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Services by Government or local authority
Services by Government or a local authority excludi ng the
following services to the extent they are not cover ed
elsewhere—Sec. 66 D[a]
(i) services by the Department of Posts by way of s peed post, express parcel post, life insurance and
agency services provided to a person other than Gov ernment;
(ii) services in relation to an aircraft or a vesse l, inside or outside the precincts of a port or an
(iii) transport of goods or passengers; or
[*][any service], other than services covered under cl auses (i) to (iii) above, provided to business
[*] Substituted by the Finance Act, 2015 w.e.f. 14. 05.2015, Earlier it read as under: “support services”
With effect from 14.05.2015
“Government” means the Departments of the Central G overnment, a State Government and its
Departments and a union territory and its departmen ts but shall not be include any entity, whether created
by a statute or otherwise, the accounts of which ar e not required to be kept in accordance with article 150
of the Constitution or the rules made their under
“Local Authority” means-
(a) a Panchayat as referred to in clause (d) of article 243 of the Constitution;
(b) a Municipality as referred to in clause (e) of article 243P of the Constitution;
(c) a Municipal Committee and a District Board, legally entitled to, or entrusted by the Government
With, the control or management of a mun icipal or local fund;
(d) a Cantonment Board as defined in section 3 o f the Cantonments Act, 2006 (41 of 2006);
(e) a regional council or a district council con stituted under the Sixth Schedule to the Constituti on;
(f) a development board constituted under artic
le 371 of the Constitution; or
(g) a regional council constituted under artic le 371A of the Constitution;
(A) D.O.F. No. 334/5/2015-TRU, Dated 28.02.2015
5.1 (iii) Presently, services provided by a Government or a local authority, excluding certain services
specified under clause (a) of section 66D , are cov ered by the Negative List. Service Tax applies on t he
“support services” provided by the Government or l ocal authority to a business entity . An enabling
provision is being made, by amending section 66D to exclude all services provided by the Government or
local authority to the business entity from the Neg ative List. Consequently , the definition of “support
service” [ section 65B(49)] is being omitted. Acco rdingly, as and when this amendment is given effect to,
all services provided by the Government or local au thority to a business entity, except the services that are
specifically exempted , or covered by any another e ntry in the Negative List, shall be liable to service tax.
(B) D.O.F. No. 334/5/2015-TRU, Dated 19.05.2015
3. Presently, services provided by Government or a local authority, excluding certain services specified
under clause (a) of section 66D , are covered in th e Negative List. An enabling provision has been mad e,
by an amending section 66D(a)(iv) , to exclude all service provided by the Government or local author ity
to the business entity from the Negative List [sect ion 109(1) of Finance Act, 2015] . Consequently, t he
definition of “support service” [section 65B (49)] is also to be omitted from 14.05.2015 [ section 107 (h)
of Finance Act ,2015].
Person responsible for discharge of Service Tax Lia bility in respect of above
Relevant Service Person responsible for discharge of Service Tax
Specified services provided by
Derpartment of Posts
Department of Posts
Services in relation to vessel Concerned Government Department. For instance, Po rt
Services in relation to an Aircraft Concerned Government Department. For instance, Airport
Authority of India
Transport of Goods and/or passengers. Concerned Government Department. For instance, Indian
Railways , Delhi Transport Corporation.
Any Service [ other than those covered
by clauses (i) to (iii) to above] to
The Concern business entity by virtue of Reverse Charge
Mechanism given under section 68(2) of the Act read with
clause 6 of Notification No. 30/2012-S.T. dated 20.06.2012
Departmental clarification-Taxation of services- A n
Education Guide, Dated 20.06.2012
4.1.1 Are All Services provided by the Governmen t or Local Authority Covered in the negative
No. Most services provided by the central or state Government or local authorities are in the negative list
except the following:
(a) Services provided by the department of posts by way of speed post, express parcel post, life
insurance and agency services carried out on paymen t of commission on non-Government business;
(b) Services in relation to a vessel or an aircra ft inside or outside the precincts of a port or an airport;
(c) Transport of goods and/or passengers ;
(d) Support Services, other than those covered by clause (a) to (c) above , to business entities
4.1.2 Would the taxable services provided by the G overnment be charged to tax if they are
otherwise exempt or specified elsewhere in the nega tive list?
No. If the services provided by the Government or local authorities that have been excluded from the
negative list entry are otherwise specified in the negative list then such services would also not be taxable.
4.1.3 ‘Government’ has not been defined in the Ac t. What is the meaning of Government?
The Phrase ‘Government’ has not been defined in the Act. As per clause (23) of section 3 of the General
Clauses Act, 1897 ‘Government’ include both Central Government and any state Government As per
clause (8) of section 3 of the said Act ‘Central Go vernment’, in relation to anything done or to be do ne
after the commencement of the constitution , mean t he President. As per article 53 of the constitution the
executive power of the Union shall be vested in the President and shall be exercised by him either directly
or indirectly through officers subordinate to him i n accordance with the Constitution. Further in term of
article 77 of the Constitution all executive action s of the Government of India shall be expressed to be
taken in the name of the President. Therefore , the Central Government means the President and the
officers subordinate to him while exercising the ex ecutive powers of the union vested in the President and
in the name of the President.
Similarly as per clause (60) of section 3 of the Ge neral Clauses Act, 1897 ‘State Government’, as resp ects
anything done after the commencement of the Constit ution, shall have been, in a State the Governor, and
in Union Territory the Central Government Further a s per article 154 of the Constitution the executive
power of the state shall be vested in the Governor and shall be exercised by him either directly or
indirectly through officers subordinate to him in a ccordance with the Constitution. Further, as per ar ticle
166 of the Constitution all executive actions of th e Government of state shall be expressed to be take n in
the name of Governor. Therefore, State Government m eans the Governor or the officers subordinate to
him who exercise the executive power of the state v ested in the Governor and in the name of Governor.
4.1.4 Are various corporations formed under Centra l Acts or State Acts or various Government
companies registered under the Companies Act, 1956 or autonomous institutions set up by a special
Acts covered under the definition of ‘Government’ ?
No. A statutory body, corporation or an authority created by the Parliament or a State Legislature is
neither ‘Government’ nor a ‘Local Authority’ as wou ld be evident from the meaning of these terms
explained in point nos. 2.4.7 and 2.4.8 above resp ectively. Such Statutory body, corporation or an
Authority are normally created by the Parliament o r a state Legislature in exercise of the powers
conferred under article 53(3)(b) and article 154(2 )(b) of the Constitution respectively . It is a settled
Position of law Government ( Agarwal Vs Hindustan Steel AIR 1970 Supreme Court 1150) that the
manpower of such statutory authorities or bodies do es not become officers subordinate to the president
under article 53(1) of the Constitution . Such a St atutory Body, corporation or an authority as a juri stic
entity is separate from the state and cannot be reg arded as central or state Government and also do no t fall
in the definition of ‘Local Authority’.
Thus regulatory bodies and other autonomous entitie s which attain their entity under an act would not
comprise either Government or Local Authority.
4.1.5 What entities are then covered under ‘Govern ment’?
‘Government’ would include various departments and offices of the Central or State Government or the
U.T. Administrations which carry out their function s in the name and by order of the President of India or
the Governor of a State.
4.1.6 Would a department of the Government need t o get itself registered for each of the services
listed in answer to Q. No. 4.1.1 above?
For the Support services provided by the Government , other than where such support services are by way
of renting of immovable property , to business enti ties, Government departments will not have to get
registered because service tax will be payable on s uch services by the service receiver i.e. the business
entity receiving the service under reverse charge m echanism in terms of the provisions of section 68 o f
the Act and the notification issued under the said section as well Service Tax Rules, 1994. For Servic es
mentioned at (a) to (c) of the list (point 4.1.1 ab ove refers) tax will be payable by the concerned
Conditions of Service) Act, 1971 (such services are performed by CAG under the statue and cannot be
performed by the business entity themselves and thu s do not constitute support services.)
4.1.8 Will the services provided by Police or secu rity agencies to PSUs or corporate entities or
sports events held by private entities be taxable?
Yes. Services provided by Government security agenc ies are covered by the main portion of the definition
of support service as similar services can be provi ded by private entities. In any case it is also covered by
the inclusive portion of the definition. However th e tax will be actually payable on reverse charge by the
4.1.9 What is the meaning of Local Authority?
Local Authority is defined in clause (31) of sectio n 65B and means the following:-
(i) A Panchayat as referred to in clause (d) of a rticle 243 of the Constitution
(ii) A Municipality as referred to in clause (e) of article 243P of the Constitution
(iii) A Municipal committee and a District Board , legally entitled to, or entrusted by the Government
with, the control or management of a municipal or l ocal fund
(iv) A Cantonment Board as defined in section 3 of the Cantonment Act ,2006
(v) A regional Council or a district council cons tituted under the sixth Schedule to the Constitutio n
(vi) A development board constituted under articl e 371 of the Constitution , or
(vii) A regional council constituted under article 371A of the constitution
4.1.10 Are all local bodies constituted by a stat e or central law are local authorities?
No. The definition of ‘Local Authority’ is very spe cific as explained above and only those bodies whic h
fall in the definition comprise ‘local authorities’ . It would not include other bodies which are merel y
described as a local body by virtue of a local law.
However it may be noted that services by a Governme ntal Authority by way of any activity in
relation to any function entrusted to a municipalit y under article 243W of the constitution are
specifically exempt under the mega exemption. ‘Gove rnment Authority’ has been defined in the
said mega exemption as a board, or an authority or any other body established with 90% or more
participation by way of equity or control by Govern ment and set up by an Act of the Parliament or
a state Legislature to carry out any function entru sted to a municipality under article 243W of the
Constitution. Thus some of these local bodies may c omprise Governmental authorities
Author’s Note: The definition of term ‘Government A uthority’ has been amended with effect from
30.01.2014 vide Notification No. 02/2014-ST dated 3 0.01.2014.
4.1.11 Department of Posts provides a number of s ervices. What is the status of those services for
the purpose of levy of service tax?
As per sub-clause (i) of clause (a) of section 66D services provided by the department of posts by way of
speed post, express parcel post , life insurance, a nd agency services carried out on payment of
commission on non-Government business are excluded from the negative list. Therefore , the following
services provided by department of Posts are not li able to service tax.
Basic mail services known as postal services such a s post card , inland letter, book post, registered post
provided exclusively by the Department of Posts to meet the universal postal obligations.
Transfer of money through money orders , operations of savings accounts issue of postal orders, pension
payments and other such services
4.1.12 Would agency or intermediary services on co mmission basis (distribution of mutual funds,
bonds, passport applications, collection of telepho ne and electricity bills), which are provided by the
Department of Posts to non-Government entities be l iable to service tax?
Yes. Agency services carried out on payment of commission on non-Government business are excluded
from the negative list entry relating to services p rovided by Government or a Local Authority”
RELATED EXEMPTIONS IN NOTIFICATION NO. 25/2012
1. Entry No. 12 of Notification No. 25/2012-ST, D ated 20.06.2012 (As amended by Notification No.
06/2015-ST, Dated 01.03.2015)
With effect from 01.04.2015
Services provided to the Government, a local author ity or a governmental authority by way of
construction, erection, commissioning, installation , completion, fitting out , repairing , maintenanc e,
renovation or alteration, of –
(b) a historical monument , archaeological site or remains of national importance , archaeological
excavation, or antiquity specified under the Ancien t Monuments and Archaeological Sites and Remains
Act, 1958(24 of 1958);
(d) canal, dam or other irrigation works;
(e) pipeline, conduit or plant for (i) water supp ly (ii) water treatment , or (iii) sewerage treatment or
disposal ; or
2. Entry 25 of Notification No. 25/2012-ST, Dated 20.06.2012 (Amended by Notification No.
03/2013-ST, Dated 01.03.2013 and Notification No. 6 /2014-ST, Dated 11.07.2014
With effect from 11.07.2014
Services provided to Government, a local authority or a governmental authority by way of –
(a) water supply, public health, sanitation conse rvancy, solid waste management or slum improvement
and up-gradation; or
(b) repair or maintenance of a vessel
3. Entry 34(a) of Notification No. 25/2012-ST, Dat ed 20.06.2012
provide exemption from levy of service tax to Servi
ces received from a service provider located in a non-
taxable territory by the Government, a Local Author ity , a Governmental Authority or an individual in
relation to any purpose other than commerce , industry or an y other business or profession.
4. Entry 39 of Notification No. 25/2012-ST, Dated 20.06.2012
provides exemption from levy of service tax to Serv ices by a Government Authority by way of any
activity in relation to any function entrusted to a municipality under Article 243W of the Constitutio n.
About the Author:
Author is practicing chartered accountant in Gurga on and having specialisation in Service Tax and
Haryana VAT. He can be reached at email@example.com. Phone : 0124-4271552.