In re Madivalappa Karveerappa Belwadi (GST AAR Karnataka)
Whether the Pure Services provided to Zilla Panchayat, City corporations, Educations Institutions, and Rural Water Supply Divisions are exempted under article 243G and 243W?
Supply of manpower services like Drivers and cleaners for solid waste ‘anagement system to City Corporation/Municipalities/zilla parishads and manpower services like cleaning staff, cook, assistant cook, teachers, staff nurse and watchman to hostels and residential schools working under Social welfare department is exempted since the manpower services provided are by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.
Manpower services like Data Entry Operator, Drivers “D” Group etc to City Corporation/ Municipalities/zilla parishads and Manpower Services like clerical staff (FDA, SDA), Typists to Social welfare department are not by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution and hence attracts tax at the rate of 18%(CGST @ 9% and KGST @ 9%).
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, KARNATAKA
Sri Madivalappa Karveerappa Belwadi, M/s M.K. Belwadi (called as the ‘Applicant’ hereafter) Plot No. 18, Bankers Colony, V.S.Hublikar Building, Hubli-580024, having GSTIN 29AFOPB7951C1ZC, have filed an application for Advance Ruling under Section 97 of CGST Act, 2017 read with Rule 104 of CGST Rules, 2017 and Section 97 of KGST Act, 2017 read with Rule 104 of KGST Rules, 2017, in form GST ARA-01 discharging the fee of Rs.5,000/- each under the CGST Act and the KGST Act.
2. The Applicant is a Proprietary concern registered under Goods and Services Tax Act, 2017. The applicant has sought advance ruling in respect of the following question:
i. Whether the Pure services provided to Zilla Panchayat, City Corporations, Education institutions and Rural Water Supply Divisions are exempted under Article 243G and 243W?
3. Admissibility of the application: The question is about “applicability of a notification issued under the provisions of this Act” and hence is admissible under Section 97(2)(b) of the CGST Act 2017.
BRIEF FACTS OF THE CASE
4. The applicant furnishes some facts relevant to the issue:
4.1 The Applicant is a Contractor providing manpower services to Zilla Panchayat and City Corporation, Educational institutions, Rural Water Supply Divisions. The nature of manpower services provided are in the form of ‘D’ Group, Data Entry Operators, Cooks, Assistant Cooks, Security Guards, cleaning staff and clerical staff.
4.2 The Applicant states that they are providing Manpower Services like Data Entry Operator, Drivers, “D” Group etc. to Zilla Panchayat departments and they are claiming that manpower services provided to them are exempted from GST under SI.No.3 of Notification No. 12/2017-Central Tax (Rate), dated 28th June 2017 as pure services.
4.3 The Applicant contended that they are providing Manpower Services like Drivers and cleaners for solid waste management system to City Corporation / Municipalities. City Corporations / Municipalities are claiming that manpower services provided to them are exempted from GST under SI.No.3 of Notification No. 12/2017-Central Tax (Rate), dated 28th June 2017 as pure services since the activity they are doing is covered under ‘Public Health Sanitation Conservancy and solid waste management’ which is covered under article 243W of the Constitution.
4.4 The Applicant states that they are also providing Manpower Services like cleaning staff, catering staff like cook, assistant cook and watchman to Education Institutions under Zilla Panchayat, like Department of Social Welfare /Department of BCM and the said government departments are claiming that providing manpower services are exempted from GST under SI.No.66 Heading 9992 of Notification No. 12/2017-Central Tax (Rate), dated 28th June 2017.
5. This office had addressed a letter to the Commissioner of Central Tax, Belagavi GST Commissionerate on 17-04-2021 to file comments on the application filed. In response to their e-mail, the Assistant Commissioner of Central Tax, Hubballi has furnished comments as below:
From the documents forwarded by the Deputy Commissioner of Commercial Taxes, Authority on Advance Ruling, Bangalore, it is noticed that taxpayer Shri. Madivalappa Karveerappa Belwadi M/s. M.K. Belwadi Contractors, Hubli has sought Advance Ruling in respect of the following aspect:
“He is providing manpower services to Zilla Panchayat and City Corporation Education institutions, Rural Water supply Divisions. The nature of manpower is D Group, Data Entry Operators, Cooks, Asst Cooks, Security’s, Clerical Staffs, Zilla Panchayat and City Corporations are denying to pay GST stating that GST on such supply exempted under article 243G and 243W. Kindly clarify whether GST is exempted for above services under article 243G and 243W to the above departments. The taxpayer has enclosed the following documents to his application:
1. Letter of Zilla Panchayat, Dharwad dated 04-03-2021 addressed to him. In the letter it is informed to the tax payer that -supply of manpower is availed from the taxpayer; that monthly Bills have been sanctioned towards said supply for the period from January to December, 2020; that the payments are made excluding the GST element in compliance to the Audit Report; that in this regard a reference is made to the Dy. Commissioner, Tax Department, Dharwad and based on the information received from him further action will be initiated.
2. Letter of Zilla Panchayat, Gadag dated 08-10-2020 addressed to him. In the letter it is informed to the taxpayer that -with regard to payment of Service Tax and GST for supply of manpower during 2017-18, and 2018-19, the Chief Accounts officer during the Audit on the record has pointed out that same is not correct; that in this regard a reference is made to the revenue department for seeking clarification; that till receipt of clarification the GST part will not be paid him.
3. Letter of Zilla Panchayat, Gadag dated 29.09.2020 addressed to Special Officer (Z.P), and Ex-Officio Deputy Secretary to Government, Finance Department, Bengaluru, contents of the letter are as under:
“Zilla Panchayat, Gadag is hiring the services of Stenographer, Data Entry operator, Drivers and Attenders from an outsourced agency. The agency is adding 18% GST and the same is being paid to the agency after TDS @ 2%. The AG audit team during the compliance audit of the accounts of the Zilla Panchayat, Gadag has observed that the supply of man power services without involving any supply / transfer of goods to panchayat which is entrusted with the functions defined under Article 243G of the constitution shall be treated as supply of “Pure services” and the payment made towards obtaining such services by the agency do not attract levy of service tax with effect from 01-07-2017. As per the section A para made by Senior Audit Officer, Principal Accountant General, Dharwad payment made towards obtaining the man power services by the agency do not attract levy of GST. Further, the Advance Ruling No.GU/GAAR/R/2020/18 in case Dated: 19-05-2020, it has been concluded by Gujarat Authority for Advance Ruling, Goods and Service Tax states that the agency supplying man power services is
In the letter, with the above submission, clarification regarding levy of GST on supply of Manpower is sought.
4. In the instant application the Taxpayer has sought advance ruling as to -whether manpower supply of-Group-D staff, Data Entry Operators, Cooks, Asst Cooks, Secutiy’s, lerical Staffs to Zilla Panchayat and City Corporations are exempted from GST by treating them as supply towards activity for function to be performed by Panchayat and Municipality which are listed under article 243G and 243W of constitution.
5. The exemption to services provided to Government by way activity entrusted to Panchayat or Municipality is covered under Notification No. 12/2017-Central Tax (Rate), dated 28th June 2017. Hence, the Taxpayer’s application is seeking ruling on applicability of a notification issued under the provisions of the Central Goods and Services Act, 2017.
Relevant portion of the Notification No. 12/2017-Central Tax(Rate) dated 28.06. 2017 reads as under:
G.S.R (E).- 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:-
