Bio-remediation and bio-mining services for municipal solid waste processing qualify as pure services but lose GST exemption after Notification 16/2021 amendment /2021

AAR-AP ruled that the applicant's bio-remediation and bio-mining services for municipal solid waste processing at Tirumala qualified as pure services under Notification 11/2017, initially eligible for exemption under SI.No.3 of Notification 12/2017 as functions entrusted to municipalities under Article 243W. However, following amendment by Notification 16/2021 effective January 1, 2022, these services are no longer exempted from GST.

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Issues Involved:
1. Classification of the services provided by the applicant.
2. Whether the services provided by the applicant are exempted under SI.No.3 of Notification No.12/2017 as amended.

Detailed Analysis:

1. Classification of the Services:
The applicant, M/s. Zigma Global Environ Solutions Private Limited, provides services related to the processing and disposal of legacy municipal solid waste through bio-remediation and bio-mining. The applicant contends that their services fall under SAC code No.9994, specifically Group 99943, which pertains to "sewage and waste collection, treatment and disposal and other environmental protection services" as per Notification No.11/2017 Central Tax (Rate) dated 28.06.2017. The Authority for Advance Ruling concurs with the applicant’s classification after examining the nature of the services provided.

2. Exemption under SI.No.3 of Notification No.12/2017:
The applicant claims that their services should be exempt under SI.No.3 of Notification No.12/2017 Central Tax (Rate) dated 28.07.2017, which exempts "pure services" provided to the Central Government, State Government, Union Territory, local authority, or a Governmental authority by way of any activity related to functions entrusted to a municipality under Article 243W of the Constitution.

a) Pure Services:
The services rendered by the applicant do not involve the supply of any goods, thus qualifying as "pure services." The services include the complete reclamation of dumpsite land through bio-remediation and bio-mining, in compliance with Solid Waste Management Rules, 2016.

b) Governmental Authority:
The Tirumala Tirupati Devasthanam (TTD) is examined to determine if it qualifies as a "Governmental Authority." The TTD, established under the A.P. Charitable & Hindu Religious Institutions & Endowments Act (1987), meets the criteria of being set up by an Act of State Legislature. Additionally, the Board of Trustees of TTD is constituted by the government, with significant government participation and control, thus fulfilling the requirement of 90% or more participation by the government.

c) Functions Entrusted to a Municipality:
The functions carried out by TTD, such as public health, sanitation conservancy, and solid waste management, align with the functions entrusted to a municipality under Article 243W of the Constitution. Therefore, the services provided by the applicant to TTD fall under the scope of activities exempted under SI.No.3 of Notification No.12/2017.

Amendment to Notification No.12/2017:
However, Notification No. 16/2021-Central Tax (Rate) dated November 18, 2021, effective from January 1, 2022, amends the exemption. It omits the words "or a Governmental authority or a Government Entity" from Serial No. 3 and 3A, thereby excluding services provided to a Governmental Authority or Government Entity from the exemption. Consequently, the services provided by the applicant are no longer exempt from GST under SI.No.3 of Notification No.12/2017 as amended by Notification No. 16/2021.

Ruling:
- Classification: The services provided by the applicant fall under SAC code No.9994, specifically Group 99943 - Waste treatment and disposal services.
- Exemption: The services provided by the applicant are not exempt under SI.No.3 of Notification No.12/2017 as amended by Notification No. 16/2021.

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