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of <h1>GST not exempt for sewage treatment plant operation & maintenance services due to value threshold</h1> <h3>In Re: M/s. GDCL-EMIT JV,</h3> In Re: M/s. GDCL-EMIT JV, - TMI Issues Involved:1. Applicability of GST exemption on outward supply for operation and maintenance of the sewage treatment plant.2. GST exemption on inward supplies directly received for the above services.Issue-wise Detailed Analysis:Issue 1: Applicability of GST exemption on outward supply for operation and maintenance of the sewage treatment plantThe applicant sought an advance ruling on whether their outward supply for the operation and maintenance of a sewage treatment plant of 26 MLD capacity at LakkarGhat, Rishikesh to Uttarakhand Pey Jal Nigam (UPJN) is exempt from GST under specific notifications.The relevant notifications include:- Notification No. 2/2018-Central Tax (Rate) dated 25.01.2018- Notification No. 2/2018-Integrated Tax (Rate) dated 25.01.2018- Notification No. 138/2018/18(20)/XXVII(8)/2017/CTR-2, Dehradun dated 06.02.2018The notifications stipulate three conditions for exemption:1. The supply must be a composite supply of goods and services where the value of goods does not exceed 25% of the total value.2. The recipient must be a Government entity, such as the Central Government, State Government, Local Authority, Governmental Authority, or a Government Entity.3. The services must relate to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution.The contract between the applicant and UPJN includes:- Survey, design, and construction of sewer lines and pumping stations.- Design, build, operate, and transfer of a sewage treatment plant with 15 years of operation and maintenance.The total contract value is Rs. 126,37,46,020, with design build cost of Rs. 72,42,94,625 and operation and maintenance cost of Rs. 53,94,51,394.98.The authority determined that the operation and maintenance services are part of a composite supply where the principal supply is the design and building. The operation and maintenance are considered supplementary and ancillary to the primary supply. The value of goods in the composite supply exceeds 25% of the total value, disqualifying it from exemption under the specified notifications.The authority also noted that the applicant attempted to split the contract to show only the operation and maintenance part, which is not permissible. The entire contract value must be considered, and the value of goods exceeds the 25% threshold, making the supply taxable.Issue 2: GST exemption on inward supplies directly received for the above servicesThe applicant also sought clarification on whether inward supplies directly received for the services are exempt from GST.Since the main supply of operation and maintenance of the sewage treatment plant is not exempt from GST, the inward supplies directly received for these services are also not exempt.Order:1. The outward supply of operation and maintenance of the sewage treatment plant of 26 MLD capacity at LakkarGhat, Rishikesh, Dehradun, State of Uttarakhand to Uttarakhand Pey Jal Nigam is not exempted under the specified notifications.2. The inward supplies directly received for the above supply of services are also not exempted.
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