GST exemption granted for services to Govt agency related to minor irrigation and water management

The ruling determined that the Applicant's supply to the Irrigation and Waterways Directorate, Govt of West Bengal, was exempt from GST payment under Sl No. 3A of Notification No 9/2017 - Integrated Tax (Rate), subject to the provisions under Section 103 of the GST Act. The decision was based on the nature of the service provided, which was primarily a composite supply of services related to functions entrusted to Panchayats under the Constitution, specifically minor irrigation and water management activities.

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Issues:
1. Admissibility of the Application
2. Interpretation of Exemption Notification for GST applicability
3. Analysis of functions entrusted to Panchayats under the Constitution

Issue 1: Admissibility of the Application
The Applicant sought a ruling on the applicability of exemption under Sl No. 3 or 3A of Notification No 9/2017 - Integrated Tax (Rate) for a contract awarded by the Irrigation and Waterways Directorate, Govt of West Bengal. The concerned officer from the Revenue did not object to the admission of the application, confirming that the question raised was not pending or decided in any forum. Therefore, the application was admitted.

Issue 2: Interpretation of Exemption Notification for GST applicability
The Applicant argued that the work provided to the State Government constituted a pure service or a composite supply where the supply of goods was minimal, making it eligible for exemption under Sl No. 3 or 3A of the Exemption Notification. However, the concerned officer from the Revenue contended that the Exemption Notification applied only to pure services and not to supplies involving goods. The Bench referred to Circular No. 51/25/2018-GST, which clarified that functions performed by a panchayat or municipality under the Constitution for public welfare services were eligible for exemption under Sl No. 3 or 3A. The Bench analyzed the nature of the supply, the recipient being the State Government, and the functions entrusted to a panchayat under the Constitution to determine the applicability of the Exemption Notification. It was concluded that the Applicant's service was primarily a composite supply of services, making it eligible for exemption under Sl No. 3A of the Exemption Notification.

Issue 3: Analysis of functions entrusted to Panchayats under the Constitution
The Bench examined the functions entrusted to Panchayats under Article 243G of the Constitution, which included various activities related to economic development and social justice. The resuscitation of the river by the Applicant for the State Government fell under the function listed in the Eleventh Schedule, specifically related to minor irrigation, water management, and watershed development. As the Applicant's service was in relation to a function entrusted to a panchayat, it was deemed exempt under Sl No. 3A of the Exemption Notification.

In conclusion, the ruling stated that the Applicant's supply to the Irrigation and Waterways Directorate, Govt of West Bengal, was exempt from GST payment under Sl No. 3A of Notification No 9/2017 - Integrated Tax (Rate), subject to the provisions under Section 103 of the GST Act.

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