Composite supply exemption denied for dredging services because the recipient was not a qualifying government or local authority entity.

Dredging services supplied under a composite supply were not exempt under serial No. 3A of Notification No. 9/2017-IT (Rate) as amended because the decisive condition was the identity of the recipient. The exemption applied only where the supply was made to the Central Government, State Government, Union Territory or a local authority in relation to Panchayat or Municipality functions, and the Gujarat Maritime Board did not fall within those categories. The earlier reference to a government entity was no longer in the amended entry, so the supply remained taxable and the exemption was denied.

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Issues: Whether dredging services supplied to the Gujarat Maritime Board were covered by serial No. 3A of Notification No. 9/2017-IT (Rate) dated 28.6.2017 as amended.

Analysis: Serial No. 3A exempted a composite supply of goods and services only where the value of goods did not exceed 25% of the composite supply and the supply was made to the Central Government, State Government, Union Territory or local authority by way of an activity in relation to functions entrusted to a Panchayat or Municipality. The work described in the tender involved a composite supply, and the certificate on the 25% condition was found to be ambiguous and later acknowledged as a drafting error. The decisive requirement was the identity of the recipient. The Gujarat Maritime Board was found to be the owner and recipient of the dredging service, but it is neither the Central Government, State Government, Union Territory nor a local authority. The earlier reference to a government entity did not assist the applicant because that expression stood omitted from serial No. 3A by amendment. The question whether the activity related to a Panchayat function was therefore not pursued further.

Conclusion: The dredging service supplied to the Gujarat Maritime Board was not eligible for exemption under serial No. 3A of Notification No. 9/2017-IT (Rate) dated 28.6.2017 as amended.

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