Municipal services: GST implications on pure services & composite supplies

The ruling clarified that services received by the Municipal Corporation, including cleaning roads, gardens, toilets, and waste collection, are a mix of pure services and composite supplies. Pure services and composite supplies with goods not exceeding 25% value attract nil GST and are exempt from GST TDS. However, if the value of goods exceeds 25%, GST applies at 12% or 18%, and provisions of GST TDS will be applicable.

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Issues:
Classification of services for a Municipal Corporation under GST laws.

Analysis:
The Municipal Corporation sought an advance ruling on the taxability of services received from contractors for cleaning roads, gardens, toilets, and waste collection. The applicant, being a registered person under CGST and SGST Acts, was admitted for advance ruling as per Section 97(2)(a),(e), and (g). The jurisdictional officer highlighted that services to local authorities are nil-rated under Notification No. 12/2017.

The applicant argued that most services received fall under Article 243W of the Constitution but were unsure if they were taxable. The services provided by the Municipality fall under the Twelfth Schedule of the Constitution, including cleaning roads, gardens, toilets, and waste collection. The ruling emphasized that services provided by the applicant are a mix of pure services and goods supply, such as construction services involving manpower and goods like bricks and pipes.

The ruling referred to Notifications No. 12/2017 and 12/2017-CT (Rate) to determine the tax treatment of composite supplies. If the value of goods in a composite supply does not exceed 25%, it attracts nil GST. However, if the value exceeds 25%, GST applies at 12% or 18% based on the specific activity. The ruling also discussed the applicability of GST TDS under Section 51 of the CGST/SGST Act, noting that the applicant, as a local authority, may be eligible to deduct TDS if services are taxable.

In conclusion, the ruling clarified the tax treatment for services received by the Municipal Corporation. Pure services and composite supplies with goods not exceeding 25% value attract nil GST and are exempt from GST TDS. However, if the value of goods exceeds 25%, GST applies at 12% or 18%, and provisions of GST TDS will be applicable.

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