Companies supplying transport to local authorities have to prove that the activities for which the vehicles are used are exempt services such as public health, if they want to avoid paying goods and services tax (GST), ruled the Gujarat-based authority for advance ruling (AAR).

Otherwise, GST of 5, 12 and 18 per cent will be imposed depending on usage, say experts on the basis of the ruling.

Pure services, including public health related ones, supplied to the government and local authorities are exempt from GST. Here, pure services mean supplies, which are not bundled with goods.

AAR holds that while the transport services supplied to the municipality are not bundled with goods, it is not clear whether these would be used solely for public health work.

The work order submitted by the company said the services will be used for transporting the municipality's health department team during the probable third wave of Covid-l9 or for “other emergency and important matter related services”.

The authority wanted to know from the municipality the nature of works covered under “other emergency and important matter related services”.

However, the municipal corporation did not submit any clarification on the issue. The civic body also deducted GST at source on the company's transport services. AAR therefore ruled that the services are not exempt from GST, but allowed the company to claim input tax credit.

The authority also held that it is not their remit to say what documents are to be provided by the company to prove its claims.

Source: Business Standard 
https://www.business-standard.com/article/economy-policy/supplying-of-transport-to-municipalities-not-exempt-under-all-circumstances-122090701018_1.html

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