Service of Supply of Teachers to Schools and Colleges Run by Municipality Exempt from GST: AAR [Read Order]

The Authority for Advance Rulings (AAR) in Karnataka ruled that the supply of teachers and lecturers to schools and colleges run by municipalities is exempt from Goods and Services Tax (GST). The issue comes after Crystal Infosystems and Services, a company providing such services to Bruhat Bengaluru Mahanagara Palike (BBMP) schools, sought clarification on their GST liability. BBMP, a municipality constituted by the Government of Karnataka, refused to pay the 18% GST, claiming that the service is pure and that the BBMP is a municipality that is exempt under GST law.

The applicant, represented by Viyayakumar, has stated that the services are exempt under entry number 3 of Notification No. 12/2017 – Central Tax (Rate), as they are pure services provided to a local authority for functions entrusted to municipalities under Article 243W of the Constitution, which includes education promotion.

It was observed by the authority that the teacher and lecture supply of services are indeed exempt from GST under the cited notification, and ruled in favor of the applicant. The two-member bench of M.P Ravi Prasad and Kiran Reddy. ruled that “the service of supply of teachers/lecturers to schools/colleges run by BBMP, on outsource basis is covered under pure services being provided to a local authority (BBMP) by way of an activity in relation to a function “Promoting educational aspects” entrusted to a Municipality under article 243W of the Constitution of India and hence are exempted in terms of entry number 3 of Notification 12/2017-Central Tax (Rate) dated 28.06.2017, as amended.”

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