In re Ethnus Consultancy Services Private Limited (GST AAR Karnataka)
The Karnataka Authority for Advance Ruling (AAR) has determined that Ethnus Consultancy Services Private Limited’s training services provided to the Karnataka Skill Development Corporation (KSDC) are subject to Goods and Services Tax (GST). Ethnus Consultancy, a company focused on training and skill development, had sought an advance ruling on whether their services to government bodies, specifically KSDC, were exempt from GST under Notification 12/2017-Central Tax (Rate). This notification provides an exemption for services supplied to the Central or State Government under a training program where the total expenditure is borne by the government. The company argued that since KSDC is a government entity and the training program is government-funded, the services should be considered Nil-rated.
However, the AAR ruled against this claim, stating that the primary condition for the exemption was not met. The AAR’s analysis focused on the fact that the services were provided to KSDC, which is an independent legal entity separate from the State Government itself. The exemption under Notification 12/2017 is specifically for services rendered directly to the Central Government, State Government, or a Union Territory administration. Since KSDC is a distinct legal body, the AAR concluded that the services were not supplied to the State Government as required by the notification. Consequently, the AAR held that the income earned by Ethnus Consultancy from the “Kalike Jothege Kaushalya” program under the CMKKY scheme of the Karnataka government constitutes a taxable supply of services, and the exemption does not apply.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, KARNATAKA
M/s. Ethnus Consultancy Services Private Limited (herein after referred to as ‘Applicant’), Second Floor, No.151/17/1, SST Chambers, 36th Cross, Jayanagar 5th Block, Bengaluru- 560041, having GSTIN 29AACCE5852B1ZS, have filed an application for Advance Ruling under Section 97 of CGST Act, 2017, read with Rule 104 of the 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 KGST Act.
2. The Applicant is a training and skill development company providing necessary employability skills, certification and placement support to the youth of India.
3. The applicant has sought advance ruling in respect of the following questions:
(i) As per Notification 12/2017, SL No. 72, Chapter 99, Heading 9992 reads “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”, is Nil rated. is this applicable to our organization when it provides services to Government under any training programme ?
(ii) Whether income earned from Karnataka Skill Development Corporation by implementing skill development program “Kalike Jothege Kaushalya’ under the CMKKY scheme of Gout. of Karnataka, results to taxable supply of services?
4. Admissibility of the application: The question is about the “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.
5. Brief Facts of The Case: The applicant has furnished the following facts relevant to the issue:
5.1 The Applicant states that they are training and skill development company providing necessary employability skills, certification and placement support to the youth of India.
5.2 The Applicant states that they work with multiple State Govts. as one of their implementation partners to deliver skill development programs to the youth of those respective states; that currently they work with KSDC (Govt. of Karnataka), TNSDC (Govt. of Tamil Nadu), OSDA (Govt. of Odisha), ASAP (Govt. of Kerala) among others; that any Government skill development program is funded by the respective state government, through its skills development departments / bodies / corporations.
6. Applicant’s Interpretation of lam:
6.1 The Applicant contends that as per Notification 12/2017, 51. No. 72, the “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”, covered under Chapter 99, Heading 9992 are Nil rated.
6.2 The applicant interprets, as per the above notification, that any or all training programmed which are wholly funded by a Government through its departments / bodies / corporations, the GST rate is Nil. As such their training services to a Government via its departments / bodies / corporations, does not result in taxable supply of services.
PERSONAL HEARING/PROCEEDINGS HELD ON 16.06.2025
7. Swathi N.A, Senior Manager (Finance and Accounts) and duly authorized representative of the applicant appeared for personal hearing proceedings and reiterated the facts narrated in their application.
FINDINGS & DISCUSSION
8. At the outset we would like to make it clear that the provisions of CGST Act, 2017 and the KGST Act, 2017 are in pari-materia and have the same provisions in like matter and differ from each other only on a few 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 the KGST Act.
9. We have considered the submissions made by the applicant in their application for advance ruling. We have also considered the issues involved on which advance ruling is sought by the applicant and the relevant facts along with the arguments made by their authorized representative and also their submissions made during the time of hearing.
10. The Applicant submitted that they work with multiple State Governments as one of their implementation partners to deliver skill development programs to the youth of those respective states; that currently they work with Karnataka Skill Development Corporation (hereinafter KSDC for brevity). The applicant has provided a copy of office order which states that they are one of the industry approved partners for providing skill training to students who are studying in 6th semester of Government degree colleges and the same is signed by the Managing Director, KSDC.
11. The Applicant states that they claim exemption under entry No. 72 of Notification 12/2017-Central Tax(Rate) dated 28.06.2017 as they are providing services to the State Government through their training programme, for which total expenditure is borne by the State Government.
12. In view of the above, We proceed to examine whether the Applicant is eligible to claim exemption under entry No. 72 ofNotification 12/2017-Central Tax(Rate) dated 28.06.2017 which is as under:
It is observed from the above entry that to claim exemption under this entry, all of the following three conditions should be satisfied.
a) The services should be provided to the Central Government or State Government or Union
b) 14 Services provided should be in the form of training programme and
c) 75% or more of the total expenditure is borne by the Central Government or State Government or Union territory.
13. We proceed to examine the aforesaid conditions one by one. The Applicant is providing services to KSDC, as per the work order provided by the Applicant, which is an independent legal entity distinct from state government. Therefore the Applicant is not providing services to the Central Government or State Government or Union territory. Thus the first condition itself is not satisfied and hence we do not go into the validation of remaining conditions.
14. In view of the above the Applicant is not eligible to claim exemption under the entry number 72 of Notification 12/2017-Central Tax(Rate) dated 28.06.2017 and hence the applicant’s services are exigible to GST.
15. In view of the foregoing, we pass the following
RULING
(i) Exemption under entry No. 72 of Notification 12/2017-Central Tax(Rate) dated 28.06.2017 is not applicable to the Applicant.
(ii)The income earned from Karnataka Skill Development Corporation by implementing skill development program “Kalike Jothege Kaushalye” under the CMKKY scheme of Govt. of Karnataka, is a taxable supply of services.
