No GST Exemption on Manpower Supply to Webel Technology: AAR Ruling

In re Webel Support Multipurpose Service Cooperate Society Limited (GST AAR West Bengal)

West Bengal Authority for Advance Ruling (AAR) examined whether the supply of manpower services by Webel Support Multipurpose Service Cooperative Society Limited to Webel Technology Limited (WTL) qualifies for GST exemption under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The applicant, a cooperative society, was contracted by WTL to provide engineers and data entry operators for the Public Health Engineering Directorate’s Jal Jeevan Mission (JJM) project in West Bengal. Initially, GST at 18% was applied to the contract. However, the Public Health Engineering Department later directed WTL to refund the GST amount, asserting that the services should be exempt under the notification. The applicant sought clarification through an advance ruling, arguing that their services qualify as “pure services” and should be exempt.

The AAR ruled that while the manpower supply qualifies as “pure services,” it does not meet the exemption criteria because the services are provided to WTL, a government-owned entity, rather than directly to a government department or local authority. Under GST law, the recipient of services is the entity liable for payment. Since WTL is the direct recipient, the exemption under Notification No. 12/2017 does not apply. Therefore, the manpower supply remains taxable at 18%. This ruling clarifies that indirect contracts with government agencies through intermediaries like WTL do not qualify for GST exemptions.

FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, WEST BENGAL

1 At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression ‘GST Act’ would mean the CGST Act and the WBGST Act both.

1.2 The applicant is a Co-operative Society registered under the West Bengal Co-operative Societies Registration Act. The applicant provides multipurpose services including supply of manpower support services to various Government Departments under M/s Webel Technology Limited (WTL, for short). The applicant has received a work order from WTL for providing manpower services to the Public Health Engineering Directorate of the Government of West Bengal for executing their ‘JAL JEEVAN MISSION’ Project in the state of West Bengal.

1.3 The applicant has made this application under sub section (1) of section 97 of the GST Act and the rules made there under raising following questions vide serial number 14 of the application in FORM GST ARA-01:

Question 1: Whether Jal Jeevan Mission is correct in classifying the services provided to Government entities as exempted services?

Question 2: Whether the services are exempted under notification no. 12/2017 Central Tax (Rate) dated 28.06.2017?

1.4 An applicant desirous of obtaining an advance ruling is required to file an application on the common portal in FORM GST ARA-01 in respect of subject matter as specified in sub-section (2) of section 97 of the GST Act. The questions on which the advance ruling is sought for are found to be covered under clause (b) of sub-section (2) of section 97 of the GST Act.

1.5 The applicant states that the questions raised in the application have neither been decided by nor is pending before any authority under any provision of the GST Act.

1.6 The officer concerned from the revenue has raised no objection to the admission of the application.

1.7 The application is, therefore, admitted.

2. Submission of the Applicant

2.1 The applicant is a Co-operative Society registered under the West Bengal Co-operative Societies Registration Act. The applicant provides multipurpose services including supply of manpower support services to various Government Departments under WTL. On 22.09.2023, the applicant has received a work order from WTL for providing manpower services of 513 Junior Engineers (Civil), 45 Junior Engineers (Mechanical) and 25 Junior Engineers (Electrical) and 99 Data Entry Operators to the Public Health Engineering Directorate of the Government of West Bengal for executing their ‘JAL JEEVAN MISSION’ Project in the state of West Bengal. At the time of entering into the contract, the applicant put the contract price after adding 18% as GST since the said services is offered by the principal employer and falls under the category of taxable service under HSN code no. 998513 .The applicant submits that the work order has been renewed for one year by WTL vide order dated 02.04.2024.

2.2 The applicant submits that he has been informed on 15.07.2024 by WTL that Public Health Engineering Directorate of the Government of West Bengal has issued a letter to WTL and asserted that as per Government Notification No.56/2017/25 dated 29th June 2017 and Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (1136 F.T. dated 28.06.2017), rate of GST for the services rendered in respect of the above referred work is NIL. By the said memo, Public Health Engineering Directorate of the Government of West Bengal has directed the Chief Executive Officer, WTL to return the amount paid on account of GST, being excess payment and therefore refundable.

2.3 The authorized advocate of the dealer, in course of personal hearing and later through email, has submitted that according to the applicant, the instant supply is taxable @ 18%.

3. Submission of the Revenue

3.1 The concerned officer from the revenue has not expressed any view on the issue raised by the applicant.

4. Observations & Findings of the Authority

4.1 We have gone through the records of the issue as well as submissions made by the authorized advocate of the applicant during the course of personal hearing.

4.2 The applicant has received a work order from WTL for providing manpower services to the Public Health Engineering Directorate of the Government of West Bengal for executing their ‘JAL JEEVAN MISSION’ Project in the state of West Bengal. The issue before us is to decide whether such supply would qualify for exemption vide entry number 3 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended. For ease of reference, the relevant entry is reproduced herein under:

4.4 The applicant has enclosed a Memo bearing no. 1919/RS dated 15.07.2024 which has been issued by the Executive Engineer, Resource Division, P.H.E. Department, Government of West Bengal to the Chief Executive Officer, WTL regarding payment of bills in connection with the salary of Data Entry Operators & Junior Engineers in connection with JJM. In the said letter, the Executive Engineer has observed as follows:

“ It is pertinent to mention here as per the Govt Notification No. 56/2017/25 dated 29th June 2017 & Notification No. 12/2017-State tax rate vide no. 1136-F.T 28th June, 2017 vide SI. No. 3 the rate of GST for the services rendered is NIL. The work entrusted to you comes under the purview of SI. No. (3) of the above Mentioned notification and attract NIL GST.

In consonance with the above Notification, the GST claimed through the tax invoice for the services rendered is inadmissible. Accordingly, Payment is required to be made excluding the GST component against the preferred claim.”

The aforesaid document thus clearly shows that the work has been awarded by the PHED to Webel Technology Limited for rendering manpower services to them for JJM project. It is thus evident that WTL has received the work order from the Public Health Engineering Department, Government of West Bengal. WTL subsequently has engaged the applicant to provide the aforesaid manpower services.

4.5 Now, in order to decide whether the services provided by the applicant are eligible for exemption under serial number 3 of the Notification supra, we need to ascertain whether all the following factors get satisfied in the instant case:

i. whether the instant supply of services can be treated as pure services;

ii. whether the applicant provides services to the Central Government, State Government or Union Territory or local authority; and

iii. whether the said services are in relation to any function entrusted to a Panchayat under article 243G or to a municipality under article 243W of the Constitution of India.

4.6 The term ‘pure services’ has not been defined under the GST Act. However, a bare reading of the description of services as specified in entry serial number 3 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended, denotes supply of services which does not involve any supply of goods can be regarded as pure services. The applicant has submitted that as per the work order issued to him by WTL, he provides manpower services of 513 Junior Engineers (Civil), 45 Junior Engineers (Mechanical) and 25 Junior Engineers (Electrical) and 99 Data Entry Operators for executing ‘JAL JEEVAN MISSION’ Project. It prima facie appears that the aforesaid supply doesn’t involve any transfer of materials in goods. We therefore hold that the supply of services as provided by the applicant is pure services.

4.7 Now we proceed to examine the second condition i.e., whether the applicant provides services to the Central Government, State Government or Union Territory or local authority. In the instant case, the work order for supplying manpower services has been awarded to WTL by the PHE Department, Government of West Bengal. The applicant in turn has received the order from WTL. The terms of payment as it appears from the work order issued by WTL speaks that the applicant will receive payment from WTL on back to back basis. In this context, the definition of ‘recipient’ as referred to in clause (93) of section 2 of the GST Act may be referred to which reads as follows:

“recipient” of supply of goods or services or both, means—

a. where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration;

b. where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and

c. where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied;

4.8 In the instant case, the applicant has been awarded the contract by WTL for which WTL is liable to pay the consideration to the applicant. So, there can be no dispute that the applicant is supplying the services to WTL. We therefore hold that the second condition i.e., the applicant provides services to the Central Government, State Government or Union Territory or local authority does not get satisfied in the instant case.

4.9 As it is mandatory to satisfy all the three conditions as mentioned earlier in para 2.5 so as to qualify a services for exemption under serial number 3 of the Notification No. 12/2017-Cenral Tax (Rate) dated 28.06.2017, as amended, and we have already expressed our view that the condition as referred to under serial number (ii) in para 2.5 has not been satisfied here , we do not proceed further to examine the admissibility in respect of condition mentioned under serial number (iii) i.e., whether the said services are in relation to any function entrusted to a Panchayat under article 243G or to a municipality under article 243W of the Constitution of India.

In view of the above discussions, we rule as under:

RULING

The applicant provides services to Webel Technology Limited and not to the Public Health Engineering Department, Government of West Bengal. The instant supply of services would not qualify to be an exempted supply under serial number 3 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended.