12% GST Applicable on Services Provided Until 31.12.2021 for Governmental Authority: AAAR [Read Order]

The Rajasthan Appellate Authority for Advance Ruling (AAAR) has held that 12% Goods and Service Tax (GST) is applicable on services provided until 31.12.2021 for Government Authority.

The issue to be decided was what will be the GST rate for the work undertaken by applicant (now appellant) for M/s Jaipur Smart City Limited under Bid Reference No. JSCL/ Works/02/2020-21? GST rate shall be 18% (i.e., 9% CGST and 9% SGST) for the work undertaken by the appellant for M/s JSCL under Bid Reference no. JSCL/Works/02/2020-21 Central Tax (Rate), issued on 28.06.2017, outlines that certain activities by the Central Government, State Government, or local authorities as public authorities won’t be considered goods or services. Specifically, services related to Panchayat functions under Article 243G of the Constitution are exempt. A subsequent amendment on 26.07.2018, via Notification No. 1612018 – Central Tax (Rate), extends this exemption to Union Territories and Municipalities under Articles 243W and 243W of the Constitution, respectively.

The appellant contended  that, under Notification No. 12/2017 Central Tax (Rate) dated 28th June 2017, amended by Notification No. 0212018 – Central Tax (Rate) dated 25th January 2018, pure services offered to governmental entities, as outlined in Article 243G or 243W of the Constitution, are tax-exempt. Accordingly, the reimbursement from M/s JSCL to the appellant for NOC fees, associated with functions mentioned in Article 243W, falls under nil tax rates, aligning with the provisions specified in the notifications That the Government of India, Ministry of Finance by Notification No. 16/2021- Central Tax (Rate) dated 18.11.2021 has amended the above said Entry No. 3  w.e.f.01.01.2022 whereby after the words ,” a Governmental Authority or a Government Entity” has been omitted .

Thus there is no dispute with regards to the rate of GST w.e.f. 01.01.2022 and the period of dispute is in relation of applicable rate of GST till 31.12.2021 The GST rate for services provided by the appellant to M/s Jaipur Smart City Limited, under Bid Reference No. JSCLWorkV02/2020-21, is determined by Item number (vi) in Column (3) of serial number 3 of Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017, as amended. Applicable at 12% GST (6% CGST & 6% SGST) until 31.12.2021, subsequent to Notification No. 22/2021 – Central Tax (Rate) dated 31.12.2021, the omission of “a Governmental Authority or a Government Entity” alters the tax liability from 01.01.2022 onward. The two-member bench of Mahindra Ranga, (Central Tax) Member and Dr. Ravi Kumar (State Tax) Member observed that The said services are liable to attract GST @ 12% (i.e.6% CGST & 6010 SGST) during the contracted period only up to 31.12.2021 as after that in column no. (3) Of Serial No. 3 of Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017 the words “a Governmental Authority or a Government Entity” have been omitted vide Notification No. 22/2021- Central Tax (Rate) date d 31.12.2021 w.e.f. 01.01.2022.

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