# Services Provided by Government — Taxability Framework

NOT all services by Government / Local Authority are exempt. The framework is governed by 'specified services', recipient type (business entity vs others) and threshold limit.

## Step 1: Identify 'Specified Services' (NOT exempt)

Following four are 'specified services':

(a) Services by Department of Posts and Ministry of Railways (Indian Railways);

(b) Services in relation to an aircraft or vessel, inside or outside precincts of an airport/port;

(d) Any other service provided to business entities whose aggregate turnover in preceding FY exceeds threshold limit for registration.

Services (a) to (c) above are 'specified services' simpliciter.

## Step 2: Apply the Taxability Matrix

### A. Services to Business Entity

Turnover of Business Entity in Preceding FY	Type of Service	Taxability
≤ Threshold limit	Any (other than specified services and renting of immovable property)	EXEMPT
> Threshold limit	Specified Services [(a)–(c)]	Taxable under Forward Charge
> Threshold limit	Other than specified services	Taxable under Reverse Charge

### B. Renting of Immovable Property

Services of renting of immovable property by CG/SG/UT/local authority (except Ministry of Railways) to a registered person → Taxable under RCM.

## Step 3: Special Sub-rules

### Department of Posts

Provides basic mail services (post card, inland letter, book post, registered post), financial services (money transfers, savings, pensions), and agency services (mutual funds, bonds, passport).
Exempt: Post card, inland letter, book post, ordinary post (envelopes < 10 grams).
Taxable: All other services (without RCM — Department of Posts pays directly).

### Accommodation by Defence/Police Messes (Entry 6)

Accommodation services supplied by Air Force Mess, Army Mess, Navy Mess, Paramilitary and Police forces messes to personnel or non-business entities → EXEMPT.

### Inter-departmental Services (Entry 8)

Services (other than specified services) provided by one Department to another Department of Government → EXEMPT.

### Constitutional Functions (Entries 4 & 5)

Services by Governmental Authority in relation to functions entrusted under Article 243W (Municipality) and 243G (Panchayat) → EXEMPT.

### Police / Security Services

Services provided by police/security agencies to PSUs / corporate entities / private sports events → Taxable under RCM.

### Tolerating Non-performance of Contract (Entry 62)

Consideration received by Government for tolerating non-performance of contract → EXEMPT.

Worked example

### Example 1

Example 1 — Threshold test: CG provides consultancy (not a specified service) to ABC Ltd whose turnover in preceding FY was Rs. 15 lakh (below registration threshold). Taxable?

Solution: EXEMPT, because the service is not a specified service and is provided to a business entity below the threshold limit.

### Example 2

Example 2 — Specified service test: Indian Railways transports goods for ABC Ltd (turnover Rs. 5 crore). Taxability?

Solution: Taxable under Forward Charge — Ministry of Railways services are 'specified services' and recipient is above threshold.

### Example 3

Example 3 — Police security at private event: Karnataka Cricket Association requests the Commissioner of Police to provide security for a cricket match against consideration. Who pays GST?

Solution: The KCA (recipient) is liable to pay GST under Reverse Charge Mechanism. This is a security service by Government to a corporate entity for a privately-held event — not exempt and taxable under RCM.

### Example 4

Example 4 — Non-performance damages: PWD Karnataka contracted with M/s ABC for construction by 31st Dec. Due to ABC's non-performance, the Department claimed Rs. 10,00,000 as damages. Is the Rs. 10 lakh taxable?

Solution: EXEMPT under Entry 62. Consideration received by Government for tolerating non-performance is exempt from GST.

### Example 5

Example 5 — Department of Posts: Department of Posts sells a post card (Rs. 0.50) and processes a passport application (Rs. 1,500). Taxability?

Solution: Post card → EXEMPT. Passport application processing → Taxable (Department of Posts pays GST under forward charge, no RCM).

⚠️ Common exam mistakes

Assuming ALL Government services are exempt — only specific entries are exempt; specified services and services to large business entities are taxable.
Applying RCM to specified services like Railways transport — these are under FORWARD CHARGE, not RCM.
Forgetting that renting of immovable property by Government to a registered person is under RCM (except by Ministry of Railways).
Treating police security to private sports event as exempt — it is taxable under RCM.
Treating Department of Posts services as eligible for RCM — Department of Posts itself pays GST on its taxable services; no RCM applies.

Reference: Entries 4, 5, 6, 8, 62 and related — Notification No. 12/2017-CT(R) dated 28.06.2017

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Exemption to Services Provided by Government / Local Authority

Worked example

⚠️ Common exam mistakes