2022 (1) TMI 747 - AAR - GST

GST exemption for handling services under government schemes clarified by Authority.

The Authority ruled that the services provided by the applicant in handling sarees, dhothies, and school uniforms under government schemes are exempt from ... Exemption under Notification No. 12/2017 - Pure services provided to the State Government - Composite supply versus pure service - Services 'in relation to' functions entrusted under Articles 243G and 243W of the Constitution - Handling charges as consideration for supply of servicesExemption under Notification No. 12/2017 - Pure services provided to the State Government - Composite supply versus pure service - Services 'in relation to' functions entrusted under Articles 243G and 243W of the Constitution - Handling charges as consideration for supply of services - Whether the handling services rendered by the applicant in relation to procurement, inspection, storage and transportation of Sarees, Dhothies and School Uniforms supplied to State Government departments are exempt under SI. No. 3 of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017. - HELD THAT: - The Authority examined the scope of SI. No. 3 of Notification No. 12/2017 which grants nil rate to 'Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the ... State Government ... by way of any activity in relation to any function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W'. The applicant's activities consist of inspection, collection, storage and transportation of goods and receipt of handling charges fixed by a government committee. The State tax officer contended the activities were a composite supply and thus not covered by the exemption. The Authority analysed (i) whether the handling activities are services without supply of goods and (ii) whether such services are 'in relation to' functions entrusted to Panchayats/Municipalities. It held that the gamut of handling activities are services (and do not amount to supply of goods) and that the notification's restriction excludes only composite supplies involving supply of goods, not composite supplies made up solely of services. Further, having compared the functions listed in the Eleventh and Twelfth Schedules, the Authority found a sufficient nexus between the handling services and the functions (such as planning for social and economic development, safeguarding interests of weaker sections, public distribution system and education/primary and secondary education) entrusted to Panchayats/Municipalities, and that the services were supplied to State Government departments. On these bases the Authority concluded the handling services fall within the exemption at SI. No. 3 of Notification No. 12/2017. [Paras 8, 9]The handling services rendered by the applicant in respect of free distribution of Sarees, Dhothies and School Uniforms to State Government departments are exempt from GST under SI. No. 3 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017.Pre-GST period supplies - Whether handling charges relating to the pre-GST period (2015-16 and 2016-17) fall within the Authority's jurisdiction for advance ruling. - HELD THAT: - The applicant sought clarification on applicability of GST to handling charges for pre-GST years. The Authority observed that supplies in the pre-GST period are governed by earlier statutes and not by the CGST provisions. Consequently, questions pertaining to pre-GST period taxation do not fall within the scope of the advance ruling under the Act and cannot be admitted. [Paras 6, 9]The question on handling charges relating to the pre-GST period is not admitted and does not fall within the Authority's jurisdiction for advance ruling.Final Conclusion: The Authority ruled that the applicant's handling services for distribution of Sarees, Dhothies and School Uniforms to State Government departments are exempt from GST under SI. No. 3 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017; the query on pre-GST years 2015-16 and 2016-17 is not admitted before the Authority. Issues Involved:1. Applicability of 18% GST on expenses incurred for handling Cost Free Distribution Sarees & Dhothies and Cost Free School Uniform Scheme.2. Applicability of GST on Handling Charges related to the Pre-GST period (2015-16 and 2016-17).Issue-wise Detailed Analysis:1. Applicability of 18% GST on expenses incurred for handling Cost Free Distribution Sarees & Dhothies and Cost Free School Uniform Scheme:The applicant, a Nodal Agency, sought clarification on whether the expenses incurred for handling sarees, dhothies, and school uniforms under government schemes would attract 18% GST. They argued that their services, which include inspection, procurement, storage, and distribution, are 'pure services' provided to the State Government, and thus exempt from GST under Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017.The Authority examined the nature of the services provided by the applicant, which included quality checks, procurement, storage, and transportation of goods. The State Jurisdictional Authority opined that these activities constituted a 'composite supply' and not 'pure services,' making the applicant ineligible for the exemption. However, the Authority clarified that 'pure services' encompass all service categories under SAC 99 and that the exemption applies to services provided without the involvement of goods.The Authority concluded that the applicant's activities of handling sarees, dhothies, and school uniforms, which involve inspection, collection, storage, and transportation, are indeed 'pure services' as they do not involve the supply of goods. Since these services are provided to the State Government and relate to functions entrusted to Panchayats and Municipalities under Articles 243G and 243W of the Constitution, they qualify for the exemption under Notification No. 12/2017 - Central Tax (Rate).2. Applicability of GST on Handling Charges related to the Pre-GST period (2015-16 and 2016-17):The applicant also sought clarification on whether handling charges related to the Pre-GST period (2015-16 and 2016-17) would attract GST. The Authority noted that this question pertains to a period before the implementation of GST, governed by the provisions of the then-prevailing statutes. Therefore, the Authority did not admit this question under the ambit of section 95(a) and did not provide a ruling on this issue.Ruling:1. The services rendered by the applicant towards handling of Dhothies & Sarees/School Uniforms from Co-operative Societies to Public Distribution System/Revenue Department are exempted from payment of GST as per serial number 3 of the table given in GST Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017 as amended.2. The question regarding the applicability of GST on handling charges related to the Pre-GST period does not fall under the ambit of section 95(a) and is not admitted by the Authority.