2025 (2) TMI 298 - AAR - GST

Taxability of supply of man power services to PHE Department in terms of Serial No 3 of Notification no. 12/2017-State Tax (Rate) vide 1136 F.T. dated 28.06.2017 - HELD THAT - The term pure services has not been defined under the GST Act. However a bare reading of the description of services as specified in entry serial number 3 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 as amended denotes supply of services which does not involve any supply of goods can be regarded as pure services. The applicant has submitted that as per the work order issued to him by PHE he provides manpower services of 583 Junior Engineers for executing JAL JEEVAN MISSION Project. It prima facie appears that the aforesaid supply doesn t involve any transfer of materials in goods. The supply of services as provided by the applicant is pure services. The second condition i.e. whether the applicant provides services to the Central Government State Government or Union Territory or local authority. Both the work order and the letter bearing memo no 1919/RS dated 15.07.2024 submitted by the applicant issued by Directorate of Public Health Engineering Govt of West Bengal. It transpires from above that the applicant provides the aforesaid services to Government of West Bengal. The first and second conditions i.e. the supply of services can be regarded as pure supply of goods and services and having been provided to the State Government get satisfied. Whether the said services are in relation to any functions entrusted to a Panchayat under article 243G or to a municipality under article 243W of the Constitution of India? - HELD THAT - The functions entrusted to a Panchayat or to a municipality as listed in the Eleventh and/or Twelfth Schedule includes the functions like drinking water or water supply for domestic industrial and commercial purposes. Thus the services as provided by the applicant for supply of data entry operator junior engineer (System Administrator Software Support Personnel) throughout the West Bengal in connection with JJM is found to be covered by the subject matter as listed in the Eleventh and/or Twelfth Schedule thereby can be regarded as a supply in relation to functions entrusted to a Panchayat under article 243G and/or to a municipality under article 243W of the Constitution of India. Conclusion - Supplies of data entry operator junior engineer (System Administrator Software Support Personnel) made by the applicant to the Public Health Engineering Department (PHE) Government of West Bengal for executing Jal Jeevan Mission is exempted from payment of tax vide serial number 3 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 corresponding State Notification No. 1136 F.T. dated 28.06.2017 as amended.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this ruling are:

(a) What is the applicable rate of tax on the work allotted by the Department of Public Health Engineering (PHE) under the Jal Jeevan Mission (JJM), a Government of West Bengal initiative?

(b) Whether the supply of manpower services-specifically data entry operators and junior engineers (including system administrators and software support personnel)-to the West Bengal Government in connection with JJM qualifies as a "pure service" provided by way of any activity related to functions entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W of the Constitution of India?

(c) Whether such manpower services have the requisite nexus with any functions entrusted to Panchayats or Municipalities under Articles 243G and 243W respectively, thereby qualifying for exemption under Serial No. 3 of Notification No. 12/2017-State Tax (Rate) dated 28.06.2017 (as amended)?

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) and (b): Applicability of Tax Rate and Nature of Services Provided under Jal Jeevan Mission

Relevant Legal Framework and Precedents: The GST Act provisions under Sections 97, 99, and 100 govern advance rulings and appeals. Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, particularly Serial No. 3, exempts "pure services" provided to Central/State Government or local authorities by way of any activity related to functions entrusted to Panchayats under Article 243G or Municipalities under Article 243W. The Eleventh and Twelfth Schedules of the Constitution enumerate such functions.

Court's Interpretation and Reasoning: The Court noted that the applicant, a Public Sector Undertaking acting as a nodal agency for IT infrastructure and e-governance, supplies manpower services (data entry operators and junior engineers) to PHE for executing the JJM. The supply is "pure services" as it does not involve transfer of goods. The applicant provides these services to the State Government, fulfilling the first two conditions of exemption under Serial No. 3.

Key Evidence and Findings: The work order and correspondence from PHE confirmed the applicant's role in supplying manpower for JJM. The JJM's objective is to provide safe and adequate drinking water to rural households, a function falling within the purview of drinking water supply as listed in the Eleventh Schedule (Panchayats) and Twelfth Schedule (Municipalities).

Application of Law to Facts: Since the services are provided to the State Government and relate to drinking water supply, a function entrusted to Panchayats and Municipalities, the supply qualifies as an activity related to functions under Articles 243G and 243W. Thus, the supply is eligible for exemption under Serial No. 3 of Notification No. 12/2017.

Treatment of Competing Arguments: The applicant contended that the manpower services were ancillary and not directly related to Panchayat or Municipality functions. It relied on various advance rulings (e.g., Madivalappa Karveerappa Belwadi, Chhattisgarh Anusandhan & Vikas Firm, and Geospatial Studio LLP) which held that manpower services like data entry operators generally do not qualify for exemption as they lack direct nexus to Panchayat or Municipality functions. The Court distinguished these rulings by emphasizing the nature of the project (JJM) and the specific function of water supply, which is explicitly listed in the constitutional schedules.

Conclusions: The Court concluded that the manpower services supplied for JJM are integrally connected to a function entrusted to Panchayats and Municipalities, thereby qualifying for exemption under Serial No. 3.

Issue (c): Nexus of Manpower Services with Functions Entrusted to Panchayats/Municipalities

Relevant Legal Framework and Precedents: Articles 243G and 243W of the Constitution define the powers and responsibilities of Panchayats and Municipalities, with exhaustive lists of functions in the Eleventh and Twelfth Schedules respectively. Notification No. 12/2017 exempts services connected to these functions.

Court's Interpretation and Reasoning: The Court examined the Eleventh Schedule functions (e.g., drinking water, minor irrigation, rural housing) and Twelfth Schedule functions (e.g., water supply for domestic and industrial purposes, public health and sanitation). The JJM clearly falls within the drinking water function. The manpower services provided by the applicant, though ancillary, are necessary for implementing the primary water supply function.

Key Evidence and Findings: The Court referred to the official description of JJM from the Public Health Engineering Department and the Ministry of Jal Shakti, confirming the mission's objective aligns with functions entrusted to Panchayats and Municipalities. The Court also noted the applicant's supply of junior engineers and system administrators as essential for project execution.

Application of Law to Facts: By linking the manpower services to the execution of the water supply scheme, the Court found a sufficient nexus to the functions enumerated in the constitutional schedules. This connection satisfies the second condition for exemption under the Notification.

Treatment of Competing Arguments: The applicant's reliance on prior rulings denying exemption for manpower services was considered. However, those rulings involved manpower services unrelated to the core functions listed in the constitutional schedules. The Court distinguished the present case on the basis of the direct involvement of manpower in a constitutionally recognized function (drinking water supply).

Conclusions: The Court held that the manpower services have the requisite nexus with functions entrusted to Panchayats/Municipalities and are thus exempt from GST under the cited Notification.

3. SIGNIFICANT HOLDINGS

The Court's key legal reasoning and determinations include:

"The supply of services as provided by the applicant is pure services."

"The applicant provides the aforesaid services to Government of West Bengal. We therefore find that the first and second conditions i.e., the supply of services can be regarded as pure supply of goods and services and having been provided to the State Government get satisfied."

"The functions entrusted to a Panchayat or to a municipality as listed in the Eleventh and/or Twelfth Schedule includes the functions like drinking water or water supply for domestic, industrial and commercial purposes."

"The services as provided by the applicant for supply of data entry operator & junior engineer (System Administrator, Software Support Personnel) throughout the West Bengal in connection with JJM is found to be covered by the subject matter as listed in the Eleventh and/or Twelfth Schedule thereby can be regarded as a supply in relation to functions entrusted to a Panchayat under article 243G and/or to a municipality under article 243W of the Constitution of India."

"Supplies of data entry operator & junior engineer (System Administrator, Software Support Personnel) made by the applicant to the Public Health Engineering Department (PHE), Government of West Bengal for executing Jal Jeevan Mission is exempted from payment of tax vide serial number 3 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017."

Core principles established:

"Pure services" exclude works contracts or composite supplies involving goods.
Exemption under Notification No. 12/2017 applies only if the service is provided to Central/State Government or local authority and is connected to functions entrusted to Panchayats/Municipalities under Articles 243G/243W.
The Eleventh and Twelfth Schedules provide exhaustive lists of functions for Panchayats and Municipalities respectively; only services connected to these functions qualify for exemption.
Manpower services ancillary to constitutionally recognized functions (e.g., drinking water supply) are exempt if they have a direct nexus to those functions.

Final determinations on each issue:

(a) The supply of manpower services to PHE under JJM is a "pure service" and is supplied to the State Government.

(b) The services have a direct nexus to the function of drinking water supply, a function entrusted to Panchayats and Municipalities under Articles 243G and 243W.

(c) Therefore, such supply qualifies for exemption from GST under Serial No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and corresponding State Notification.

← Previous Next →