River resectioning with drainage work qualifies as composite supply with service exemption under Notification 9/2017 Sl No. 3A for irrigation development

The AAR held that resectioning of river Jamuna constituted a composite supply with excavation and re-excavation of drainage channels as the principal supply. Goods supply, if any, was incidental and not separately priced. Since the recipient State Government entity was engaged in irrigation and waterways development - a function under Eleventh Schedule Article 243G entrusted to panchayats - the service qualified for exemption under Sl No. 3A of Notification 9/2017.

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Issues involved:
1. Admissibility of the application
2. Interpretation of exemption under Notification No 9/2017 - Integrated Tax (Rate)

Admissibility of the application:
The application was admitted as the concerned officer did not object to its admission, and the question raised was not pending or decided in any forum. The application was deemed admissible under the CGST Act 2017/WBGST Act 2017.

Interpretation of exemption under Notification No 9/2017 - Integrated Tax (Rate):
The Applicant sought a ruling on whether an exemption under Sl No. 3 or 3A of Notification No 9/2017 applies to a contract awarded by the Irrigation and Waterways Directorate, Govt of West Bengal. The Applicant argued that the work involved in the contract constitutes a pure service or a composite supply with negligible goods supply, related to functions entrusted to a panchayat or municipality under the Constitution.

The Bench observed that the service tax exemption under the previous regime has been continued under GST under Sl No. 3 and 3A of the Exemption Notification. It clarified that activities related to functions of public welfare entrusted to panchayats or municipalities are exempt from GST, provided the supply is pure service or a composite supply with goods value not exceeding 25%.

The Bench analyzed the nature of the contract, determining it as a composite supply of services with incidental goods supply. The functions of a panchayat under the Constitution were discussed, linking the activities of the recipient to those listed in the Eleventh Schedule. The recipient's certification confirmed that the work awarded to the Applicant was related to the functions under Article 243G of the Constitution.

Based on the above analysis, the ruling stated that the Applicant's supply to the Irrigation and Waterways Directorate, Govt of West Bengal, is exempt from GST under Sl No. 3A of Notification No 9/2017 - Integrated Tax (Rate). The ruling is valid unless declared void under the provisions of the GST Act.

This comprehensive analysis of the issues involved in the judgment provides a detailed understanding of the interpretation of the exemption notification and the admissibility of the application before the Authority for Advance Ruling in West Bengal.

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