2019 (9) TMI 1048 - AAR - GST

Exemption from GST for Municipal Service Supply

In Re: M/s. Mahendra Roy

The applicant's supply of conservancy/solid waste management service to the Howrah Municipal Corporation was found exempt from GST payment under specific ... Deduction of TDS under GST - Classification of services - conservancy/solid waste management service to the Conservancy Department of the Howrah Municipal Corporation - Pure services - Whether the above supply is exempted in terms of Sl No. 3 or 3A of Notification No. 12/2017 - Central Tax (Rate) dated 28/06/2017 (corresponding State Notification No. 1136 - FT dated 28/06/2017), as amended from time to time (hereinafter collectively referred to as Exemption Notification), and if so, whether the notifications regarding TDS are applicable in his case? HELD THAT:- The consideration to be paid measures the work only in terms of the quantity of the garbage lifted and removed. Based on the above documents, it may, therefore, be concluded that the Applicant’s supply to HMC is a pure service - Furthermore, Article 243W of the Constitution that discusses the powers, authority and responsibilities of a Municipality, refers to the functions listed under the Twelfth Schedule as may be entrusted to the above authority. Sl No. 6 of the Twelfth Schedule refers to public health, sanitation, conservancy and solid waste management. The Applicant’s supply to HMC is a function mentioned under Sl No. 6 of the Twelfth Schedule - The Applicant’s service to HMC, therefore, is exempt under Sl No. 3 of the Exemption Notification. The TDS Notifications bring into force section 51 of the GST Act, specify the persons under section 51(1)(d) of the Act and have mandated and laid down the mechanism for deduction of TDS. These notifications, therefore, are applicable only if TDS is deductible on the Applicant’s supply under section 51 of the GST Act. Section 51 (1) of the Act provides that the Government may mandate inter alia a local authority to deduct TDS while making payment to a supplier of taxable goods or services or both. As the Applicant is making an exempt supply to HMC the provisions of section 51 and, for that matter, the TDS Notifications do not apply to his supply. Issues:Admissibility of the ApplicationAdmissibility of the Application:The applicant sought a ruling on whether their supply of conservancy/solid waste management service to the Howrah Municipal Corporation is exempted under specific notifications and if the TDS deductions by the Corporation are applicable. The questions were found admissible under section 97(2)(b) of the GST Act, and the Revenue officer did not object to the application, leading to its admission.Submissions of the Applicant:The applicant argued that their service falls under the exemption category for 'pure service' provided to local authorities as per the Exemption Notification. They presented evidence to establish that their supply is purely a service and thus should be exempt under the relevant notification.Observations and findings of the Bench:The Bench referred to Circular No. 51/25/2018-GST, explaining the continuity of service tax exemptions under GST, particularly for services related to public health, sanitation, conservancy, solid waste management, etc., provided to local authorities. The Circular clarified that such services are eligible for exemption under specific sections of the Exemption Notification. The Bench emphasized that the applicant's eligibility for exemption should be assessed based on the nature of the supply, the recipient being a local authority, and the relation to functions entrusted to municipalities under the Constitution.The Bench analyzed the applicant's work orders and concluded that the service provided was a pure service, aligning with the functions mentioned in the Constitution entrusted to municipalities. Therefore, the applicant's service to the Howrah Municipal Corporation was deemed exempt under the Exemption Notification. Additionally, the Bench highlighted that the TDS Notifications were only applicable if TDS was deductible on taxable supplies, which did not apply to the applicant's exempt supply.Ruling:The ruling stated that the applicant's supply to the Howrah Municipal Corporation was exempt from GST payment under the specific notification. As the applicant's service was exempt, the TDS provisions did not apply to their supply. The ruling's validity was subject to the provisions under Section 103 unless declared void under Section 104(1) of the GST Act.