GST on Manpower Services to Panchayats: AAR Karnataka Ruling

In re Manish Manpower Agency (GST AAR Karnataka)

Introduction: Delve into the recent GST Authority for Advance Ruling (AAR) Karnataka decision regarding the tax implications on the supply of manpower services by Manish Manpower Agency to Zilla Panchayat, Taluka Panchayat, and various government departments. This article provides a detailed analysis of the ruling, addressing questions related to GST exemptions and taxable services.

Detailed Analysis:

• Background of Manish Manpower Agency: Manish Manpower Agency, a Partnership firm, filed an advance ruling seeking clarification on the GST treatment for their supply of manpower services to entities like Zilla Panchayat, Taluka Panchayat, Forest Department, KPTCL, and Railway Department.
• Evolution of Key Question: The applicant initially sought an advance ruling on whether pure services provided to Zilla Panchayat (social welfare department) and Taluk Panchayat are exempt under Article 243G of the constitution. However, during the personal hearing, the question was refined to focus on the GST exemption under Notification No.12/2017-Central Tax (Rate) for specific manpower services.
• Admissibility of the Application: The application falls under the category of “Determination of the liability to pay tax on goods or services,” covered by Sections 97(2)(e) of the CGST Act 2017, making it admissible for advance ruling.
• Factual Overview: Manish Manpower Agency provides a range of manpower services, including ‘C’ Group and ‘D’ Group staff, teachers, Data Entry Operators, Staff Nurse, Typists, Cooks, Assistant Cooks, Watchman, and Cleaning Staff, to government entities such as Zilla Panchayat, Taluk Panchayat, and others.
• Legal Interpretation: The applicant claimed GST exemption for certain services under Sl.No.3 of Notification No.12/2017-Central Tax (Rate), citing their provision of pure services to Social Welfare Department/Backward Classes Welfare Department through Zilla Panchayat/Taluk Panchayat.
• Examination of Exemption Conditions: The AAR scrutinized the two conditions necessary for GST exemption:
  • Pure Services to a local authority
  • In relation to a function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W of the Constitution.
• Conclusion on Exemption: Manpower services like cleaning staff, cook, assistant cook, staff nurse, teachers, and watchman provided to hostels and residential schools/colleges run by Social Welfare Department were deemed exempt. This exemption was justified by fulfilling both conditions mentioned in Entry No.3 of Notification No.12/2017-Central Tax (Rate).
• Tax Implications on Other Manpower Services: The AAR clarified that services like Data Entry Operator, Drivers, “D” Group staff, FDA, SDA, Typists supplied to Zilla Panchayat/Taluk Panchayat/Social Welfare Department/Backward Classes Welfare Department are not related to functions entrusted to Panchayats or Municipalities. Hence, these services attract GST at the rate of 18% (9% CGST and 9% SGST).

Personal Hearing / Proceedings: Sri. Lingaraj M Pujari, Chartered Accountant, and authorized representative of Manish Manpower Agency appeared for the personal hearing proceedings held on 03.11.2023, reiterating the facts presented in the application.

Findings & Discussion: