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Service rendered by govt, not its agency, only exempt from GST
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SME Times News Bureau | 24 Oct, 2021
Private and public sector agencies providing goods and services and
collecting charges from clients on behalf of the government will not be
exempt from paying GST and have to pay the tax at applicable rates, the
Telangana Authority for Advance Rulings (AAR) has ruled.
Services
by the Central government, state government, Union Territory or local
authority are exempt from GST but this rule has a few exception,
including services provided to business entities. The AAR
Telangana ruled that e-procurement transaction fee collected by an
agency on behalf of the government is chargeable to GST.
According
to a senior partner at AMRG & Associates, Rajat Mohan, the
authority also clarified that neither the services rendered by a
business entity to the government nor its activity acting on behalf of
the government, qualify to be treated at par with services rendered
purely by the government or its agencies that are exempt from GST.
The
AAR ruling came on an application by the Telangana State Technology
Services Ltd (TSTSL), a public sector undertaking and a service agency
to the Telangana government and its departments relating to IT and
related services.
One of such services provided by the TSTSL is
acting as a fund manager on behalf of state IT E&C Department in
executing e-procurement process.
TSTSL, as fund manager, receives entire amounts such as e-procurement transaction charges into a designated bank account.
On
receipt of the e-Procurement Transaction Fees (inclusive of GST), the
TSTS is paying 18 per cent GST on the fees on a monthly basis and
recognises its share of service charges and again pays GST at 18 per
cent on a monthly basis.
The balance amounts are utilised for IT expenditure towards the specific requirements of the departments concerned.
In
its plea, the applicant said that he is acting as a pure agent on
behalf of the state government which is floating tenders amounting to
supply of services and argued that such supply may not attract tax under
CGST Act, 2017.
However, the AAR clearly distinguished between
services provided by government and someone on behalf of the government
and held that the latter activity is taxable.
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