In this article let’s discuss about Supply of Services By / To Government or Local

Authorities Under GST.

Before Proceeding to understand the GST Implication on such Supplies, first let’s
discuss What is Mean by Govt. or Local Authorities?
What is the meaning of ‘Government’?
As per section 2(53) of the CGST Act, 2017, ‘Government’ means the Central
Government. In the same manner, Section 2(53) of the State GST enactment(s) define
‘Government’ to mean Government of the respective State.
As per clause (23) of section 3 of the General Clauses Act, 1897 the ‘ Government’
includes both the Central Government and any State Government.
Central Government
As per clause (8) of section 3 of the said Act, the ‘Central Government’, in relation to
anything done or to be done after the commencement of the Constitution, means the
President.
As per Article 53 of the Constitution, the executive power of the Union shall be vested in
the President and shall be exercised by him either directly or indirectly through officers
subordinate to him in accordance with the Constitution.
Further, in terms of Article 77 of the Constitution, all executive actions of the
Government of India shall be expressed to be taken in the name of the President.
Therefore, the Central Government means the President and the officers
subordinate to him while exercising the executive powers of the Union vested in
the President and in the name of the President.
State Government
Similarly, as per clause (60) of section 3 of the General Clauses Act,1897, the ‘State
Government’, as respects anything done after the commencement of the Constitution,
shall be in a State the Governor, and in an Union Territory the Central Government.
As per Article 154 of the Constitution, the executive power of the State shall be vested
in the Governor and shall be exercised by him either directly or indirectly through
officers subordinate to him in accordance with the Constitution.
Further, as per article 166 of the Constitution, all executive actions of the Government of
State shall be expressed to be taken in the name of Governor. Therefore, State
Government means the Governor or the officers subordinate to him who exercise the
executive powers of the State vested in the Governor and in the name of the Governor.
Governmental Authority & Government Entity  
“Governmental Authority” means an authority or a board or any other body, – (i) set up
by an Act of Parliament or a State Legislature; or (ii) established by any Government,
with 90per cent. or more participation by way of equity or control, to carry out any
function entrusted to a Municipality under Article 243 W of the Constitution or to a
Panchayat under Article 243 G of the Constitution.
 “Government Entity” means an authority or a board or any other body including a
society, trust, corporation, (i) set up by an Act of Parliament or State Legislature; or (ii)
established by any Government, with 90 per cent or more participation by way of equity
or control, to carry out a function entrusted by the Central Government, State
Government, Union Territory or a local authority.”
Who is a Local Authority?
Local authority is defined in clause (69) of section 2 of the CGST Act, 2017 and means
the following:
 a “Panchayat” as defined in clause (d) of article 243 of the Constitution;
 a “Municipality” as defined in clause (e) of article 243P of the Constitution;
 a Municipal Committee, a ZillaParishad, 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;
 a Cantonment Board as defined in section 3 of the Cantonments Act, 2006;
 a Regional Council or a District Council constituted under the Sixth Schedule to
the Constitution;
 a Development Board constituted under article 371 of the Constitution; or
 a Regional Council constituted under article 371A of the Constitution;
Municipality under clause (e) of the Article 243P
The term Municipality has not been defined in the GST law. However, according to
Section 2(69) of the CGST Act, 2017 the said term derives its meaning from clause (e)
of the Article 243P of the Constitution of India. The said Article defines Municipality to
mean an institution of self-government constituted under Article 243Q. As per Article
243Q, Municipality includes Nagar Panchayat in Transitional area, Municipal Council for
smaller urban area and Municipal Corporation for larger urban area. The following are
the powers specified under Article 243W of the Constitution of India which are entrusted
to the Municipality:
1. Urban planning including town planning.
2. Regulation of land-use and construction of buildings.
3. Planning for economic and social development.
4. Roads and bridges.
5. Water supply for domestic, industrial and, commercial purposes.
6. Public health, sanitation conservancy and solid waste management.
7. Fire services.
8. 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, play-grounds.
13. Promotion of cultural, educational and aesthetic aspects.
14. Burials and burial grounds; cremations, cremation grounds and electric
crematoriums.
15. Cattle ponds; 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.
Any services by the Government by way of activity in relation to the above functions
entrusted to the municipality will be exempt in nature.
Panchayat under clause (d) of the Article 243
The term ‘Panchayat’ has not been defined in the CGST Act, 2017. However, Section
2(69) of the CGST Act which defines local authority states that the definition of
Panchayat can be borrowed from clause (d) of Article 243 of the Constitution of India. It
defines Panchayat to mean an institution of self-government of the rural area
constituted under article 243B. As per Article 243B, there shall be constituted in every
state, Panchayats at the village, intermediate and district levels.
Article 243G of the Constitution of India entrusts powers, authority and responsibilities
to the Panchayat. The Constitution of India endows the Panchayat with such powers
and authority to enable them to function as institution of self-government. Also, it allows
enactment of laws for the devolution of powers and responsibilities upon Panchayat
subject to certain conditions with respect to the following:
(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
The activities specified within the Eleventh Schedule are Agriculture, including
agricultural extension; Land improvement, implementation of land reforms, land
consolidation and soil conservation; Minor irrigation, water management and watershed
development; Animal husbandry, dairying and poultry; Fisheries; Social forestry and
farm forestry; Minor forest produce; Small scale industries, including food processing
industries; Khadi, village and cottage industries; Rural housing; Drinking water; Fuel and
fodder; Roads, culverts, bridges, ferries, waterways and other means of communication;
Rural electrification, including distribution of electricity; Non-conventional energy
sources; Poverty alleviation programme; Education, including primary and secondary
schools; Technical training and vocational education; Adult and non-formal education;
Libraries; Cultural activities; Markets and fairs; Health and sanitation, including
hospitals, primary health centers and dispensaries; Family welfare; Women and child
development; Social welfare, including welfare of the handicapped and mentally
retarded; Welfare of the weaker sections, and in particular, of the Scheduled Castes
and the Scheduled Tribes; Public distribution system; Maintenance of community
assets.
For instance, the Government provides technical training/vocational education to
farmers in relation to the function of Panchayat entrusted under Article 243G of the
Constitution.

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 Provided By / To Government / Local Authorities
Let’s now Discuss about GST Applicability on services provided by / to Government /
Local Authorities separately.
Services Supplied by Government / Local Authorities
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

Exempted Services Provided by the Government or the Local Authority

Entry Nos: 4, 5, 6, 7,8,9, 9C, 34A, 42, 47, 61, 62, 63,64, 65, 65B of Notification No.
12/2017- Central Tax (Rate); 28th June, 2017 are the Exempted Services Provided by
Government or the Local Authority.
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Services Provided by Govt. Attracting GST (Forward Charge)

Other than Services Falling under Notification: 13/2017-Central Tax
(Rate) & Notification : 12/2017- Central Tax (Rate) i.e other than Exempted Services
& Services under RCM
Notification : 12/2017- Central Tax (Rate) i.e other than Exempted Services &
Services under RCM

Services Supplied to Government / Local Authorities: Exempted

Entry Nos: 3, 11A, 16, 21B, 40, 45,  51, 72 of Notification No. 12/2017-Central Tax
(Rate) dt. 28.06.2017 provides Services Supplied to Government / Local Authorities
which are Exempted.
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