Whether Man Power Services supplied to Zila Panchayat and Taluka Panchayat qualify for Pure services exemption from GST?

Various queries and doubts have been observed in the area of pure services provided to the Central Government, State Government and Local Authority and the applicability of exemption notification in thereto.

“Pure Services (excluding works contract service or other composite supplies involving any goods) provided to the Central Government, State Government or Union territory or local authority or a  Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under  Article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.”

From the above said entry no.3 of the notification no. 12/2017- Central tax (Rate) dated 26.06.2017  it is observed that, in order to claim exemption on supply of man power services two conditions should be satisfied: 

1. Pure Services (excluding works contract service or other composite supplies involving any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority. 

2. by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.”

As per section 2(69) of CGST Act 2017 “Local Authority” means: 

(a) Panchayat as defined in clause (d) of article 243 of the Constitution;

(b) a Municipality as defined in clause (e) of article 243P of the Constitution;

(c) 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.

(d) a Cantonment board as defined in section 3 of the Cantonment Act,2006

(e) a Regional council or a District council constituted under Sixth Schedule to the constitution.

(f) a Development board constituted under Article 371 of the Constitution or

(g) a Regional council constituted under Article 371A of the Constitution.

243G- Powers, authority and responsibilities of Panchayats subject to the provisions of this Constitution the Legislature of a State may, by law, endow the Panchayats with such powers and authority and may be necessary to enable them to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon panchayats at the appropriate level subject to such conditions as may be specified therein with respect to : 

(a) The preparation of plans for economic development and social justice;

(b) The implementation of schemes for economic development and social justice as may be entrusted to them including those in relation to the matters listed in the Eleventh Schedule. 

Matters listed in Eleventh schedule are:

1. Agriculture including agricultural extension. 

2. Land improvement, implementation of land reforms, land consolidation and soil conservation.

3. Minor irrigation, water management and watershed development.

4. Animal husbandry, dairying and poultry.

5. Fisheries.

6. Social forestry and farm forestry.

7. Minor forest produce.

8. Small scale industries including food processing industries.

9. Khadi village and cottage industries.

10. Rural housing.

11. Drinking water.

12, Fuel and fodder.

13. Roads, culverts, bridges, ferries, waterways and other means of communication.

14. Rural electrification, including distribution of electricity.

15. Non-conventional energy sources.

16. Poverty alleviation programme.

17. Education including primary and secondary schools.

18. Technical training and vocational education.

19. Adult and non-formal education.

20. Libraries.

21. Cultural activities.

22. Markets and fairs.

23. Health and sanitation, including hospitals, primary health centres and dispensaries.

24. Family welfare.

25. Women and child development.

26. Social welfare including welfare of the handicapped and mentally retarded.

27. Welfare of the weaker sections and in particular of the Scheduled Castes and the Scheduled Tribes.

28. Public distribution system.

243W.  Powers, authority and responsibilities of Municipalities etc ; subject to the provisions of this Constitution, the Legislature of a State may, by law, endow 

(a) the Municipalities with such powers and authority as may be necessary to enable them to function as institutions of self-government and such law, may contain provisions for the devolution of powers and responsibilities upon Municipalities, subject to such conditions as may be specified therein,

with respect to

(i) the preparation of plans for economic development and social justice;

(i) the performance of functions and the implementation of schemes as may be entrusted to them including those in relation to the matters listed in the Twelfth Schedule;

There are 18 items in the twelfth schedule of the Constitution which are as below:

. Urban planning including town planning.

. Regulation of land-use and construction of buildings.

. Planning for economic and social development.

. Roads and bridges.

. Water supply for domestic, industrial and commercial purposes.

. Public health, sanitation conservancy and solid waste management.

. Fire services.

. Urban forestry, protection of the environment and promotion of ecological aspects.

9. Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded.

10. Slum improvement and upgradation.

11. Urban poverty alleviation.

12. Provision of urban amenities and facilities such as parks, gardens, playgrounds.

13. Promotion of cultural, educational and aesthetic aspects.

14. Burials and burial grounds; cremations, cremation grounds and electric crematoriums.

15. Cattle pounds; prevention of cruelty to animals.

16. Vital statistics including registration of births and deaths.

17. Public amenities including street lighting, parking lots, bus stops and public conveniences.

18. Regulation of slaughter houses and tanneries.

Conclusion

Supply of manpower services like cleaning staff, cook, assistant cook, staff nurse, teachers and watchman to hostels and residential schools/ colleges run by Social welfare department is exempted since the manpower services provided are by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution.

Supply of Manpower services like Data Entry Operator, Drivers, “D” Group staff, FDA, SDA, Typists to Zila Panchayat/ Taluk Panchayat/ Social welfare department/ Backward Classes Welfare Department are not by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution and hence attracts GST at the rate of 18%.

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