The Authority for Advance Rulings (AAR), Karnataka in the case of M/S. MANISH MANPOWER AGENCY vide Order no. KAR ADRG 03/2024 dated 29.01.2024, ruled the GST implications regarding supply of manpower services to Zilla Panchayat, Taluka Panchayat, and various government departments.

In this case, the applicant is providing manpower services to educational institutions under Zilla Panchayat like Social Welfare Department/ BCM Department, Taluk Panchayat, Social Welfare Department, Forest Department. The nature of manpower services provided are in the form of ‘C’ Group and ‘D’ Group, teachers, Data Entry Operators, Staff Nurse, Typists, Cooks, Assistant Cooks, Watchman, Cleaning Staffs etc.

The Applicant sought advance rulings, as to whether GST would be exempted under Entry no. 3 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, for their supply of manpower services to entities like Zilla Panchayat, Taluka Panchayat, Forest Department, KPTCL, and Railway Department.

The Applicant states that the provision of manpower services like cleaning staff, cook, assistant cook, teachers, staff nurse and watchman to hostels and residential schools working under Social Welfare Department is exempted as it satisfies both the conditions mentioned under entry no. 3 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. These manpower services are provided to Social Welfare Department, which is a department of State Government. These manpower services are provided to socially backward people, scheduled caste and scheduled tribe which is in relation to function entrusted to a Panchayat under article 243G of the Constitution which is covered by 27th entry of eleventh schedule which says “Welfare of the weaker sections, and in particular, of the Scheduled Castes and the Scheduled Tribes.

The AAR, Karnataka observed Entry No.3 of the aforesaid Exemption Notification, and stated that in order to claim exemption on supply of man power services two conditions should be satisfied, i.e.

(1) Pure Services to a local authority
(2) Activity to be in relation to any 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.

The AAR referred to the meaning of “Local Authority” in terms of Section 2(69) of the CGST Act, and stated that Zilla Panchayat and Taluk Panchayat are covered under local authorities and hence the first condition is satisfied.

In relation to the second condition, the AAR stated as under:

• Supply of  manpower services like cleaning staff, cook, assistant cook, staff nurse, teachers and watchman to hostels and residential schools/colleges run by Social welfare department is exempted since the manpower services provided are by way of any activity in relation to any 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.
• Supply of Manpower services like Data Entry Operator, Drivers, “D” Group staff, FDA, SDA, Typists to Zilla Panchayat/Taluk Panchayat/ Social welfare department/Backward Classes Welfare Department are not by way of any activity in relation to any 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 and hence attracts GST at the rate of 18% (CGST @9% and KGST @9%).