No GST on Supply of Service by Government controlled Association to Government Authorities

The Karnataka Authority of Advance Ruling (AAR) ruled that the Government controlled associations do not have to pay Goods and Services Tax (GST) on supply of service to the state government and local authorities when consideration is received as grants.

The applicant M/s Bellary Nirmiti Kendra, who provides civil works contract services, stated that they supply service to the state government, Local Authority or any person specified by the state government, local authority, against consideration received in the form of grants. Also, the applicant mentioned that the transaction mentioned above is not liable for GST based on Notification No.32/2017- CGST (Rate) dated 13th October 2017.

The applicant stated that they had been established under the national network programme of building centres scheme. The scheme was launched by the Government of India under HUDCO and promoted by the Government of Karnataka. The government authorities will pay consideration in the form of state government grants with the assistance of the Housing Department.

The District Administration of Bellary has established the organisation under the Chairmanship of Deputy Commissioner/District Collector, Bellary. This entity takes up all the Government related Housing and other development works in the district by providing various alternative building technologies and innovative building products to minimise the cost of construction and speedy construction.

The applicant M/s Bellary Nirmiti Kendra has sought the advance ruling on whether the services provided by the government-controlled Association to the state government or local authority against consideration in the form of grants are liable to GST or not.

The AAR, including Mr M.P. Ravi Prasad and Mr Mashhood ur Rehman, ruled that the transaction mentioned above is not liable to GST. The AAR also said that this ruling is valid only when the government-controlled association is covered under the definition of “Government Entity”; if not, then the transaction is liable to GST.

For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@cleartax.in

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