public conveniences.

18. Regulation of slaughter houses and tanneries.

Disclaimer:  The author has defined major aspects related to the topic according to its own understanding to the subject . Further the Interpretations, explanations etc. given in  the above mentioned article is the personal opinion of the author and one may differ on certain issues . Therefore readers/ users of this article are strictly advised to refer original act, notification, circular, rules etc. before acting upon it. The author is not responsible for any type of loss occurred due to the above.