GST Ruling: Material Testing Taxable, Geological Surveying Exempt

The Authority ruled that the quality material testing services provided by the governmental authority are not exempt from GST under Notification No. 12/2017-CT(Rate) as they are not directly provided to government or local authorities. However, the geological surveying and testing services conducted by the same authority are exempt from GST under the same notification, as they are considered "Pure Services" directly related to functions entrusted to local authorities.

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Issues Involved:
1. Applicability of Notification No. 12/2017-CT(Rate) for "Pure Services" (testing of materials for quality) by TWAD Board.
2. Applicability of Notification No. 12/2017-CT(Rate) for conducting Geological surveying and testing (Pure Services) by TWAD Board.

Detailed Analysis:

Issue 1: Applicability of Notification No. 12/2017-CT(Rate) for "Pure Services" (testing of materials for quality) by TWAD Board

The applicant, a governmental authority executing water supply and sewerage works, sought a ruling on whether their material quality testing services are exempt from GST under SI.No.3 of Notification No. 12/2017-CT(Rate). The applicant argued that these services, being "Pure Services" related to water supply and sewerage schemes, should be exempt.

The Authority examined the conditions of the notification, which exempts "Pure services" provided to the government or local authorities by way of any activity related to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution. The Authority noted that the testing services were provided to contractors, not directly to the government or local authorities. Therefore, these services do not qualify for the exemption as they are not directly provided to the specified class of service receivers.

The Authority concluded that the quality testing services do not meet the conditions of the notification and are not exempt from GST.

Issue 2: Applicability of Notification No. 12/2017-CT(Rate) for conducting Geological surveying and testing (Pure Services) by TWAD Board

The applicant also sought a ruling on whether their geological surveying and testing services, aimed at identifying water potentiality, are exempt from GST. These services are provided to various government departments and local authorities.

The Authority examined the conditions of the notification and found that the geological surveying and testing services qualify as "Pure Services" provided to local authorities, which are entrusted with the function of water supply under Article 243G and 243W. The Authority noted that these services are directly related to the functions entrusted to the local authorities and therefore qualify for the exemption.

The Authority ruled that the geological surveying and testing services are exempt from GST, subject to the conditions that the supply should be after 24.01.2018, should be pure services, and must be made to the specified class of service receivers.

Ruling:

1. The services provided by the applicant, namely, Quality material testing works, are not exempted from Goods and Services Tax in terms of entry no.3 of the Notification 12/2017- Central Tax (rate) dated 28.06.2017 as amended.
2. The service of Geophysical survey investigation is exempted from Goods and Services Tax in terms of entry no.3 of the Notification 12/2017- Central Tax (rate) dated 28.06.2017, subject to the conditions stated in Para 9.7 above.

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