No GST Exemption for Payments Made to Outsourced Workers at Vikram Sarabhai Space Centre, Clarifies Ruling
In a significant ruling, the Kerala Authority for Advance Rulings (AAR) has clarified that Goods and Services Tax (GST) is applicable on interim payments made to outsourced workers during the COVID-19 lockdown period. This ruling comes in response to an application filed by M/s. The Kerala State Ex-Servicemen League (KSESL), a charitable society providing manpower services.
The ruling, delivered by a bench consisting of Shri. Jomy Jacob IRS and Shri. Mansur M.I., addresses the issue of GST applicability on payments made by the Vikram Sarabhai Space Centre (VSSC) to KSESL during the nationwide lockdown. KSESL had provided manpower services to VSSC, and during the lockdown, payments were made to the outsourced workforce under a mutual agreement.
The AAR ruled that the interim payments made by VSSC to the outsourced workforce, categorized as 'on duty' under the contractual agreement, are taxable as consideration for manpower services. The Authority noted that these payments fall under the scope of taxable supply and do not qualify for GST exemption under Notification No. 12/2017-CT(R).
The ruling emphasized that the payments made during the extraordinary circumstances of the COVID-19 lockdown do not alter the taxability of the supply. The GST is levied at the applicable rate on the entire amount received as consideration for manpower services.
The Kerala State Ex-Servicemen League had argued that the payments were interim financial support to the workforce and not for any services rendered during the lockdown. However, the AAR pointed out that the payments were made under a subsisting contract of engagement, and the period was treated as 'on duty' based on directions from the Central Government.
The ruling also clarified that the payments received from VSSC are considered taxable supplies under the Central Goods and Services Tax Act, 2017. It further stated that no specific GST exemption exists for such cases based on the nature of the service rendered during the lockdown.
This ruling serves as a critical reference for organizations and service providers regarding the tax treatment of payments made under extraordinary circumstances, reaffirming the applicability of GST on manpower services provided under mutual agreements.
Bottom Line:
GST applicability on interim wages/payments received during lockdown period clarified - Payments treated as contractual consideration for manpower services supplied under mutual agreement, no GST exemption available.
Statutory provision(s): Central Goods and Services Tax Act, 2017, Sections 7 and 15
M/s. The Kerala State Ex-service League, (AAR)(Kerala) : Law Finder Doc Id # 2835249
