GST PROVISIONS FOR GOVERNMENT DEPARTMENTS

GST PROVISIONS FOR GOVERNMENT DEPARTMENTS/AUTHORITY

Supply of Services By / To Government or Local Authorities Under GST
Whether activities performed by Government is business or not?

Section 2(17) of the CGST Act, 2017 defines ‘business’ to includes

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar
activity, whether or not it is for a pecuniary benefit;

(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);

(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume,
frequency, continuity or regularity of such transaction;

(d) supply or acquisition of goods including capital goods and services in connection with
commencement or closure of business;

(e) provision by a club, association, society, or any such body (for a subscription or any other
consideration) of the facilities or benefits to its members;

(f) admission, for a consideration, of persons to any premises;

(g) services supplied by a person as the holder of an office which has been accepted by him in the
course or furtherance of his trade, profession or vocation;

(h) services provided by a race club by way of totalisator or a licence to book maker in such club; and

(i) any activity or transaction undertaken by the Central Government, a State Government or any
local authority in which they are engaged as public authorities;

It is clearly evident from clause (i) of the Section 2(17) that for the purposes of GST any activity or
transaction undertaken by the Central or State Government or any local authority, in which they are
engaged as public authorities, shall be deemed to be business.

Services Supplied by Government / Local Authorities can be Classified in to three Categories for
understanding GST applicability :

> Services Provided by Govt. Attracting RCM
> Services Provided by Govt. Exempted from GST
> Services Provided by Govt. Attracting GST (Forward Charge)
Services Provided by Govt. Attracting RCM:

Following Notifications provide Services falls under Reverse Charge Mechanism (RCM)
Notification No. 13/2017-Central Tax (Rate) dt. 28.06.2017 And Notification No. 10/2017-Integrated
Tax (Rate) dt. 28.06.2017 Entry Nos: 5 & 5A Notification No. 13/2017-Central Tax (Rate) dt.
28.06.2017 are related to Government / Local Authority Services which falls under RCM, that means
when the Government / Local Authority Services any of such services to Registered Business Entity,
the Recipient has to Pay GST

Whether a Government Department, required to deduct tax at source, is liable to take registration
as a normal taxpayer?
Answer: The Government Departmentis required to take registration as a normal taxpayer only if it
makes a taxable supply of goods and/or services and in such cases, theregistration shall be obtained
on the basis of PAN but Bank account is not mandatory. However, if it is not making any taxable
supply of goods and/or services, it is required to register only as a deductorof tax at source on the
basis of TAN/PAN.

Would services provided by one department of the Government to another Department of the
Government be taxable?
Answer: Services provided by one department of the Central Government/StateGovernment to
another department of the Central Government/ State Government are exempt under notification
No. 12/2017-Central Tax (Rate), dated28.06.2017 [S No 8 of the Table]. However, this exemption is
not applicable to: (a) services provided 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, the State Government and Union Territory; (b) services in relation to a vessel or an
aircraft inside or outside the precincts of a port or an airport; (c) services of transport of goods
and/or passengers.

Would services received by Government, a local authority, a governmental authority from a provider
of service located outside India be taxable?
Answer: No tax is payable on the services received by the Government / local authority/
governmental authority from a provider of service located outside India. However, the exemption is
applicable to only those services which are received for the purpose other than commerce, industry
or any other business or profession. In other words, if the Government receives such services for the
purpose of business or commerce, then tax would apply on the same.