2022 (7) TMI 404 - AAR - GST

Municipal waste management contracts qualify for GST exemption under Notification 12/2017-CT as pure services to local authorities

The AAR, Tamil Nadu ruled on GST exemption for solid waste management contracts with municipal corporations. The authority held that contracts for ... Exemption from GST or not - contracts received from various city corporations and a municipality towards Solid waste management - Contracts received from various city corporations and municipalities towards removal of legacy waste dumped at dump site through bio-mining process - applicability of Sl.No.3 of Notification 12/2017-CT.(Rate) dated 28.06.2017 - Applicability of GST TDS for the exempted contracts - HELD THAT:- From the agreement, it is observed that the facility viz., BIO-CNG will be built, operated by the applicant and will be transferred to the GCC without any cost at the end of the agreed upon period. Thus it is seen that the work involved is a composite supply of goods and services as it involves transfer of facility built by the contractor which would include the Plant and machinery and support structures. Hence this supply of the applicant is not 'Pure services'. Therefore, it is found that the contract entered into for the conversion of wet waste into BIO-CNG does not satisfy the first criterion of being 'Pure services' and is found not eligible for exemption under SI.No.3 Notification 12/2017-C.T. (Rate) dated 28.06.2017(as amended). The Greater Chennai Corporation was formed vide G.O.Ms. No. 152, Dt.26.10.2015 which was earlier established as Chennai Corporation that originally was formed as Madras Municipal Corporation on the 29th September 1688. The service recipients are various Municipal Corporations which are all local authorities. As per Section 2 clause (69) sub- clause (b) of the CGST Act, 2017 'Municipality' as defined in clause (e) of article 243 P the Constitution is a local authority, hence the services are provided to 'Local Authority' and the criterion related to recipient is satisfied. Whether the activity is a function entrusted to a municipality under Article 243W of the Constitution? - HELD THAT:- On a cogent reading of SI. No. 6 of the Twelfth Schedule to the Constitution and Rule 15 of the Solid Waste Management Rules 2016, it is evident that it is the duty of the local authority to investigate, analyse the existing dumpsites for their potential bio-mining and bio-remediation and wherever feasible has to take actions to bio-mine or bio-remediate the sites under 'Solid Waste Management'. In the case at hand the function of bio-mining. Bio-remediation of the dump yard and maintenance of Micro composting center is entrusted to the applicant and therefore the final criterion is also satisfied. The contracts received from various city corporations and municipalities towards removal of legacy waste dumped at dump site through bio-mining process is 'Pure services' rendered to a local authority and the activity is a function entrusted to a municipality under Article 243W of the Constitution. Thus the contracts are eligible for exemption from GST vide SI.No.3 of Notification 12/2017-CT. (Rate) dated 28.06.2017(as amended). Further the contracts entered into for maintenance of Micro-composting and labour contracts for collection of bulk and wet waste are also found to be 'Pure services' rendered to local authorities and are activities entrusted to a municipality under Article 243W of the Constitution. However the contract pertaining to Bio-CNG carried at the Central Asphaltic plant being supply of goods and services together does not qualify as 'Pure services' and hence it is found not to be eligible for exemption under SI.No.3 of Notification 12/2017-CT. (Rate) dated 28.06.2017(as amended). Issues Involved:1. Exemption from GST for contracts related to Solid Waste Management under Notification 12/2017-CT.(Rate) dated 28.06.2017.2. Exemption from GST for contracts related to removal of legacy waste through bio-mining process under Notification 12/2017-CT.(Rate) dated 28.06.2017.3. Applicability of GST TDS for the exempted contracts.Issue-wise Detailed Analysis:1. Exemption from GST for Solid Waste Management Contracts:The applicant sought an advance ruling on whether contracts received from various city corporations and municipalities towards Solid Waste Management are exempted from GST under Sl.No.3 of Notification 12/2017-CT.(Rate) dated 28.06.2017. The relevant entry exempts 'Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government, Union Territory, or local authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W of the Constitution.'The contracts in question include:- Removal of legacy waste through bio-mining.- Maintaining Micro Compost Centers and processing wet waste.- Labour contracts for collection and removal of wet waste and bulk waste.The Authority examined whether these services qualify as 'Pure services' and are provided to a local authority. It was concluded that:- The services for removal of legacy waste, maintaining Micro Compost Centers, and labour contracts for waste collection are 'Pure services.'- These services are provided to local authorities, satisfying the criteria of being functions entrusted to municipalities under Article 243W of the Constitution.Therefore, these contracts are exempt from GST under Sl.No.3 of Notification 12/2017-CT.(Rate) dated 28.06.2017.2. Exemption from GST for Removal of Legacy Waste through Bio-Mining Process:The applicant also sought clarity on whether contracts for removal of legacy waste through bio-mining process are exempted from GST under the same notification. The Authority reviewed the contracts and confirmed that:- The removal of legacy waste through bio-mining process qualifies as 'Pure services.'- These services are provided to local authorities and are functions entrusted to municipalities under Article 243W of the Constitution.Thus, contracts for the removal of legacy waste through bio-mining process are also exempt from GST under Sl.No.3 of Notification 12/2017-CT.(Rate) dated 28.06.2017.3. Applicability of GST TDS for the Exempted Contracts:The applicant questioned whether GST TDS is applicable for the exempted contracts. The Authority clarified that TDS is to be collected and paid by the Municipalities and Corporations being recipients of the service, not by the applicant. The question raised pertains to the applicability of the notification to the recipient of the services, who is a distinct person for whom this ruling is not applicable as per Section 103 of the Act. Therefore, the question on the applicability of TDS on the exempted contracts was not admitted for consideration.Ruling:1. Contracts related to Solid Waste Management, except for Bio-CNG at the Central Asphaltic Plant, are exempt from GST under Sl.No.3 of Notification 12/2017-CT.(Rate) dated 28.06.2017.2. Contracts for removal of legacy waste through bio-mining process are exempt from GST under the same notification.3. The question on TDS applicability was not admitted for reasons cited.