Goods and Services Tax – General FAQ on GST – Frequently Asked Questions – 170818-02 – Question 1 : Are all services provided by the Government or local authority exempted from payment of tax? Answer : No, all services provided by the Government or a local authority are not exempt from tax. As for instance, services, namely, (i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of an airport or a port; (iii) transport of goods or passengers; or (iv) any service, other than services covered under (i) to (iii) above, provided to business entities are not exempt and that these services are liable to tax. That said, most of the services provided by the Central Government, State Government, Union Territory or local authority are exempt from tax. These include services provided by governme
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aircraft or a vessel, inside or outside the precincts of an airport or a port, the service recipients are required to pay the tax under reverse charge mechanism. Question 3 : What is the meaning of Government ? Answer : As per section 2(53) of the CGST Act, 2017, Government means the Central Government. As per clause (23) of section 3 of the General Clauses Act, 1897 the Government includes both the Central Government and any State Government. As per clause (8) of section 3 of the said Act, the Central Government , in relation to anything done or to be done after the commencement of the Constitution, means the 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 sub-ordinate to him in accordance with the Constitution. Further, in terms of Article 77 of the Constitution, all executive actions of the Government of India shall be expressed
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wers of the State vested in the Governor and in the name of the Governor. Question 4 : Who is a local authority? Answer : Local authority is defined in clause (69) of section 2 of the CGST Act, 2017 and means the following : Panchayat as defined in clause (d) of article 243 of the Constitution; Municipality as defined in clause (e) of article 243P of the Constitution; a Municipal Committee, a , a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund; Cantonment Board as defined in section 3 of the Cantonments Act, 2006; Regional Council or a District Council constituted under the Sixth Schedule to the Constitution; Development Board constituted under article 371 of the Constitution; or Regional Council constituted under article 371A of the Constitution; Question 5 : Are all local bodies constituted by a State or Central Law regarded as local a
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stion 6 : Would a statutory body, corporation or an authority constituted under an Act passed by the Parliament or any of the State Legislatures be regarded as Government or local authority for the purposes of the GST Acts? Answer : A statutory body, corporation or an authority created by the Parliament or a State Legislature is neither Government nor a local authority . Such statutory bodies, corporations or authorities are normally created by the Parliament or 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 (Agarwal v. Hindustan Steel – AIR 1970 Supreme Court 1150) that the manpower of such statutory authorities or bodies do not become officers sub-ordinate to the President under article 53(1) of the Constitution and similarly to the Governor under article 154(1). Such a statutory body, corporation or an authority as a juridical entity is separate from the
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outside the precincts of a port or an airport; (c) services of transport of goods and/or passengers. Question 8 : What are the transport services provided by the Government or local authorities exempt from tax? Answer : Transport services provided by the Government to passengers by – (i) railways in a class other than – (a) first class; or (b) an air-conditioned coach; (ii) metro, monorail or tramway; (iii) inland waterways; (iv) public transport, other than predominantly for tourism purpose, in a vessel between places located in India; and (v) metered cabs or auto rickshaws (including E-rickshaws) are exempt from tax. Question 9 : Are various corporations formed under the Central Acts or State Acts or various government companies registered under the Companies Act, 1956/2013 or autonomous institutions set up by special Acts covered under the definition of Government ? Answer : No. The corporations formed under the Central or a State Act or various companies regist
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entities or sports events held by private entities be taxable? Answer : Yes. Services provided by Police or security agencies of Government to PSU/private business entities are not exempt from GST. Such services are taxable supplies and the recipients are required to pay the tax under reverse charge mechanism on the amount of consideration paid to Government for such supply of services. Illustration : The Karnataka Cricket Association, Bangalore requests the Commissioner of Police, Bangalore to provide security in and around the Cricket Stadium for the purpose of conducting the cricket match. The Commissioner of Police arranges the required security for a consideration. In this case, services of providing security by the police personnel are not exempt. As the services are provided by Government, Karnataka Cricket Association is liable to pay the tax on the amount of consideration paid under reverse charge mechanism. Question 12 : The Department of Posts provides a numbe
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p;The Department of Posts also provides services like distribution of mutual funds, bonds, passport applications, collection of telephone and electricity bills on commission basis. These services are in the nature of intermediary and generally called agency services. In these cases, the Department of Posts is liable to pay tax without application of reverse charge. Question 14 : Would services received by Government, a local authority, a governmental authority from a provider of service located outside India be taxable? Answer : No tax is payable on the services received by the Government/local authority/governmental authority from a provider of service located outside India. However, the exemption is applicable to only those services which are received for the purpose other than commerce, industry or any other business or profession. In other words, if the Government receives such services for the purpose of business or commerce, then tax would apply on the same. Question 15
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) Fire services. (h) Urban forestry, protection of the environment and promotion of ecological aspects. (i) Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded. (j) Slum improvement and upgradation. (k) Urban poverty alleviation. (l) Provision of urban amenities and facilities such as parks, gardens, playgrounds. (m) Promotion of cultural, educational and aesthetic aspects. (n) Burials and burial grounds; cremations, cremation grounds; and electric crematoriums. (o) Cattle pounds; prevention of cruelty to animals. (p) Vital statistics including registration of births and deaths. (q) Public amenities including street lighting, parking lots, bus stops and public conveniences. (r) Regulation of slaughter houses and tanneries. Question 17 : What are the functions entrusted to a Panchayat under Article 243G of the Constitution? Answer : The functions entrusted to a Panchayat under the Eleventh Schedule to Article 243G of the Co
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xxiii) Health and sanitation, including hospitals, primary health centres and dispensaries. (xxiv) Family welfare. (xxv) Women and child development. (xxvi) Social welfare, including welfare of the handicapped and mentally retarded. (xxvii) Welfare of the weaker sections, and in particular, of the Scheduled Castes and the Scheduled Tribes. (xxviii) Public distribution system. (xxix) Maintenance of community assets. Question 18 : What is the significance of services provided by Government or a local authority by way of tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable to the Government or the local authority? Answer : Non-performance of a contract or breach of contract is one of the conditions normally stipulated in the Government contracts for supply of goods or services. The agreement entered into between the parties stipulates that both the service provider and service recipient abide by the terms and cond
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h the parties that M/s. ABC shall complete the construction work and handover the project on or before 31-12-2017. It was further agreed that any breach of the terms of contract by either party would give right to the other party to claim for damages or penalty. Assuming that M/s. ABC does not complete the construction and handover the project by the specified date i.e., on or before 31-12-2017. As per the contract, the department asks for damages/penalty from M/s. ABC and threatened to go to the court if not paid. Assuming that M/s. ABC has paid an amount of ₹ 10,00,000/- to the department for non performance of contract. Such amount paid to department is exempted from payment of tax. Question 19 : Whether services in the nature of change of land use, commercial building approval, utility services provided by a governmental authority are taxable? Answer : Regulation of land-use, construction of buildings and other services listed in the Twelfth Schedule to the Constitu
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ashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand have been given the status of special category States for the purpose of GST Acts. Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017 (Sl. No. 7 of the Table) provides for exemption from payment of tax in respect of services provided to a business entity located in a special category State with a turnover up to ₹ 10 lakh rupees. However, this exemption is not be applicable to (a) services – (i) by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government; (ii) in relation to an aircraft or a vessel, inside or outside the precincts of an airport or a port; (iii) of transport of goods or passengers and (iv) services by way of renting of immovable property. Question 22 : A small business entity is carrying on a business relating to consulting engineer services in Delhi. Does it need to
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goods or services or both under sub-section (3) or sub-section (4) of section 9 of the CGST Act, 2017, or under sub-section (3) or sub-section (4) of section 5 of the IGST Act, 2017. Question 24 : Whether reverse charge is applicable to services provided by Government or local authorities? Answer : Yes, reverse charge is applicable in respect of services provided by Government or local authorities to any person whose turnover exceeds ₹ 20 lakhs (Rs. 10 lakhs for Special Category States) excluding the following services : (i) renting of immovable property; (ii) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government; (iii) services in relation to an aircraft or a vessel, inside or outside the precincts of an airport or a port; (iv) transport of goods or passengers. Thus, the recipient of supply of goods or services is liable to pay the entire amount of tax involved in s
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. The exemption is provided to services involves only supply of services and not for works contract services. Question 26 : Would services in relation to supply of motor vehicles to Government be taxable? Answer : Supply of a motor vehicle meant to carry more than twelve passengers by way of giving on hire to a state transport undertaking is exempted from tax. The exemption is applicable to services provided to state transport undertaking and not to other departments of Government or local authority. Generally, such State transport undertakings/corporations are established by law with a view to providing public transport facility to the commuters. In some cases, transport undertakings hire the buses on lease basis from private persons on payment of consideration. The services by way of supply of motor vehicles to such state transport undertaking are exempt from payment of tax. However, supplies of motor vehicles to Government Departments other than the state transport underta
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fifty thousand rupees (excluding tax payable under the GST Acts). The deductor shall remit the deducted amount to the Government and is also required to furnish a certificate to the deductee by mentioning the details of the amount deducted and payment of such deducted amount. Illustration : ABC Ltd. supplies the service valued at ₹ 3,00,000/- excluding tax to Government department. The department while making the payment of ₹ 3,00,000/- should deduct ₹ 3000/- on account of CGST and ₹ 3000/- on account of SGST and make a net payment of ₹ 2,94,000/- to ABC Ltd. Thereafter, the department shall pay the amount of ₹ 3,000/- to the Central Government and ₹ 3,000/- to the State Government and furnish a certificate to the deductee, containing the details of such deduction including the details of such deductee. Question 29 : Whether the deductee can claim the input tax credit on the deduction of tax at source amount? Answer : No. The ta
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