2020 (7) TMI 448 - AAR - GST

GST Exemption for Municipal Waste Services by Government Entity

In Re: M/s. Zigma Global Environ Solutions Private Limited,

The Authority for Advance Ruling classified the services provided by the Municipal Solid Waste Management Company under SAC Code No: 9994. The services ... Classification of services - segregation, treatment, recycling of Municipal Solid Waste (MSW) and thus clearing MSW landfills - exemption under SI.No.3 of Notification 12/2017 dated 28.07.2017 as amended - service recipient i.e., M/s. Tirupati Smart City Corporation - Governmental Authority or not - liability of Governmental Authority to deduct TDS as per the provisions of section for the services rendered. Classification of services - whether the nature of the activities of the applicant falls under SAC Code No 9994? - HELD THAT:- We concur with the opinion of the applicant after a thorough examination of the nature of the services of the applicant by classifying them under Sl.No.32 of Heading 9994 of Notification No: 11/2017 Central Tax (Rate) dt. 28.06.2017. Whether services provided by the applicant is exempted under SI.No.3 of Notification 12/2017 dated 28.07.2017 as amended? - HELD THAT:- Sl. No. 3 of the above notification describes pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a panchayat under article 243G of the constitution or in relation to any function entrusted to a Municipality under article 243W of the constitution. Whether the services rendered by the applicant are pure services? - HELD THAT:- The Services rendered by the applicant as seen from the record, are devoid of any incorporation of goods in the process of supply and the agreement copy between the applicant and Tirupati Smart City Corporation Limited reveals the same citing the approximate value of the work to be done under the agreement for a sum of ₹ 18,64,00,000/- (Rupees Eighteen Crore Sixty Four lakh only) for 2,00,000 MT (Contract Price). Hence, they are classifiable as pure services, excluding works contract service and other composite supplies involving supply of any goods. Whether the service recipient i.e., M/s. Tirupati Smart City Corporation is a “Governmental Authority” as per the definition of Notification No: 12/2017 Central Tax (Rate) dt:28.06.2017 as amended? - HELD THAT:- The applicant satisfies all the conditionalities as described under Section 2(16) of the IGST Act, or as defined vide Notification No. 31/2017 - Central Tax (Rate), dated: 13.10.2017 - the service recipient is a Governmental Authority. Thus, services provided by the Applicant are exempted under SI.No.3 of Notification No. 12/2017 dated 28.07.2017 as amended further by Notification No. 32/2017 - Central Tax (Rate), dated: 13.10.2017. Issues Involved:1. Classification of the services provided by the Applicant.2. Whether services provided by the Applicant are exempted under SI.No.3 of Notification 12/2017 dated 28.07.2017 as amended.3. Whether the service recipient, M/s Tirupati Smart City Corporation, is a 'Governmental Authority' as per the definition of Notification No: 12/2017 Central Tax (Rate) dt: 28.06.2017.4. Whether the Governmental Authority is liable to deduct TDS as per the provisions of section for the services rendered as stated in the Application.Detailed Analysis:1. Classification of the Services Provided by the Applicant:The applicant, a Municipal Solid Waste (MSW) Management Company, provides services involving segregation, treatment, recycling of MSW, and clearing MSW landfills. The applicant contends that these services fall under SAC Code No: 9994 'Sewage and waste collection, treatment and disposal and other environmental protection services' as per Notification No: 11/2017-Central Tax (Rate) dated 28.06.2017. The Authority for Advance Ruling (AAR) concurs with this classification, confirming that the services fall under Sl.No.32 of Heading 9994 of the said notification.2. Exemption Under SI.No.3 of Notification 12/2017:The AAR examined whether the services provided by the applicant qualify as 'pure services' (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government, Union territory, local authority, or a Governmental authority. The AAR found that the services rendered by the applicant are devoid of any incorporation of goods, thus classifying them as pure services. Consequently, the services provided by the applicant are exempted under SI.No.3 of Notification No. 12/2017 dated 28.07.2017 as amended.3. Whether the Service Recipient is a 'Governmental Authority':The AAR examined if M/s Tirupati Smart City Corporation Limited (TSCCL) qualifies as a 'Governmental Authority' under Section 2(16) of the IGST Act and Notification No. 31/2017 - Central Tax (Rate), dated 13.10.2017. TSCCL, a Special Purpose Vehicle (SPV) created by the Government of Andhra Pradesh, has 50:50 equity shareholding between the Andhra Pradesh State Government and the Tirupati Municipal Corporation. The AAR confirmed that TSCCL is established by the government with more than 90% participation by way of equity or control and carries out functions entrusted to a municipality under Article 243W of the Constitution, particularly public health, sanitation conservancy, and solid waste management. Thus, TSCCL qualifies as a 'Governmental Authority.'4. Liability to Deduct TDS:The AAR noted that as per Section 51(1) of the CGST Act and Notification No: 50/2018 Central Tax, dated 13.09.2018, specified persons must deduct tax at source on taxable goods or services where the total value exceeds Rs. 2,50,000. However, since the services provided by the applicant are exempt from GST under SI.No.3 of Notification No: 12/2017, no TDS deduction arises for these services.Ruling:1. The services provided by the applicant fall under Sl.No.32 of Heading 9994 of Notification No: 11/2017 Central Tax (Rate) dated 28.06.2017.2. The service recipient, M/s Tirupati Smart City Corporation, is a 'Governmental Authority.'3. The services provided by the applicant are exempt under SI.No.3 of Notification No: 12/2017 dated 28.07.2017 as amended.4. The question of TDS deduction does not arise as the services are exempted.