As per the GST Law, pure services provided to the local authority by way of any activity in relation to any function entrusted to a municipality under article 243W of the Constitution, is exempted from GST. In a recent advance ruling filed by Vodafone Idea Limited in Telangana, Vodafone sought clarification over GST exemption on telecommunication services provided to municipality of Hyderabad and its employees. Can such services be said to be provided in relation of functions entrusted to a municipality and thus eligible for an exemption?
In our view, such services cannot said to be in relation to functions entrusted to municipality and thus not exempted from GST.
The Authority of advance ruling has given a similar decision. They also referred to a judgement by Honourable Supreme Court of India in case of Madhav Rao Jivaji Rao Scindia Vs Union of India AIR 1971 SC 530, according to which “relating to” means to bring into relation or establish a relation that there should be a direct and immediate link with a covenant and that there cannot be any independent existence outside such covenant. As there is no direct relation of services of Vodafone and the functions entrusted to municipality, therefore, such services are not exempted from GST.
