Nil GST on energized bore wells upheld for Government Entities where supply related to Panchayat irrigation functions.

Composite supply of energized bore wells qualified for nil-rate GST under entry 3A because the goods component was under 25% of the total value, the recipient corporations were Government Entities controlled by the State, and the supply was an activity in relation to a function entrusted to a Panchayat. The drilling and energisation of bore wells for irrigation were linked to minor irrigation under Article 243G and the Karnataka Panchayat Raj Act, 1993, so the statutory conditions for exemption were satisfied.

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Issues: Whether the composite supply of energized bore wells supplied to Karnataka Government corporations qualified for nil GST under entry 3A of Notification No. 12/2017-Central Tax (Rate), as amended, on the footing that the recipient was a Government Entity and the supply was an activity in relation to a function entrusted to a Panchayat under Article 243G of the Constitution of India.

Analysis: The supply was found to be a composite supply in which the value of goods was less than 25% of the total value. The recipient corporations were held to be Government Entities because they were established and controlled by the State Government to carry out entrusted functions. The drilling and energisation of bore wells for irrigation were examined with reference to Article 243G of the Constitution of India and the Karnataka Panchayat Raj Act, 1993, under which implementation of individual irrigation works falls within Panchayat functions. The service was therefore treated as an activity in relation to minor irrigation entrusted to a Panchayat.

Conclusion: The supply satisfied all the conditions of entry 3A and was held eligible for nil-rate GST.

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