Manpower supply for solid waste management to Nagar Palika Parishad exempt from GST under Notification 12/2017

The AAR Uttarakhand ruled that supply of manpower for solid waste management to a Nagar Palika Parishad is exempt from GST. The Authority determined that the service does not constitute composite supply as only drivers with protective gears were provided, with safety kits being mandatory COVID precautions rather than separate goods. The Nagar Palika Parishad qualified as a local authority performing constitutional functions under Article 243W. The manpower supply fell under Entry No.3 of Chapter 99 in Notification 12/2017 as amended by Notification 2/2018, making it GST-exempt.

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Issues Involved:
1. Classification of the proposed service under the definition of Composite supply of Goods and Service.
2. Determination of whether the recipient of the service, Nagar Palika Parishad, Muni ki Reti, Dhalwala, qualifies as a local authority or a Governmental authority or a Government Entity.
3. Determination of whether the service/work is covered under the functions entrusted to a Municipality under Article 243W of the Constitution.
4. Determination of whether the contract is exempt from Goods and Services Tax (GST) under the relevant notifications.

Issue-wise Detailed Analysis:

1. Classification of the Proposed Service:
The applicant sought to determine if their contract for supplying manpower for managing solid waste qualifies as a "Composite supply of Goods and Service" under Entry No. 3A of Chapter 99 in Notification No. 12/2017 - Central Tax (rate) dated 28th June 2017, as amended by Notification No. 2/2018 - Central Tax (rate) dated 25th January 2018. The ruling clarified that the service provided by the applicant does not fulfill the criteria of a composite supply, as the supply involved only manpower without any significant supply of goods. The safety kits provided were deemed not to be "goods" in the context of the service provided. Therefore, the service does not fall under the definition of "Composite supply of Goods and Service" as per the specified notification.

2. Determination of Local Authority Status:
The ruling confirmed that Nagar Palika Parishad, Muni Ki Reti, Dhalwala qualifies as a "local authority" under Section 2(69) of the CGST Act, 2017. The definition includes entities like municipalities, which are self-governed institutions constituted under Article 243Q of the Constitution. The Nagar Palika Parishad has 11 wards and manages municipal work, satisfying the criteria of a local authority.

3. Coverage Under Article 243W Functions:
The service of supplying manpower for managing solid waste was examined to determine if it falls under the functions entrusted to a Municipality under Article 243W of the Constitution. The ruling confirmed that the service is indeed covered under clause (f) of Article 243W, which includes public health, sanitation conservancy, and solid waste management. The applicant's contract for managing solid waste aligns with these functions.

4. GST Exemption Eligibility:
The final issue was whether the contract is exempt from GST under Notification No. 12/2017 - Central Tax (rate) dated 28th June 2017, as amended. Although the service did not qualify as a composite supply under Entry No. 3A, it was found to be covered under Entry No. 3 of the same notification, which exempts "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 Municipality under article 243W of the Constitution." Since the applicant provided only manpower without any goods, the service was exempt from GST.

Ruling:
1. The contract for supply of manpower for managing solid waste does not come under the definition of "Composite supply of Goods and Service" at Entry No. 3A of Chapter 99 as mentioned in Notification No. 12/2017 - Central Tax (rate) dated 28th June 2017, as amended.
2. Nagar Palika Parishad, Muni ki Reti, Dhalwala is covered under the definition of "local authority" in view of Section 2(69) of the CGST Act, 2017.
3. The service of supplying manpower for managing solid waste is covered under the "Function entrusted to a Municipality under Article 243W of the Constitution."
4. The contract of supplying manpower to Nagar Palika Parishad, Muni Ki Reti, Dhalwala for managing solid waste is exempt from GST in accordance with Entry No. 3 of Notification No. 12/2017 - Central Tax (rate) dated 28th June 2017, as amended.

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