Economy

Telangana AAR: GST must be paid on service charges received on behalf of the government

The Telangana Authority of Advance Rulings (AAR) has issued a new ruling earlier this month. It states that any agency working for a government is liable to pay GST on e-procurement transactions services. 

It is applicable whether as a service provided to the government or for charges collected on behalf of the government from any business entity. Hence, none of the services is exempt under the GST law. The agencies can be functioning either as a private or public sector. 

The Telangana AAR passed this ruling in the case of M/s Telangana State Technology Services Ltd (TSTSL). It is a Public Sector Undertaking (PSU) providing Information Technology (IT) and similar services to various Telangana government departments. The case pertains to the e-procurement process where TSTSL acted as a fund manager. It received total amounts as charges towards e-procurement transactions in a particular bank account.

Every month, TSTSL was depositing GST at 18% on the entire amount. Furthermore, out of the same amount, it paid 18% GST on its portion of service charges every month. The agency paid the balance amount to the government departments.

TSTSL claimed to act as a pure agent for the state government that floated online tenders with its help. Its transaction fee is included in the tender fee, which is collected for the e-procurement of goods or services for the government departments. 

TSTSL reasoned that it is not subject to GST. The PSU stated that this service falls under Entry 6 of the CGST notification number 12/2017 dated 28th June 2017. The notification provides a GST exemption on such services by the central or state governments subject to some exceptions.

The AAR countered that the entry provides an exemption from GST for services provided by the state or central governments and not for services provided to a government. Additionally, the AAR clarified that services provided by agencies on behalf of governments to any business entities are also not exempted from GST.

The ruling is straightforward, throwing light on the provisions of GST exemptions granted for government supplies. Since the agency was providing services to the government and not receiving any service in turn, it was not eligible for exemption.

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

Share

Recent Posts

Mutual Funds: SIP Inflows Breach Rs 19,000-Crore Mark for the First Time in February ’24

The systematic investment plan (SIP) contribution in February 2024 has crossed a new milestone. The monthly contribution tipped at Rs…

10 months ago

Income-Tax Return: A Brief Note on Annual Information Statement (AIS)

The Income-Tax (I-T) Department has directed taxpayers to access the Annual Information Statement (AIS) via the e-filing official portal and…

10 months ago

Mutual Funds: All About SIP and Market Fluctuations

Considering the vagaries of the stock market, investors often ponder over reevaluating their strategies. Whether to continue to remain invested…

10 months ago

Income-Tax Saving Through Strategic Life Insurance Planning

Financial planning is beyond just investing wisely to save on taxes; it's also related to protecting oneself and one's loved…

10 months ago

Income-Tax Return: Here’s a Note on Tax-Saving Avenues

A salaried individual earning up to Rs 5-15 lakh as net salary on an annual basis must first take stock…

10 months ago

A Quick Take on Equity-Linked Savings Scheme

Equity-linked savings schemes (ELSS), also referred to as tax-saving schemes, are equity funds that invest a significant portion of their…

10 months ago