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 bio-mining legacy waste removal, micro-composting maintenance, and bulk/wet waste collection constitute "pure services" to local authorities under Article 243W functions, qualifying for GST exemption under Notification 12/2017-CT. However, the Bio-CNG conversion contract was deemed a composite supply of goods and services involving facility transfer, disqualifying it from exemption as it fails the "pure services" criterion.

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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.

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