FAQ on GOVERNMENT SERVICES under GST
GST
Dated:- 10-10-2017
FAQ on GOVERNMENT SERVICES under GST
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Document 1
FAQ on GOVERNMENT SERVICES under GST
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
Territor
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y 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.
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 subordinate to him in
accordance with the Constitution. Further, in terms of Artic
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re, 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.
Directorate of Commercial Taxes, West Bengal
Note: Reference to WBGST Act, 2017 includes reference to CGST Act, 2017 also.
Disclaimer: Answer is only for educational and guidance purposes and do not hold any legal validity. For complete details
(law, rules, notifications and other information) please refer to the relevant section of this website.
FAQ on GOVERNMENT SERVICES under GST
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:
• 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
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orities to undertake
developmental works like infrastructure, housing, residential & commercial development,
construction of houses, etc. The Governments setup these authorities under the Town and
Planning Act. Examples of such developmental authorities are Delhi Development Authority,
Ahmedabad 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 Acts.
Question 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 statu
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vernment be taxable?
Answer: Services provided by one department of the Central Government/State Government
to another department of the Central Government/ State Government 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:
Directorate of Commercial Taxes, West Bengal
Note: Reference to WBGST Act, 2017 includes reference to CGST Act, 2017 also.
Disclaimer: Answer is only for educational and guidance purposes and do not hold any legal validity. For complete details
(law, rules, notifications and other information) please refer to the relevant section of this website.
FAQ on GOVERNMENT SERVICES under GST
(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 i
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istered under the Companies Act, 1956/2013 or autonomous institutions set up by the State
Acts will not be covered under the definition of 'Government' and therefore, services provided
by them will be taxable unless exempted by a notification.
Question 10: Are various regulatory bodies formed by the Government covered under the
definition of 'Government'?
Answer: No. A regulatory body, also called regulatory agency, is a public authority or a
governmental body which exercises functions assigned to them in a regulatory or supervisory
capacity. These bodies do 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.
Question 11: Will the services provided by Police or security agencies of Government to PSUs
or corporate
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rvices. What is the status of those
services for the purpose of levy of tax?
Answer: The services by way of speed post, express parcel post, life insurance, and agency
services provided to a person other than the Government or Union territory are not exempt. In
Directorate of Commercial Taxes, West Bengal
Note: Reference to WBGST Act, 2017 includes reference to CGST Act, 2017 also.
Disclaimer: Answer is only for educational and guidance purposes and do not hold any legal validity. For complete details
(law, rules, notifications and other information) please refer to the relevant section of this website.
FAQ on GOVERNMENT SERVICES under GST
respect of these services the Department of Posts is liable to pay tax without application of
reverse charge.
However, the following services provided by the Department of Posts are not liable to tax.
(a) Basic mail services known as postal services such as post card, inland letter, book post,
registered post provided exclusively by the
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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: Whether the exemption is applicable to online information and database access
or retrieval services received by Government or local authorities from provider of service
located in non-taxable territory?
Answer: No. Online information and database access or retrieval services received by
Government or local authorities from non-taxable territory for any purpose including
furtherance of business or commerce are liable to tax.
Question 16: What are the functions entrusted to a municipality under Article 243W of the
Constitution
Answer: The functions entrusted to a municipality under the Twelfth Schedule
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s and do not hold any legal validity. For complete details
(law, rules, notifications and other information) please refer to the relevant section of this website.
FAQ on GOVERNMENT SERVICES under GST
(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 Constitution are as under:
(i) Agriculture, including agricultural extension. (ii) Land improvement, implementation of land
reforms, land consolidation and soil conservation. (iii) Minor irrigation, water management and
watershed d
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tarded. (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 conditions of the contract. In case any of the parties
breach the contract for any reason including non-performance of the contract, then such
person is liable to pay damages in the form of fines or penalty to the other party. Non
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e 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
Directorate of Commercial Taxes, West Bengal
Note: Reference to WBGST Act, 2017 includes reference to CGST Act, 2017 also.
Disclaimer: Answer is only for educational and guidance purposes and do not hold any legal validity. For complete details
(law, rules, notifications and other information) please refer to the relevant section of this website.
FAQ on GOVERNMENT SERVICES under GST
to go to the court if not paid. Assuming that M/s ABC has paid an amount of Rs. 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
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s specified in sub-clause (g) of clause (4) of Article 279A
of the Constitution. As per the said clause, the States of Arunachal Pradesh, Assam, Jammu
and Kashmir, 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 28.06.2017 (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 Rs. 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 rent
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Act, 2017, “reverse charge” means the liability to pay tax by
the recipient of supply of goods or services or both instead of the supplier of such 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 subsection (4) of section 5 of the IGST Act, 2017.
Directorate of Commercial Taxes, West Bengal
Note: Reference to WBGST Act, 2017 includes reference to CGST Act, 2017 also.
Disclaimer: Answer is only for educational and guidance purposes and do not hold any legal validity. For complete details
(law, rules, notifications and other information) please refer to the relevant section of this website.
FAQ on GOVERNMENT SERVICES under GST
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 Rs.20 lakhs (Rs.10
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eer services, advisory services, and like services provided by business entities not involving
any supply of goods would be treated as supply of pure services. On the other hand, let us
take the example of a governmental authority awarding the work of maintenance of street
lights in a Municipal area to an agency which involves apart from maintenance, replacement
of defunct lights and other spares. In this case, the scope of the service involves maintenance
work and supply of goods, which falls under the works contract services. 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
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the CGST Act, 2017, the Government may mandate (a) a
department or establishment of the Central Government or State Government; or (b) local
authority; or (c) Governmental agencies; or (d) such persons or category of persons as may
be notified by the Government on the recommendations of the Council, to deduct tax at the
rate of one per cent on account of CGST and one percent on account of SGST from the
Directorate of Commercial Taxes, West Bengal
Note: Reference to WBGST Act, 2017 includes reference to CGST Act, 2017 also.
Disclaimer: Answer is only for educational and guidance purposes and do not hold any legal validity. For complete details
(law, rules, notifications and other information) please refer to the relevant section of this website.
FAQ on GOVERNMENT SERVICES under GST
payment made or credited to the supplier where the total value of the supply under a contract
exceeds two lakh and fifty thousand rupees (excluding tax payable under the GST Acts). The
deductor sh
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edger (upon being accepted by the
deductee in his Form GSTR-2A) of the deductee and can be utilized for payment of output
tax.
Question 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?
Answer: The Government provides license to various companies including Public Sector
Undertakings for exploration of natural resources like oil, hydrocarbons, iron ore, manganese,
etc. For having assigned the rights to use the natural resources, the licensee companies are
required to pay consideration in the form of annual license fee, lease charges, royalty, etc to
the Government. The activity of assignment of rights to use natural resources is treated as
supply of services and the licensee is required to pay tax on the amount of consideration paid
in the form of royalty or any other form under reverse charge mechanism.
Question 31: Whether a Government Department, required to deduct
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