Gujarat Authority of Advance Ruling in its recent ruling (Advance Ruling No. GUJ/GAAR/R/2020/18) in the case of M/s. A.B.Enterprise has adjudged that pure services (supply of manpower, security service) provided to Central Government, State Government, Local Authorities, Governmental Authorities, Government Entities is exempt from GST, subject to fulfillment of certain conditions.
Facts of the case
The applicant viz M/s. A.B.Enterprise is a partnership firm registered under GST and having it’s principle place of business at Mehsana, Gujarat and is engaged in the business of providing manpower services to Government as well as Non-Government entities and has been providing such services for the past several years; that the aforesaid supply of services includes manpower supply for housekeeping, cleaning, security, data entry operators etc. at various positions in such Government departments.
The applicant has been awarded contract from various Government departments on successful bidding of tenders floated by respective Government departments/organizations; that they provide works contract service as well which is supplied along with goods; that however in case of man power supply service, supply is only for service and there is no supply of goods along with it in execution of such man power supply service contract; that after introduction of GST, they have provided man power supply service to Central Govt , State Govt, local authority , Governmental Authority, Ltd Company and Pvt Ltd Company.
It has been submitted by applicant that they are providing man power supply service to Central Government, State Government and various entities including government entities; that they also provide such services to private organizations/corporate on which GST is collected and discharged in appropriate manner.
Question on which ruling is sought
Whether the applicant is eligible to claim exemption benefit under Sr.No.3 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 for Pure services (supply of manpower, security service) provided to Central Government, State Government, Local Authorities, Governmental Authorities, Government Entities?
Highlights and Ruling in Order of Gujarat AAR
- The conditions to be fulfilled to be eligible for taking the benefit of the exemption from GST under Sr.No.3 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017, is as under:
(i) Pure services are to be provided.
(ii) Service recipient should either be Central Government or State Government or Union territory or Local authority or Governmental authority or Government entity: and
(iii) Such services provided should be by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution of India or in relation to any function entrusted to a Municipality under Article 243W of the Constitution of India.
- If a person provides only service to any person without involvement of supply of goods along with supply of services, then the same would be termed as supply of pure service. On going through the work orders submitted by the applicant with regard to services provided to the entities, it is seen that the services provided are of only manpower supply or security services and since there is no involvement of supply of goods in these services, the services would be called ‘pure services’ Hence the first condition is fulfilled.
- Applicant shall be eligible for the exemption under the Notification No.12/2017- Central Tax (Rate) dated 28.06.2017 only if the services in question are provided by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution of India or in relation to any function entrusted to a Municipality under Article 243W of the Constitution of India.
- The exemption sought by the applicant will depend upon the nature of services provided by them in terms of specific contracts entered by them with respective service recipients.
In view of above the Gujarat AAR adjudged that the applicant is eligible to claim exemption benefit under Sr.No.3 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 for pure services (supply of manpower, security service) provided to Central Government, State Government, Local Authorities, Governmental Authorities, Government Entities subject to the condition that the services provided to these entities mentioned above are services provided by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution of India or in relation to any function entrusted to a Municipality under Article 243W of the Constitution of India.
Our view
This ruling is significant as the term pure services has not been defined in the Act, Rules or Notification. The ruling of Gujarat AAR seems to be on right footing. In this regard answer to Q. No 35 of FAQs issued by CBEC (CBIC) is also relevant which is being reproduced below:
“In the context of the language used in the Notification, supply of services without involving any supply of goods would be treated as supply of pure services‘. For example, supply of man power for cleanliness of roads, public places, architect services, consulting engineering services, advisory services and like services provided by business entities not involving any supply of goods would be treated as supply of pure services. On the other hand, let us take the example of governmental authorities awarding the work of maintenance of street lights in a municipal area to agency which involve apart from maintenance, replacement of defunct lights and other spares. In this case, the scope of the service involves maintenance work and supply of goods, which falls under the works contract services. The exemption is provided to services involves only supply of services and not for work contract services”.
It is also pertinent to mention here that recently Gujarat AAR had in the case of Shri Jayesh Anilkumar Dalal had adjudged that providing of consultancy services for Architectural design and Project management Consultancy for Housing project to Gandhinagar Urban Development Authority and Rajkot Municipality is eligible for exemption per Sl. No. 3 – (Chapter 99) of Table mentioned in Notification No. 12/2017 –Central Tax (Rate) dated 28.06.2017.
For ready reference of our readers the complete order of Gujarat AAR is given below:
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