In re Andhra pradesh corporation for Outsourced services (GST AAR Andhra Pradesh)
Order from the Authority for Advance Ruling (AAR) in Andhra Pradesh regarding the applicability of GST (Goods and Services Tax) on the services provided by Andhra Pradesh Corporation for Outsourced Services (APCOS). Summary of the key points mentioned in the order:
1. APCOS is a not-for-profit company established under the Companies Act, 2013, to provide manpower supply services to various government departments, corporations, municipalities, and public institutions in Andhra Pradesh.
2. APCOS aims to remove private outsourcing agencies, ensure corruption-free outsourcing, provide reservation for specific categories, ensure timely payment of salaries, and provide statutory benefits to the outsourced manpower.
3. The applicant sought an advance ruling on the following questions:
a. The value of the supply of services rendered by APCOS as per Section 15 of the GST Act.
b. Whether the supply of manpower services to various state government departments is eligible for GST exemption under Notification Number 12/2017-Central Tax (Rate).
c. Whether the services of manpower supply to government authorities and entities are eligible for GST exemption under NNotification Number 12/2017-Central Tax (Rate) as amended by Notification 16/2021-Central Tax (Rate).
4. The AAR examined the relevant provisions of the GST Act and the notifications mentioned above. They concluded the following:
a. The value of the supply of services by APCOS includes the total amount collected, which consists of remuneration, EPF, ESI, and welfare fund. GST is applicable on the entire amount.
b. The exemption from GST under Notification Number 12/2017-Central Tax (Rate) is applicable only to services provided by APCOS that are directly related to functions entrusted to a Panchayat under Article 243G of the Constitution or to functions entrusted to a Municipality under Article 243W of the Constitution. Other services provided by APCOS are taxable at 18% GST.
c. The same exemption criteria mentioned in point (b) apply to services provided by APCOS to government authorities and entities.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING,ANDHRA PRADESH
ORDER
(Under sub-section (4) of Section 98 of Central Goods and Services Tax Act, 2017 and sub- section (4) of Section 98 of Andhra Pradesh Goods and Services Tax Act, 2017)
1. At the outset we would like to make it clear that the provisions of COST Act, 2017 and APGST Act, 2017 are in pari materia and have the same provisions in like matter and differ from each other only on a lew specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in (he APGST Act.
2. The present application has been filed u/s 97 of the Central Goods & Services Tax Act, 2017 and AP Goods & Services Tax Act, 2017 (hereinafter referred to CGST Act and APGST Act respectively) by M/s. Andhra Pradesh corporation for out sourced services (hereinafter referred to as applicant), registered under the AP Goods & Services Tax Act, 2017.
3. Brief facts of the case
3.1 M/s. Andhra pradesh corporation for Outsourced services (here in after referred as “APCOS”) is registered tax payer with GSTIN 37AASCA9533BIZH with effect from 15/07/2020 and having, its principal place of business located at NTR ADMINISTRTIVE BLOCK, 2nd FLOOR, P. N. Bus stand, vijaywada, krishna, Andhra pradesh, 520013, is providing manpower supply services (SAC 998519) to various government departments, corporations, municipalities and other public institution in the state of Andhra pradesh.
3.2 Andhra pradesh corporation for Outsourced services (APCOS) is established in accordance with G. O. Ms. No. 126 dated 18/10/2019, which is incorporated under section 8 of the companies Act, 2013, as a not-for-profit company, to achieve the following outcomes:
i Removal of private outsourcing agencies / middle men
ii. Corruption free outsourcing manpower placement for all Government departments / organizations.
iii. 50% reservation for SC’s / ST’s / BC’s & Minorities and 50% reservation for women.
iv. Timely and full payment of salaries into the bank account of outsourced manpower without leakages.
v. Assured statutory benefits like EPF & ESI etc.
The following are the key objectives of the corporation.
i. To engage required skilled, semi-skilled and unskilled manpower through systematic and transparent processes.
ii. To place the engaged manpower to the needy departments / organizations, as per their requirements.
iii To ensure that full benefits are extended to the engaged outsourced man power as per the rules and norms applicable and ensure that their statutory benefits such as Employee Provident Fund (EPF) and Employee State Insurance (ESI) are complied with.
iv. To act as a One-Stop-Shop for all the outsourcing requirements of the Govt of AP departments / organizations / Institutions.
The shareholding of APCOS shall be 100% with Government Of Andhra Pradesh in line with the vision and objectives of the outsourcing. The APCOS to be a non-protitable organization which initiates services for the outsourcing the manpower and the services in the State
4. Questions raised before the authority:
The applicant seeks advance ruling on the following:
1. Based on the facts submitted in fact A above, as per section 15 of GST Act, what is the value of the supply of the services rendered by APCOS.
2. Whether the supply of manpower services to various departments under state government provided by the applicant i.e., APCOS is eligible for exemption from GST, as per Sr. 3 of Notification Number 12/2017-Central Tax (Rate) New Delhi, dated 28th June,2017 as amended, being pure services as per the definition and the services rendered thereby being listed in article 243G and 24 3W of Constitution as functions pertaining to panchayat and municipality.
3. Whether the services of manpower supply services to various government authorities and Government entities provided by the applicant, ie., APCOS is eligible for exemption from GST, as provided under Sr. 3A of Notification Number 12/2017-Central Tax (Rate) New Delhi, dated 28th June,2017 as amended vide notification 16/2021 – Central tax (rate) dated 18-11-2021 being pure services as per the definition and the services rendered thereby being listed in article 243G and 243W of Constitution as functions pertaining to panchayat and municipality.
On Verification of basic information of the applicant, it is observed that the applicant is under Central jurisdiction i.e, Krishna Lanka Circle, Amaravathi Division. Accordingly, the application has been forwarded to the jurisdictional officer and a copy marked to the Central Tax authorities to offer their remarks as per Sec. 98(1) of CGST /APGST Act 2017.
In response, remarks are received from the central jurisdictional officer concerned stating that no proceedings lying pending with the issue, for which the advance ruling sought by the applicant.
5. Brief facts of the case
5.1 The applicant submits the following in support of their arguments :
Fact No. 1: As per the G.O Ms No. 126 and G.O.Ms.No136, APCOS is a single point solution for the manpower requirements of all the governmental organizations, departments, and corporations. The exact scope of operations of APCOS can be ascertained from various documents, and practices followed by various entities. Some of the salient features to be considered here arc as under.
1) APCOS is not an agency that recruits manpower for the government entities. The recruitments of manpower arc being made by the respective governmental departments, corporations etc. APCOS is not involved in any of the process of calling for the interviews, conducting interviews, shortlisting the eligible candidates etc.,
2) APCOS is not entering into any employment agreement with any of the employees. In fact, there is an explicit term in the letter intimating employment to the employees, that there is no employer and employee relationship between APCOS and the recruitee.
3) APCOS is not concerned with the attendance or the actual conduct of the recruilee’s on their job. The recruits are not subservient to the instruction of APCOS and APCOS is not involved in the day-to-day operations of any of the recruitee.
4) APCOS do not undertake to ensure that a certain number of employees are provided to the respective government departments, corporation and in case of absence or termination of any of the employees to replenish the same and to ensure that the work force is made available.
5) APCOS do not run the payroll – nor does receive and remit the salary amounts of the outsources employees. The remittance of the emoluments of the employment are made directly to the employees by the respective government entities based on their actual attendance and other terms of employment.
6) APCOS is only concerned with ensuring that all the statutory deductions and payments to the employees arc made properly. Respective departments are remitting the Statutory payments like PF, ESI, PT, GST etc., to APCOs and APCOS undertakes to ensure that all statutory deductions arc properly remitted to the respective authorities. APCOS is receiving the actual amount that shall be remitted to the authorities like PF, ESI, Pl’, GST etc., and is remitting exactly the same amounts.
7) APCOS is getting a mark-up of 1% of the amount of the salary of the employees. Based on the facts, Government Policy in the form of GO 126,136, and the agreements, it can be noted that the consideration of the supply of services made by APCOS is only the 1% markup. APCOS is not concerned about not receiving the basic portion of the salary of the outsourced employees, though APCOS is receiving the statutory payments in relation to the employees it cannot be considered as Income and expenditure of APCOS. It is only a pass through to APCOS, but is not a part of consideration of APCOS.
Fact. No. 2
The functions entrusted to a municipality under the Twelth Schedule to Article 243W of the Constitution and the list of Departments/ Authorities/ Local Bodies, etc., discharging those functions
6. Applicant’s Interpretation of Law:
1. APCOS is of the opinion that the supply of manpower supply services to the departments mentioned above is “pure service” as the aforesaid services are listed in 11th and 12th schedule of the constitution as a function pertaining to panchayats and municipality respectively and as per the definition, it qualifies as “pure services” and that their scope of services involve no supply of materials or any construction activities, Hence The same is eligible for GST exemption.
2. The applicant submits That, notification No. 12/2017- Central Tax (Rate) dated 28-06-2017 as amended stipulates at SI.No 3 of the notification that GST rate is NII. on “PURE SERVICES” which is extracted here as under :
In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), The Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts the intra-State supply of services of description as specified in column (3) of the Table below from so much of the central Tax leviable thereon under sub-section (1) of section 9 of the said Act, as is in excess of the said Tax calculated at the rate as specified in the corresponding entry in column (4) of the said Table, unless specified otherwise, subject to the relevant conditions as specified in the corresponding entry in column (5) of the said Table, namely:-
