GST: UPDATES ON SUPPLY TO GOVERNMENT VIA SUB CONTRACT IS EXEMPT?
1. Appellant has received contract from Government departments for undertaking gardening and landscaping activities.
2. In order to execute the work, the Appellant has engaged sub-contractors.
3. The sub-contractors bill the Appellant for the gardening and landscaping work done at the government departments.
4. The Appellant in turn bills the Government department in terms of the contract given to them.
The issue to be determined is whether the supply of services by the sub-contractor to the Appellant for executing the gardening and landscaping work for government departments is exempt from GST
Points to Consider
It is the argument of the Appellant that if the exemption is not available to the subcontractors, then the GST paid by the Appellant on the inward supply from the subcontractors will become a cost to them since they will not be eligible to avail the input tax credit of the tax paid on the inward supply, for the reason that the output supply made by them to the Government Department is exempted
It is a well settled law that exemption notifications are to be interpreted strictly as to their eligibility. One cannot be influenced by extraneous factors while determining a person’s eligibility to an exemption notification. Therefore, on a strict interpretation of the entry Sl.No 3 and 3A, we hold that the supply of services by the subcontractors to the Appellant is not eligible for the benefit of exemption under either SI..No 3 or 3 A of Notification No 12/2017 CT (R) dated 28-06-2017.