Services for government bore wells under Panchayats qualify for NIL GST rate

The ruling confirmed that the applicant's services, involving drilling bore wells for government entities under schemes falling within functions entrusted to Panchayats, are covered under Article 243G of the Constitution. The recipient entities, established by the Government of Karnataka with full control and share capital, qualify as Government Entities under the GST Act. Consequently, the services provided by the applicant attract a NIL rate of GST under Notification No. 2/2018 - Central Tax (Rate) dated 25/01/2018.

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Issues Involved:
1. Applicability of Notification No. 2/2018 - Central Tax (Rate) dated 25/01/2018.
2. Whether the applicant's services are covered under Article 243G of the Constitution.
3. Definition and qualification of the recipient entities as Government Entities under the GST Act.

Issue-wise Detailed Analysis:

1. Applicability of Notification No. 2/2018 - Central Tax (Rate) dated 25/01/2018:
The applicant, a partnership firm engaged in drilling bore wells for small and marginal landowners under various government schemes, sought an advance ruling on whether their services are exempt under Notification No. 2/2018 - Central Tax (Rate) dated 25/01/2018. The notification specifies a NIL rate for composite supply of goods and services provided to government entities, where the value of goods does not exceed 25% of the total value of supply. The applicant's service includes drilling bore wells, fixing casing pipes, and other related activities, with the value of goods being less than 5% of the total contract value.

2. Whether the applicant's services are covered under Article 243G of the Constitution:
The applicant argued that their services fall under the functions entrusted to Panchayats under Article 243G of the Constitution, specifically under "Minor Irrigation, Water Management and Watershed Development" listed in the Eleventh Schedule. The applicant provided services to government entities like Dr. B.R. Ambedkar Development Corporation Limited and Karnataka Maharshi Valmiki Scheduled Tribes Development Corporation Limited, which are involved in minor irrigation schemes. The ruling confirmed that the applicant's services are indeed covered under these functions, as the activities of drilling bore wells and their energization are part of minor irrigation works.

3. Definition and qualification of the recipient entities as Government Entities under the GST Act:
The ruling examined whether the recipient entities qualify as "Government Entities" under the GST Act. According to Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, a Government Entity is defined as an authority or body set up by an Act of Parliament or State Legislature with 90% or more participation by way of equity or control by the government. The entities in question, Dr. B.R. Ambedkar Development Corporation Limited and Karnataka Maharshi Valmiki Scheduled Tribes Development Corporation Limited, are established by the Government of Karnataka with 100% control and share capital. Therefore, they qualify as Government Entities.

Findings and Discussion:
The ruling found that the applicant's services are provided to government entities under schemes that fall within the functions entrusted to Panchayats under Article 243G. The composite supply of goods and services by the applicant involves goods constituting less than 25% of the total value, fulfilling the conditions of Notification No. 2/2018 - Central Tax (Rate) dated 25/01/2018. Consequently, the services provided by the applicant attract a NIL rate of GST.

Ruling:
The composite supply of energized bore wells to the recipients being Government entities, as explained by the applicant, is covered under entry no. 3A of the Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 2/2018-Central Tax (Rate) dated 25.01.2018, thereby attracting a NIL rate of GST.

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