Forest conservation services qualify for GST exemption under Notification 12/2017 with specific conditions and TDS requirements

The AAR, Uttarakhand ruled on GST exemption for forest conservation services including seed collection, trench digging, fire line clearing, and nursery operations. The Authority held that exemption under Notification 12/2017 applies only to pure services or composite supplies where goods value doesn't exceed 25% of total supply value, provided to government entities for functions under Constitutional articles 243G or 243W. Each contract must be examined individually for exemption eligibility. Regarding TDS under section 51 CGST Act, deduction is not required only when contract value is below Rs. 2.5 lakhs, otherwise TDS provisions apply mandatorily.

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Issues Involved:
1. Exemption of various labour services under Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017.
2. Applicable GST rate if the services are not exempted.
3. Applicability of TDS under Section 51 of the CGST Act, 2017.

Issue-wise Detailed Analysis:

1. Exemption of Labour Services under Notification No. 12/2017-Central Tax (Rate):
The applicant sought clarification on whether the supply of labour services for activities such as collection of seeds, digging contour trenches, chal-khal, clearing fire lines, controlled burning, raising seedlings, plantation, and creation of check-dams are exempt under Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017. The ruling clarified that exemption is available only if the services are either "pure services" or "composite supply of goods and services in which the value of supply of goods constitutes not more than 25% of the value of the said composite supply" and are related to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution. The applicant's activities fall under the functions listed in these articles, but each contract must be individually examined to determine eligibility for exemption.

2. Applicable GST Rate if Services are Not Exempted:
If the supply of services does not qualify for exemption under Notification No. 12/2017, the applicable GST rate must be determined. The ruling did not specify the exact rates but emphasized the need to analyze each contract individually to ascertain the rate of GST applicable based on the nature of the services and the proportion of goods involved.

3. Applicability of TDS under Section 51 of the CGST Act, 2017:
The applicant questioned whether TDS should be deducted when the cumulative value of multiple contracts exceeds Rs. 2.5 Lakhs, even if individual contracts are less than Rs. 2.5 Lakhs. The ruling clarified that TDS is required to be deducted only when the value of a single contract exceeds Rs. 2.5 Lakhs. If the value of the supply under a contract does not exceed Rs. 2.5 Lakhs, TDS is not required to be deducted.

Ruling:
1. The benefit of exemption under Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017 is available only if the contract is for pure services or composite supply of goods and services where the value of goods does not exceed 25% of the total value and the services are related to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution.
2. TDS is not required to be deducted on payments made to the supplier of taxable goods or services if the value of the supply under a contract does not exceed Rs. 2.5 Lakhs.

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