The Department of Posts provides a number of services. What is the status of those services for the purpose of levy of tax?

  1. 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 respect of these services the Department of Posts is liable to pay tax without application of reverse charge.
  2. 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 Department of Posts to meet the universal postal obligations.
    (b) Transfer of money through money orders, operation of savings accounts, issue of postal orders, pension payments and other such services.

Will the services provided by Police or security agencies of Government to PSUs or corporate entities or sports events held by private entities be taxable?

  1. Yes. Services provided by Police or security agencies of Government to PSU/private business entities are not exempt from GST.
  2. 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.
  3. 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.

Are various regulatory bodies formed by the Government covered under the definition of ‘Government’?

  1. 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.
  2. 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.

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’?

No. The corporations formed under the Central
or a State Act or various companies registered 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.

What are the transport services provided by the Government or local authorities exempt from tax?

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.

Would services provided by one department of the Government to another Department of the Government be taxable?

  1. 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:
(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.

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?

  1. A statutory body, corporation or an authority created
    by the Parliament or a State Legislature is neither ‘Government’
    nor a ‘local authority’.
  2. 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 manpower of such statutory authorities or bodies do not become officers subordinate to the President under article 53(1) of the Constitution and similarly to the Governor under article 154(1).
  3. Such a statutory body,corporation or an authority as a juridical entity is separate from the State and cannot be regarded as the Central or a State Government and also do not fall in the definition of ‘local authority’.
  4. Thus, regulatory bodies and other autonomous entities would not be regarded as the government or local authorities for the purposes of the GST Acts.

Are all local bodies constituted by a State or Central Law regarded as local authorities for the purposes of the GST Acts?

No.

  1. The definition of ‘local authority’ is very specific and means only those bodies which are mentioned as ‘local authorities’ in clause (69) of section 2 of the CGST Act, 2017. And it would not include other bodies which are merely described as a ‘local body’ by virtue of a local law.

For example,

State Governments have setup local developmental authorities 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.

Who is a local authority

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, Zilla Parishad, 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 Constitution; or
• a Regional Council constituted under article 371A of the Constitution;

What is the meaning of ‘Government’ ?

  1. As per section 2(53) of the CGST Act, 2017, ‘Government’ means the Central Government.
  2. As per clause (23) of section 3 of the General Clauses Act, 1897 the ‘Government’ includes both the Central Government and any State Government.
  3. As per clause (8) of section 3 of the saidAct, the ‘Central Government’, in relation to anything done or to be done after the commencement of the Constitution, means the President.
  4. 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.
  5. Further, in terms of Article 77 of the Constitution, all executive actions 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 executive
    powers of the Union vested in the President and in the name
    of the President.
  6. Similarly, as per clause (60) of section 3 of the General Clauses Act,1897, the ‘State Government’,as respects anything done after the commencement of
    the Constitution, shall be in a State the Governor, and in an Union Territory the Central Government. As 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
    accordance with the Constitution. Further, as per article 166 of the Constitution, all executive actions of the Government of State 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.