FAQ FOR GOVERNMENT DEPARTMENTS, LOCAL AUTHORITIES AND OTHER LINE DEPARTMENT
GST
Dated:- 22-8-2017
FAQ FOR GOVERNMENT DEPARTMENTS, LOCAL AUTHORITIES AND OTHER LINE DEPARTMENT
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Document 1
FAQ FOR GOVERNMENT DEPARTMENTS, LOCAL
AUTHORITIES AND OTHER LINE DEPARTMENTS
1. ARE ALL SERVICES PROVIDED BY THE GOVERNMENT OR LOCAL AUTHORITY EXEMPTED
FROM PAYMENT OF TAX ?
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.
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ent of Posts by way of speed post, express parcel post, life insurance, and agency
services provided to a person other than Government; and (iii) services in relation to an 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.
3. WHAT IS THE MEANING OF ‘GOVERNMENT' ?
As per section 2(53) of the GST Act, '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
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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 subordinate to
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tate
shall be expressed to be taken in the name of Governor. Therefore, State Government means
the Governor or the officers subordinate to him who exercise the executive powers of the State
vested in the Governor and in the name of the Governor.
4. WHO IS A LOCAL AUTHORITY?
Local authority is defined in clause (69) of section 2 of the CGST Act and means the
following:-
a “Panchayat” as defined in clause (d) of article 243 of the Constitution;
a “Municipality” as defined in clause (e) of article 243P of the Constitution;
a Municipal Committee, a Zilla Parishad, 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;
a Cantonment Board as defined in section 3 of the Cantonments Act, 2006;
a Regional Council or a District Council constituted under the Sixth Schedule to the
Constitution;
a Development Board constituted under article 371 of the Co
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abad
Development Authority, Bangalore Development Authority, Chennai Metropolitan
Development Authority, Bihar Industrial Area Development Authority, etc. Such developmental
authorities formed under the Town and Planning Act are not qualified as local authorities for
the purposes of the GST Act.
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 ACT?
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 Vs. Hindustan Steel AIR 1970 Supreme Court 1150) that the
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are exempt under notification No.
12/2017-Central Tax (Rate), dated 28.06.2017 [S No 8 of the Table].
However, this exemption is not applicable to
a) services provided by the Department of Posts by way of speed post, express parcel post,
life insurance, and agency services provided to a person other than the Central
Government, the State Government and Union Territory;
b) services in relation to a vessel or an aircraft inside or outside the precincts of a port or
an airport;
c) services of transport of goods and/or passengers;
8. WHAT ARE THE TRANSPORT SERVICES PROVIDED BY THE GOVERNMENT OR LOCAL
AUTHORITIES EXEMPT FROM TAX?
Transport services provided by the Government to passengers by
–
railways in a class other than — (a) first class; or (b) an air-conditioned coach;
metro, monorail or tramway;
inland waterways;
public transport, other than predominantly for tourism purpose, in a vessel between
places located in India; and
metered cabs or auto rickshaws (inc
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o not fall under the definition of Government.
Examples of regulatory bodies are – Competition Commission of India, Press Council of India,
Directorate General of Civil Aviation, Forward Market Commission, Inland Water Supply
Authority of India, Central Pollution Control Board, Securities and Exchange Board of India.
11. WILL THE SERVICES PROVIDED BY POLICE, FIRE AND RESCUE SERVICES OR SECURITY
AGENCIES OF GOVERNMENT TO PSUS OR CORPORATE ENTITIES OR SPORTS EVENTS
HELD BY PRIVATE ENTITIES BE TAXABLE?
Yes. Services provided by Police, Fire and Rescue Services 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 Kerala Cricket Association, Kochi requests the Commissioner of Police, Kochi to
provide security in and around the Cricke
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red post provided exclusively by the Department of Posts to meet the universal
postal obligations.
Transfer of money through money orders, operation of savings accounts, issue of postal
orders, pension payments and other such services.
Agency services provided to the Government or Union territory
WHAT IS THE SCOPE OF AGENCY SERVICES PROVIDED BY THE DEPARTMENT OF
POSTS MENTIONED IN THE NOTIFICATION BY SRO NO.371/2017 DTD.30TH JUNE, 2017
(KERALA) AND NO. 12/2017-CENTRAL TAX(RATE), DATED 28.06.2017?
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.
A
14. WOULD SERVICES RECEIVED BY GOVERNMENT, A LOCAL AUTHORITY,
GOVERNMENTAL AUTHORITY FROM A PROVIDER OF SERVICE LOCA
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THE CONSTITUTION?
KERALA STATE GOODS AND SERVICE TAX DEPARTMENT
KERALA GST
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The functions entrusted to a municipality under the Twelfth Schedule to Article 243W of
the Constitution are as under:
(i) Urban planning including town planning.
(ii) Regulation of land-use and construction of buildings.
(iii) Planning for economic and social development.
(iv) Roads and bridges.
(v)Water supply for domestic, industrial and commercial purposes.
(vi) Public health, sanitation conservancy and solid waste management.
(vii) Fire services.
(viii) Urban forestry, protection of the environment and promotion of ecological
aspects.
(ix) Safeguarding the interests of weaker sections of society, including the handicapped and
mentally retarded.
(x) Slum improvement and upgradation.
(xi) Urban poverty alleviation.
(xii). Provision of urban amenities and facilities such as parks, gardens, playgrounds.
(xiii). Promotion of cultural, educational and aesthetic aspects.
(xiv). Burials and
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scale industries, including food processing industries. (ix). Khadi, village and cottage
industries. (x). Rural housing. (xi). Drinking water. (xii). Fuel and fodder. (xiii). Roads,
culverts, bridges, ferries, waterways and other means of communication. (xiv). Rural
electrification, including distribution of electricity. (xv). Non-conventional energy sources.
(xvi). Poverty alleviation programme. (xvii). Education, including primary and secondary
schools. (xviii). Technical training and vocational education. (xix). Adult and non-formal
education. (xx). Libraries. (xxi). Cultural activities. (xxii). Markets and fairs. (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). Publi
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ceived the consideration in the form of fines or penalty
and is, accordingly, required to pay tax on such amount.
However, non performance of contract by the supplier of service in case of supplies to
Government is covered under the exemption from payment of tax. Thus any consideration
KERALA STATE GOODS AND SERVICE TAX DEPARTMENT
KERALA GST
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received by the Government from any person or supplier for non performance of contract is
exempted from tax.
Illustration: Public Works Department of Kerala entered into an agreement with M/s. XYZ, a
construction company for construction of office complex for certain amount of consideration.
In the agreement dated 10.7.2017, it was agreed by both the parties that M/s. XYZ 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. XYZ does no
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his gets covered under the exemption 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.
22. A SMALL BUSINESS ENTITY IS CARRYING ON A BUSINESS RELATING TO CONSULTING
ENGINEER SERVICES IN DELHI. DOES IT NEED TO PAY TAX ON THE SERVICES RECEIVED
FROM GOVERNMENT OR A LOCAL AUTHORITY?
If turnover of the entity is less than the limit of Rs. 20 lakhs in a financial year, no tax would be
payble.
KERALA STATE GOODS AND SERVICE TAX DEPARTMENT
KERALA GST
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If the turnover of a business entity is above Rs.20 lakhs, the business entity is liable to pay tax
on the servies received from Govt. on reverse charge basis.
However, with regard to the following services,
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;
services in relation to an aircraft or a ve
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able 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,
(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.
KERALA STATE GOODS AND SERVICE TAX DEPARTMENT
KERALA GST
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Thus, the recipient of supply of goods or services is liable to pay the entire amount of tax
involved in such supply of services or goods or both.
28.06.2017
AND
25.WHAT IS THE SCOPE OF 'PURE SERVICES' MENTIONED IN THE EXEMPTION
NOTIFICATION NO. 12/2017-CENTRAL TAX (RATE), DATED
S.R.O.NO.371/2017 DATED 30.06.2017?
In the context of the language used in the notification, supply of services without involving
any supply of goods would be treated as supply of 'pure services'. For example, supply of man
power for cleanliness of roads, public places, architect services, consulting engineer s
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nment 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 undertakings are taxable.
27. CAN THE SUPPLIER OF SERVICES CLAIM THE TAX PAID UNDER REVERSE CHARGE
MECHANISM AS INPUT TAX CREDIT?
Yes. The supplier of services may claim the input tax credit on the amount of tax paid under
reverse charge mechanism subject to the provisions of Input Tax Credit Rules.
28. WHAT IS THE CONCEPT CALLED ‘TAX DEDUCTION AT SOURCE'?
KERALA STATE GOODS AND SERVICE TAX DEPARTMENT
KERALA GST
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As per section 51 of the CGST Act, the Government may
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account of SGST and make a net payment of Rs.
2,94,000/- to ABC. Thereafter, the department shall pay the amount of Rs. 3,000/- to the
Central Government and Rs. 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.
29. WHETHER THE DEDUCTEE CAN CLAIM THE INPUT TAX CREDIT ON THE DEDUCTION OF
TAX AT SOURCE AMOUNT?
No. The tax deducted at source is not input tax credit. However, the amount deducted shall be
credited to the electronic cash ledger (upon being accepted by the deductee in his Form GSTR-
2A) of the deductee and can be utilized for payment of output tax.
30. WHETHER AN AMOUNT IN THE FORM OF ROYALTY OR ANY OTHER FORM
PAID/PAYABLE TO THE GOVERNMENT FOR ASSIGNING THE RIGHTS TO USE OF
NATURAL RESOURCES IS TAXABLE?
The Government provides license to various companies including Public Sector Undertakings for
exploration of natural resources like oil, hydrocarbons, iron o
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x at source on the basis of
TAN/PAN.
32. WHETHER A GOVERNMENT DEPARTMENT MAKING ONLY NON TAXABLE OR EXEMPTED
SUPPLIES NEED TO TAKE REGULAR REGISTRATION?
No. but if it has liability to deduct TDS it will have to take TDS registration.
33. WHETHER THE GOVERNMENT DEPARTMENT WILL HAVE TO TAKE REGULAR
REGISTRATION FOR ALL ITS UNITS OR DISTRICT WISE OR OFFICE WISE?
Institutional PAN can be obtained from IT department by any office. Hence, any office can get
registered under GST Act. But registration brings in responsibilities like timely return filing,, . It
is ideal that, an office of a department which is making regular taxable supplies should take
registration and those offices which have only occasional transactions can file their details
through higher offices having regular taxable supplies. However, the matter is to be decided
internally in the department.
34. WHETHER SEPARATE REGISTRATION IS REQUIRED FOR REGULAR TAXABLE SUPPLIES
AND FOR TDS+
Yes, if the Department make
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ide the state. IGST
would be the combined rate of CGST and SGST. This should be shown separately in the tax
invoice.
Eg: If for an intra state sale of timber tax to be collected is 9% CGST and 9% SGST. If the timber
is sold interstate, IGST would be 18%.
38. What would be the rate applicable for CGST and SGST?
The notifications of tax rates under CGST AND SGST are given below
Description
Notification
11/2017-Central Tax (Rate),dt. 28-06-2017
rates for supply of services under CGST Act
exemptions on supply of services under CGST Act
12/2017-Central Tax (Rate), dt. 28-06-2017
CGST Rate Schedule for goods notified under
section 9 (1)
01/2017-Central Tax (Rate), dt. 28-06-2017
CGST exempt goods notified under section 11 (1)
KGST rates for services
02/2017-Central Tax (Rate), dt. 28-06-2017
S.R.O 370/2017
exemptions on supply of services under KGST Act
KGST Rate Schedule for goods notified under
section 9 (1)
S.R.O 371/2017
S.R.O 360/2017
KGST exempt goods notified
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cannot be incorporated in TR-5, invoice will have to be issued in GST.
42. WHAT WOULD THE CONSEQUENCES, IF THE DEPARTMENT DOES NOT FILE RETURNS ?
There will be automated interest and late fee. Penalty can also be levied.
The registered person who have bought goods from Government will not be able to claim input
tax credit in his returns.
43.WHO IS LIABLE TO DEDUCT TDS?
A department or establishment of the Central or State Government, or a Local authority, or
Governmental agencies, or Persons or category of persons as may be notified, by the Central or
a State Government on the recommendations of the Council,
44. WHICH ARE THE TRANSACTIONS LIABLE FOR TDS ?
All transactions where the total value of a taxable supply received under a contract exceeds two
lakh and Fifty thousand rupees (excluding GST). For the purpose of deciding TDS liability, the
whole contract amount is to be reckoned, irrespective of individual periodic payments and TDS
is to be deducted for such individua
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n Form GSTR 7A) furnishing details
of the decution made. It is to be issued to the deductee within 5 days of crediting the amount
to the Govt. failing which fees of Rs. 100 per day subject to maximum of Rs. 5000/- will be
payable by such deductor.
50. WHAT HAPPENS IF THE DEDUCTOR DEFAULTS IN PAYMENT OF THE AMOUNT?
He will be liable to pay interest, in addition to the tax.
51. WHAT IS THE GST RATE OF PRINTED TENDER FORMS SOLD BY THE DEPARTMENT?
12%. It should be collected by the Department and paid along with the returns.
52. WHAT IS THE GST RATE OF TENDER SUBMISSION FEES COLLECTED BY THE
DEPARTMENT WHILE SUBMISSION OF E-TENDER?
It is a service provided by the Department and the tax rate is 18%. But the department need
not collect the tax. It will be paid by the contractor on reverse charge basis while filing his
returns.
53. WHETHER TDS IS TO BE MADE OR EFFECTED FOR THE TAXABLE SUPPLY RECEIVED
FROM 01-07-2017?
KERALA STATE GOODS AND SERVICE TAX DEPARTMENT
KERALA GST
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