2022 (8) TMI 922 - AAR - GST

Micro-compost centres and wet waste processing for municipal corporation classified under waste treatment services, qualifies for GST exemption

AAR TamilNadu held that maintaining micro-compost centres and processing wet waste for Greater Chennai Corporation falls under SAC 99943 (Waste Treatment ... Classification of services - Maintaining the micro-compost centres and processing the wet waste provided by the Greater Chennai Corporation at designated locations in Center Region Zones 7, 9 & 10 in Chennai - eligibility of exemption under Serial No 3 of Notification No 12/2017-Central Tax (Rate)., dated 28/07/2017, as amended from time to time - HELD THAT:- The applicant has entered into an agreement with GCC and the work order S.W.M.C.No. A7/0108A/2020 dated 23.07.2020 is issued by GCC to the applicant for “Maintaining the Micro Compost Centres and Processing the Wet Waste” provided by Greater Chennai Corporation at designated locations in Center Region Zones 7, 9 & 10 at the quoted processing fees of Rs. 1690/- PMT and for a total contract value of Rs. 9,09,36,027.50/- for a period of three years. SAC 9994 covers 'Sewage and waste collection, treatment and disposal and other environmental protection services' - The applicant has stated that as per their understanding, the activity is classified under Heading SAC 99942. The activity undertaken by the applicant is waste treatment/processing of wet waste provided by GCC and maintenance of the designated Micro compost centers of GCC, by employing their own personnel. The activity while covered under the Heading 9994, will more appropriately fall under the Group 99943- waste treatment and disposal services rather than group 99942-Waste collection Services - the classification of the activity of Maintaining Micro Compost Centers and processing the wet waste provided by GCC, is classifiable under Heading 9994 and more specifically under group 99943- 'Waste Treatment and Disposal services'. Applicability of serial No.3 of Notification No.12/2017-Central Tax (Rate)., dated 28/07/2017 - HELD THAT:- The work order received from GCC to the applicant for maintenance of the Micro Compost Centres is “Pure services' rendered to a GCC, a local authority and the said service are activities entrusted to a municipality under Article 243W of the Constitution. Hence, the applicant is eligible for exemption from GST vide SI.No.3 of Notification 12/2017-CT. (Rate) dated 28.06.2017(as amended). Issues Involved:1. Classification of the service 'Maintaining the micro-compost centres and processing the wet waste provided by the Greater Chennai Corporation at designated locations in Center Region Zones 7, 9 & 10 in Chennai.'2. Entitlement to exemption under Serial No 3 of Notification No 12/2017-Central Tax (Rate).Detailed Analysis:Issue 1: Classification of ServiceThe applicant sought to classify the service of maintaining micro-compost centres and processing wet waste provided by the Greater Chennai Corporation (GCC). The activity includes deploying laborers to maintain the centres, processing the wet waste, and handing over the by-product (manure) to GCC. The service was argued to fall under SAC 99942, which pertains to waste collection services. However, upon examination, it was determined that the service is more appropriately classified under SAC 99943, which covers waste treatment and disposal services. The classification under SAC 9994, specifically under group 99943, was confirmed because the applicant's primary activity is processing wet waste and maintaining the compost centres rather than merely collecting waste.Issue 2: Entitlement to Exemption under Notification No 12/2017-Central Tax (Rate)The applicant claimed exemption under Serial No 3 of Notification No 12/2017-Central Tax (Rate), which exempts pure services provided to the Central Government, State Government, Union territory, or local authority in relation to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution. The conditions for this exemption are:1. The service must be a pure service.2. The service must be provided to a local authority.3. The service must relate to functions entrusted to a Municipality under Article 243W.The applicant's services were deemed pure services as they involved only labor deployment without any supply of goods. The recipient, GCC, is a local authority as defined under Article 243P(e) and Article 243Q of the Constitution. The activity of processing wet waste and maintaining compost centres falls under public health, sanitation, conservancy, and solid waste management, which are functions entrusted to municipalities under Article 243W and listed in the Twelfth Schedule of the Constitution.The ruling confirmed that the applicant's services are exempt from GST under Serial No 3 of Notification No 12/2017-Central Tax (Rate), as the services are pure, provided to a local authority, and related to municipal functions. The reference to the Sumeet Facilities Ltd case was distinguished as that case involved services provided to concessionaires, not directly to a local authority.Ruling:1. The service of maintaining micro-compost centres and processing wet waste provided by GCC is classified under SAC 9994, specifically under group 99943 (waste treatment and disposal services).2. The service is exempt from GST under Serial No 3 of Notification No 12/2017-Central Tax (Rate), as it qualifies as a pure service provided to a local authority in relation to functions entrusted to a municipality under Article 243W of the Constitution.