RO Plant Supply Deemed Composite Goods/Services, Not Exempt

The applicant's supply to the Greater Chennai Corporation, comprising the provision of an RO plant and its operation and maintenance, was deemed a composite supply of goods and services rather than "pure services." Consequently, the applicant was found ineligible for exemption under Serial No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017.

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Issues Involved:
1. Whether the services provided by the applicant to the Greater Chennai Corporation qualify as "pure services" provided to a local authority.
2. Eligibility for exemption under Serial No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017.

Issue-wise Detailed Analysis:

1. Pure Services Qualification:
The applicant, engaged in the operation and maintenance of high-quality treated drinking water plants, entered into a contract with the Greater Chennai Corporation (GCC) for the "Amma Kudineer (Drinking Water Plant) Project." The applicant sought an advance ruling on whether their services qualify as "pure services" provided to a local authority, which would make them eligible for exemption under Serial No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017.

The applicant argued that their services constitute "pure services" as defined generally, meaning any supply for consideration without the transfer of property in goods. They claimed that their services involve only the operation and maintenance of the water treatment plant without any supply of goods, thus qualifying as pure services.

2. Eligibility for Exemption:
To qualify for the exemption under Serial No. 3 of Notification No. 12/2017, two conditions must be met:
- The service recipient should be the Central Government, State Government, local authority, or a governmental authority.
- The service should be related to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution.

The applicant provided services to the Greater Chennai Corporation, which is a municipal corporation and hence a local authority as defined under Section 2(69) of the CGST Act, 2017. The functions entrusted to municipalities under Article 243W include water supply for domestic, industrial, and commercial purposes, which aligns with the applicant's services.

Ruling and Analysis:
Upon examining the facts, documents, and submissions, it was found that the applicant's contract with GCC involved not only the operation and maintenance of the RO plant but also the supply and installation of the plant itself. The contract included providing smart cards, maintaining the plant, and ensuring security, which involves both goods and services.

The authority determined that the applicant's services are not "pure services" but a composite supply of goods and services. The supply of the RO plant, maintenance, smart cards, and security services are naturally bundled and cannot be separated. Therefore, the primary condition of being "pure service" is not met.

Conclusion:
The supply provided by the applicant to the Greater Chennai Corporation, involving the provision of an RO plant and its operation and maintenance, is not considered "pure service" but a composite supply of goods and services. Consequently, the applicant is not eligible for the exemption under Serial No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017.

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