# Exemption: Services Provided TO Government

## 1. Pure Services / Composite Supply ≤ 25% Goods

Exempt if provided to CG, SG, UT or LA for activities in relation to functions entrusted to:

A panchayat under Article 243G, OR
A municipality under Article 243W.

> Warning: If the service is not in relation to such constitutional functions (e.g., housekeeping, office maintenance of government buildings) → Taxable.

'Pure service' = 100% labour. 'Composite supply' qualifies only if the value of goods does not exceed 25% of total value.

## 2. Services to a Government Authority — Specific List

Exempt where provided for: water supply, public health, sanitation conservancy, solid waste management, slum improvement and upgradation.

## 3. Fair Price Shop → Government (PDS)

Services by a fair price shop to CG/SG/UT under the Public Distribution System against commission/margin → Exempt.

## 4. Insurance Schemes Wholly Funded by Government

Services to CG/SG/UT under any insurance scheme where total premium is paid by CG/SG/UT — including reinsurance of the same — are Exempt.

## 5. Training Programmes

Training services to CG/SG/UT where ≥ 75% of expenditure is borne by CG/SG/UT → Exempt.

## Quick Test

```

Is recipient Govt/LA? -> Yes

Pure service / <=25% goods, for 243G/243W functions -> Exempt
To Govt Authority for water/health/sanitation/SWM/slums -> Exempt
PDS fair-price-shop commission -> Exempt
Insurance/reinsurance (100% Govt-funded premium) -> Exempt
Training (>=75% Govt-funded) -> Exempt

Otherwise -> Taxable

```

Worked example

### Example 1

Q. ABC LLP provides street-beautification services to State Government for ₹10 lakh, including ₹2 lakh of goods.

A. Goods value = 20% (≤25%); service is for a 243W function → Exempt.

### Example 2

Q. XYZ Ltd. provides housekeeping services to a State Government office.

A. Not a function entrusted under Art. 243G/W → Taxable.

### Example 3

Q. AIRICA Institute coaches CA students under a CG scheme where 80% of expenditure is borne by CG.

A. ≥75% Govt-funded training → Exempt.

### Example 4

Q. A reinsurance company reinsures a Government insurance scheme where premium is fully paid by SG.

A. Reinsurance of 100% Govt-funded insurance scheme → Exempt.

⚠️ Common exam mistakes

Granting the 'pure services to government' exemption when goods exceed 25% of value — it then becomes taxable.
Applying the Art. 243G/W exemption to all government services — only constitutional functions qualify; routine maintenance of offices does not.
Missing the 75% expenditure threshold for training services — partial funding below 75% loses the exemption.
Assuming the water/health/sanitation list applies to all governments — it is specifically for services to a Government Authority.

Reference: — Notification No. 12/2017-CT(R)

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Exemption - Services Provided TO Government

Worked example

⚠️ Common exam mistakes