Annual maintenance services for municipal waste equipment ruled composite supply of goods and services, not pure services

The AAR, West Bengal ruled that annual operation and maintenance services for compactor and hook loader equipment provided to Howrah Municipal Corporation constitute a composite supply of goods and services, not pure services. The supply involves goods like spare parts during maintenance, disqualifying it from pure services exemption. However, the supply may qualify for exemption under serial 3A of the Exemption Notification if goods value does not exceed 25% of total supply value, as the services relate to solid waste management functions entrusted to municipalities under Article 243W of the Constitution.

---

---

Issues:
1. Whether conservancy/solid waste management services provided are exempt from GSTRs.

Analysis:
The applicant sought an advance ruling regarding the exemption of conservancy/solid waste management services from GST. The applicant, engaged in providing these services to the Conservancy Department of a Municipal Corporation, claimed that their services qualify as "pure services" exempted under specific notifications. The applicant contended that their services fall under the exemption for services provided to government authorities related to functions entrusted to Panchayats or Municipalities under the Constitution. The Authority observed that the work order described the services as the annual operation and maintenance of specific equipment for garbage disposal. While the term "pure services" was not defined, the Authority noted that the supply involved goods like spare parts, making it a composite supply. The Authority ruled that the services could be exempted under a specific notification if the value of goods in the composite supply does not exceed 25% of the total value.

The Authority analyzed the functions entrusted to Municipalities under the Constitution, particularly focusing on sanitation, conservancy, and solid waste management. It was determined that the applicant's services to the Municipal Corporation could be exempted under the relevant notification if the value of goods in the composite supply did not exceed 25% of the total value. The ruling clarified that the applicant's supply for the operation and maintenance of equipment for waste management is eligible for exemption from tax under the specified notification, subject to the condition of the goods' value not exceeding 25% of the total supply value.

This detailed analysis by the Authority provides clarity on the exemption status of conservancy/solid waste management services under GST laws. The ruling highlights the importance of understanding the nature of services provided, the composition of supply, and the specific criteria for exemption eligibility under relevant notifications.

---