Rajasthan AAAR: 12% GST Rate Applies to Services Provided to Govt Authority Until 31st Dec 2021

The Rajasthan Appellate Authority for Advance Ruling (AAAR) has determined that a 12% Goods and Service Tax (GST) applies to services rendered until 31.12.2021 for the Government Authority.

The specific matter in question was the GST rate applicable to the work carried out by the applicant (now appellant) for M/s Jaipur Smart City Limited under Bid Reference No. JSCL/ Works/02/2020-21.

The GST rate for the work performed by the appellant for M/s JSCL under Bid Reference No. JSCL/Works/02/2020-21 is 18%, divided as 9% CGST and 9% SGST. Initially, certain activities by governmental bodies were exempted from being categorized as goods or services as per the Central Tax (Rate) issued on 28.06.2017. Services tied to Panchayat functions under Article 243G of the Constitution were specifically exempt.

Later, an amendment on 26.07.2018 via Notification No. 1612018 – Central Tax (Rate) expanded this exemption to include Union Territories and Municipalities under Articles 243W and 243W of the Constitution, respectively.

The appellant argued that as per Notification No. 12/2017 Central Tax (Rate) dated 28th June 2017, amended by Notification No. 0212018 – Central Tax (Rate) dated 25th January 2018, services provided to governmental entities outlined in Article 243G or 243W of the Constitution are exempt from tax.

Therefore, the reimbursement from M/s JSCL to the appellant for NOC fees linked to functions mentioned in Article 243W is subject to nil tax rates, aligning with the provisions in the notifications.

However, the Government of India, Ministry of Finance, by Notification No. 16/2021- Central Tax (Rate) dated 18.11.2021, has amended Entry No. 3 from 01.01.2022, excluding the phrase “a Governmental Authority or a Government Entity.” Hence, the dispute pertains to the applicable GST rate until 31.12.2021, as from 01.01.2022, the rate has been clarified.

Justice Dinesh Kumar Singh stressed that the assessment order had clearly laid out the series of events, including the petitioner’s failure to comply after being informed in DRC-01. The court had faith in the authority’s accurate documentation of facts and saw no grounds to believe the petitioner’s claim of improper notice service.

In wrapping up the case, Justice Dinesh Kumar Singh dismissed the writ petition but allowed the petitioner the option to appeal the Deputy Commissioner of State Tax’s order. Additionally, the court acknowledged the extension of the appeal deadline until January 31, 2024, following Circular No.53/2023.