2019 (2) TMI 187 - AAR - GST

Ruling: Services to CMWSSB qualify as 'Pure Services' to 'Governmental Authority' under Constitution

In Re: Tamil Nadu Water Investment Company Limited

The Authority for Advance Ruling determined that the services provided by the Applicant to Chennai Metro Water Supply and Sewerage Board (CMWSSB) qualify ... Pure service - Management Consultant and DPR services provided to Chennai Metro Water Supply and Sewerage Board (CMWSSB) for the water related projects at Chennai - whether CMWSSB is Government Entity or not? - Exemption under SI. No. 3 of N/N. 12/2017-CT (Rate) dated 28th June 2017 - Held that:- If any “Pure Services” are provided to a Governmental Authority by way of any activity in relation to any function entrusted to a municipality under Article 243 W of the Constitution and that 'Governmental Authority' is an Authority or a Board set up by an Act of Parliament or a State Legislature or established by the Government with 90 percent or more participation by way of equity or control to carry out any function entrusted to a municipality under article 243 W of the Constitution, then the same is exempted vide SI.No. 3 of the Notification No. 12/2017-Central Tax (Rate). In the case at hand, from the documents furnished by the Applicant, we find that CMWSSB is a Board constituted by an act of Tamil Nadu State Legislature called Chennai Metropolitan Water Supply and Sewerage Act, 1978 (Tamil Nadu Act 28 of 1978) with 100% contribution by way of Government (i.e. by way of takeover of Assets and Liabilities from Chennai Municipal Corporation and Tamil Nadu Water Supply and Drainage Board) and controlled by the Government by way of appointing Directors of the CMWSS Board, to cariy out the functions of supplying water for domestic, industrial and commercial purposes as well as Sanitation Conservancy by way of disposal of Sewer - The Twelfth Schedule or Article 243W of the Constitution list the functions of the municipality at SI No 5 as “Water Supply for domestic, industrial and commercial purposes “and at SI No 6 as “Public health, sanitation conservancy and solid waste management” - Thus, CMWSSB is a 'Governmental authority' as defined under 2(zf) of the Notification No. 12/2017-Central Tax (Rate) 28th June 2017. The activity of the Applicant envisaged by the three agreements furnished by the applicant is supply of 'Pure Services' to CMWSSB which is a 'Governmental Authority” relating to water supply for industrial use and sanitation conservancy which are covered under Twelfth Schedule of Article 243 W of the Constitution. Therefore, the services rendered by the Applicant are exempted from CGST under SI.No. 3 of the Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017 as amended and exempted from SGST under Sl.No. 3 of the G.O. (Ms) No. 73 dated 29.06.2017 No.II (2)/CTR/532(d-15)/2017 as amended. Issues Involved:1. Determination of whether the services rendered by the Applicant to Chennai Metro Water Supply and Sewerage Board (CMWSSB) are exempt under SI. No. 3 of Notification No. 12/2017-CT (Rate) dated 28th June 2017.2. Clarification on whether CMWSSB qualifies as a 'Governmental Authority' as defined in the Notification.3. Examination of the nature of services provided by the Applicant to ascertain if they qualify as 'Pure Services.'Issue-wise Detailed Analysis:1. Exemption under SI. No. 3 of Notification No. 12/2017-CT (Rate):The Applicant sought an advance ruling on whether their services to CMWSSB are exempt under SI. No. 3 of Notification No. 12/2017-CT (Rate) dated 28th June 2017. The services in question include Project Management Consultancy (PMC) for the construction, management, and supervision of Tertiary Treatment Reverse Osmosis (TTRO) plants at Kodungaiyur and Koyambedu, and consultancy for preparing a detailed project report for smart water supply and sewerage services in T.Nagar under the Smart City Mission.2. Qualification of CMWSSB as a 'Governmental Authority':The Applicant provided documentation indicating that CMWSSB is a Board constituted by the Chennai Metropolitan Water Supply and Sewerage Act, 1978, with 100% government contribution and control. The Board carries out functions such as water supply for domestic, industrial, and commercial purposes, and sanitation conservancy, which are entrusted to a municipality under Article 243W of the Constitution. This qualifies CMWSSB as a 'Governmental Authority' under Section 2(16) of the IGST Act, as amended by Notification No. 32/2017-Central Tax (Rate) dated 13.10.2017.3. Nature of Services Provided by the Applicant:The services provided by the Applicant include supervision of construction works, design, quality assurance, third-party inspection, environmental and social management, and expenditure sign-off for the TTRO plants. Additionally, the Applicant is involved in preparing a detailed project report for smart water supply and sewerage services in T.Nagar, including preliminary investigations, surveys, GIS mapping, and design distribution systems. These services are categorized as 'Pure Services,' which exclude works contract services or other composite supplies involving the supply of goods.Conclusion and Ruling:The Authority for Advance Ruling concluded that the services provided by the Applicant to CMWSSB are 'Pure Services' rendered to a 'Governmental Authority' in relation to functions entrusted to a municipality under Article 243W of the Constitution. Therefore, these services are exempt from CGST under SI. No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017, and from SGST under SI. No. 3 of G.O. (Ms) No. 73 dated 29.06.2017.RULING:The services rendered by the Applicant to CMWSSB for Project Management Consultancy (PMC) and preparation of detailed project reports for smart water supply and sewerage services are exempt from CGST and SGST under the relevant notifications.