The Telangana State Authority for Advance Ruling (AAR) has held that Service Tax exemption is not allowable on e-procurement transaction fees collected on behalf of the Telangana government
M/s. Telangana State Technology Services Limited (TSTSL), Telangana State Public Sector Undertaking and TSTSL is a Service Agency to the Telangana Government and its Departments relating to Information Technology and its related services (applicant).
One such service is provided by TSTSL acting as a fund manager on behalf of the IT E&C Department, Telangana State in executing the e-procurement process as per the government of Telangana. TSTSL as fund manager receives entire amounts lies e-Procurement Transaction charges into designated Bank Accounts.
On receipt of the eProcurement Transaction Fees ( GST), TSTS is paying GST 18% on the entire e-Procurement Transaction Fees every month and TSTS recognizes its share of Service Charges and again pays GST @ 18% every month. The balance amounts are utilised for IT expenditure towards the specific requirements of the Concerned Departments of Telangana State.
The applicant believed that he is acting as a pure agent on behalf of the State government which is floating tenders amounting to the supply of services and such supply may not attract tax under CGST Act, 2017.
A careful reading of the Entry in the Notification reveals that services provided by the Government and not services are provided to the Government.
A two-member bench comprising Sri B. Raghu Kiran, IRS, Additional Commissioner (Central Tax) and Sri S.V. Kasi Visweswar Rao, Additional Commissioner (State Tax) held that the services provided by the applicant to the Government are not exempt under this Notification.
It was further held that the services provided by the applicant on behalf of the Government to business entities are covered by the exception to the above entry, therefore such services also are not exempt.
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