No GST leviable on Manpower Services supplied to Panchayat or Municipality in relation to any function entrusted under Indian Constitution

The Karnataka Authority for Advance Ruling (AAR) has ruled that GST is not applicable to manpower services provided to Panchayats or Municipalities. This exemption applies when these services are considered 'pure services' and relate to functions assigned to Panchayats under Article 243G or Municipalities under Article 243W of the Indian Constitution. The ruling clarifies that such services, when supplied to government bodies for these specific constitutional duties, are exempt from GST.

The Karnataka AAR, in the case of In Re. Manish Manpower Agency[KAR ADRG 03/2024 dated January 29, 2024] held that manpower services supplied to Social Welfare department in relation to any function entrusted to Panchayat under Article 243G of the Constitution or any function entrusted to the municipality under Article 243W is exempt from levy of GST as per Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017("the Exemption Notification").

Facts

Manish Manpower Agency ("the Applicant") is a partnership firm engaged in the business of supplying manpower services to Zila Panchayat, Taluka Panchayat and other related government bodies.

The Applicant has filed an application for advance ruling on whether the manpower services supplied to the Zila and Taluka Panchayat ("the Social Welfare Department"), being considered as pure services are exempted from levy of GST under Sl. No. 3 of the Exemption Notification.

Issue

Whether GST is leviable on Manpower Services supplied to Panchayat or Municipality in relation to any function entrusted under Indian Constitution?

Held

The Karnataka AAR in KAR ADRG 03/2024 held as under:

• Opined that, to claim exemption on manpower services two conditions have to be satisfied: 1) the services supplied should fall within the purview of pure services (excluding works contract or other composite supplies including any goods) provided to the Central Government, State Government or Union Territory or local authority or a Governmental authority and 2) service supplied pertaining to any activity in relation to any function entrusted by the Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a municipality under Article 243W of the Indian Constitution.
• Held that, manpower services supplied to Social Welfare department in relation to any function entrusted to Panchayat under Article 243G of the Constitution or any function entrusted to the municipality under Article 243W is exempt from levy of GST.

Relevant extract of the Exemption Notification

Sl. No. 3 of the Exemption Notification:

"3

Chapter 99

Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.

Nil

Nil"