The Telangana Authority of Advance Ruling (AAR) in the case of M/s. Vodafone Idea Limited vide Order TSAAR Order No.36/2022 dated 11.07.2022, has ruled that the supply of telecommunication services to local authorities is a taxable service.
The AAR has observed that Vodafone Idea Limited is providing data and voice services to the Greater Hyderabad Municipal Corporation (GHMC) and to the employees of the municipalities. There is no direct relation between the services provided by Vodafone Idea Limited and the functions discharged by the GHMC under Article 243W read with Schedule 12 of the Constitution of India. Therefore, the telecommunication services do not qualify for exemption under Notification No. 12/2017- Central Tax(Rate).
The applicant, Vodafone Idea Limited, is engaged in providing telecommunication services and, in the course of its business, it is also providing these services to GHMC by way of data/voice telecommunication services SAC 9984. The services provided to GHMC were not related to any specific project or specific scheme of government and were provided to GHMC to be used by employees for general office and administrative purposes.
The applicant submitted that under Serial No.3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, the services qualify to be pure services rendered in relation to functions entrusted to a municipality under Article 243W of the Constitution of India. Thus, the services are exempt from GST.
The applicant sought an advance ruling on the issue of whether the supply of “telecommunication services” to local authorities by the applicant is a taxable service and/or exempt.
The AAR held that under Serial No. 3 of Notification No. 12/2017, pure services provided “in relation to any function” entrusted to a municipality under Article 243W of the Constitution of India are eligible for exemption from GST. The exemption should be directly related to the functions enumerated under Article 243W of the Constitution of India.
The AAR held that the services provided to GHMC were not related to any specific project or specific scheme of government. As a result, Vodafone Idea Limited cannot take advantage of the exemption notification benefit.