GST liability on e-procurement services provided to Government
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Name of the Applicant: |
Telangana State Technology Services Limited |
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Case Details: |
Advance Ruling No. TSAAR Order No. 12/2021 |
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Ruling pronounced by: |
GST AAR Telangana |
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Date of Ruling: |
04-10-2021 |
Brief Facts:
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The applicant is a Public Sector Undertaking and acting as a service agency to the Telangana Government and its departments relating to Information Technology and its related services. One of such services provided by the applicant is of acting as a fund manager on behalf of the IT E&C Department, Telangana State in executing the e-procurement process as per Government orders. |
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IT E&C Department is floating tenders through the applicant and the applicant is collecting the transaction fees as an agent and retaining the margin amount of 5% as service charges so that 95% of the amount so collected is passed onto the principal i.e. IT E&C and concerned department. |
Questions raised before Authority:
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Whether the e-procurement transaction fee collected on behalf of the IT E&C Department towards online tenders results in the supply of goods or services or both, within the meaning of supply as defined? |
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Whether the tax liability arises on the e-procurement transaction fee collected on behalf of the State Government Department i.e. IT E&C department? |
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Whether these services made by the State Government Department fall under Entry No. 6 of exemption of Notification No. 12/2017- Central Tax (Rate) Dated 28th June 2017? |
Observations of Authority:
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It is the opinion of the applicant that such services provided by him fall under Entry 6 of Notification No. 12/2017- Central Tax (Rate) dated 28th June 2017 and therefore are exempt from any tax under GST. The said entry reads as follows: - “Services by the Central Government, State Government, Union Territory or local authority excluding the following services:
(a) 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 the Central Government, State Government, Union Territory; (b) Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (c) Transport of goods or passengers; or (d) Any service, other than services covered under entries (a) to (c) above, provided to business entities.” |
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A careful reading of the said Entry in the Notification reveals that this entry pertains to services provided by the Government and not services provided to the Government. The applicant is providing services to the Government. Therefore, the services provided by the applicant to the Government are not exempt under this Notification. Further, the services provided by the applicant on behalf of the Government to business entities are covered by the exception to the above entry, therefore such services also are not exempt. |
Ruling by Authority:
On the basis of the above observations, the Authority ruled that the e-procurement services provided by the applicant to IT E&C Department, Telangana Government falls within the meaning of supply as defined in the CGST Act, 2017. GST is liable for such services provided by the applicant and is not covered by Entry No. 6 of exemption Notification No. 12/2017- Central Tax (Rate) dated 28th June 2017.
Disclaimer: The above article is based upon the ruling of Hon’ble Telangana Advance Ruling Authority and is meant for informative purposes only. Readers are advised to act diligently and under consultation with a professional before applying the information contained in this article.
