The Karnataka Advance Ruling Authority ( AAR ) has held that the security services provided to Bruhat Bengaluru Mahanagra Palike ( BBMP ) by a private limited company were not exempted from liability of Goods and Services Tax ( GST ).
In this case, the applicant is KSF 9, is a private limited company registered under the Central Goods and Services Tax (CGST) Act, 2017 and the Karnataka Goods and Services Tax (KGST) Act, 2017. The applicant offers security services to BBMP. The applicant was given a work order by the BBMP to provide security services to its head office premises for a period of three years.
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The issue raised by the applicant was whether security services to BBMP were taxable or not. The applicant states that the BBMP claims that the supply of security services to them is exempt under Sl. No. 3 of Notification No. 12/2017 central Tax(R) dated 28.06.2017.
The AAR observed that according to Sl. No. 3 of the above-mentioned notification, in order to claim exemption on the supply of services, the service provided should come under the purview of pure services. The term “pure services” refers to any services (other than composite supplies involving goods or works contract service) that are supplied in connection with any activity related to any function assigned to a panchayat under article 243G of the Constitution or to a municipality under article 243W of the Constitution to the Central Government, State Government, Union territory, or local authority.
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The bench consisting of M.P. Ravi Prasad (Additional Commissioner of Commercial Taxes) and Kiran Reddy (Additional Commissioner of Customs & Indirect Taxes) was of the opinion that the security services provided by the applicant to BBMP do not fall under the function entrusted to a panchayat under article 243G of the Constitution or in relation to any function entrusted to a municipality under article 243W of the Constitution of our country.
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Thus the bench held that security services do not come under the purview of pure services and are not exempted from GST.
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