The Karnataka Bench of the Authority for Advance Ruling (AAR) has ruled that the professional services for assistance in filing of corporate tax returns provided to Bangalore Water Supply and Sewerage Board (BWSSB) is not an exempt supply as per Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017.
The applicant, M/s Ernst and Young LLP, is engaged in providing services in auditing, accounting, and taxation. The applicant had entered into an engagement letter for rendering professional services in relation to corporate tax return filing to BWSSB.
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The applicant argued that three conditions must be met for a service to qualify for the exemption: it must be a pure service without any associated goods supply, it must be provided to the Central Government, State Government, Union Territory, Local Authority, or a Governmental Authority, and it must be an activity related to a function entrusted to a Panchayat under Article 243G of the Constitution or a Municipality under Article 243W of the Constitution.
The applicant contended that since all the conditions were met, the services provided to BWSSB qualified for exemption under Entry 3 of Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017, as amended. Consequently, they should issue a ‘Bill of Supply’ for these exempt services.
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The authority observed that BWSSB did not qualify as a Local Authority as it was not vested with the control or management of a municipal or local fund. Consequently, BWSSB was neither a State Government nor a Local Authority, failing the first condition for exemption.
Furthermore, the services provided by the applicant to BWSSB did not align with any function entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution, thus not fulfilling the second condition. Therefore, the services provided to BWSSB were not exempt under the notification.
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