Dredging and De-Silting Services Classified as Pure Service with NIL GST Rate Under Entry No. 3 Notification 12/2017

The AAR, WB held that dredging and de-silting services performed by the applicant for the state government constitute a pure service without any supply of goods or works contract. The activity involves removal and dumping of silt without creation of any new dumping ground or water pocket. Consequently, the service qualifies under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The applicable GST rate on such dredging services is NIL.

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ISSUES:

Whether the supply of dredging service and removal of dredged materials qualifies as a "pure service" under GST law.Whether the supply is covered under serial no. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.Whether the supply is provided to a Central Government, State Government, Union Territory, local authority, or governmental authority.Whether the service relates to any function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W of the Constitution of India.What is the applicable GST rate on such supply.Whether Notification No. 9/2017 Integrated Tax (Rate) dated 28-06-2017 (IGST Notification) applies to the supply or the corresponding Central and State notifications for intra-state supply.

RULINGS / HOLDINGS:

The supply of dredging and removal of dredged materials is a "pure service" excluding works contract service or other composite supplies involving supply of any goods, as the activity involves no supply of goods and only removal and disposal of materials from a water body.The supply is covered under serial no. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, which exempts "Pure services ... provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G or in relation to any function entrusted to a Municipality under Article 243W of the Constitution."The supply is provided to the State Government of West Bengal through the Irrigation & Waterways Directorate, which qualifies as a governmental authority.The dredging service relates to functions entrusted to Panchayats under Article 243G, specifically entries no. 5 (minor irrigation, water management and watershed development) and 14 (roads, culverts, bridges, ferries, waterways and other means of communication) of the Eleventh Schedule.The applicable GST rate on the supply is NIL under the said notification.The IGST Notification No. 9/2017 dated 28-06-2017 does not apply as the supply is intra-state; the correct exemption notification is Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and the corresponding State notification.

RATIONALE:

The legal framework applied includes the Central Goods and Services Tax Act, 2017, the West Bengal Goods and Services Tax Act, 2017, Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, and constitutional provisions under Articles 243G and 243W of the Constitution of India.Notification No. 12/2017-Central Tax (Rate) serial no. 3 requires three cumulative conditions: (1) supply must be a pure service excluding works contract or composite supplies involving goods; (2) service must be provided to a government or governmental authority; and (3) service must relate to functions entrusted to Panchayats or Municipalities under Articles 243G or 243W respectively.The supply was held to be a pure service as dredging involves removal of silt, sediment, and debris without supply of goods, supported by definitions from the erstwhile Service Tax Act and dictionary meanings.The recipient is a State Government department, fulfilling the second condition.The nature of the dredging service aligns with functions listed in the Eleventh Schedule under Article 243G, fulfilling the third condition.The intra-state nature of the supply excludes applicability of the IGST Notification No. 9/2017 dated 28-06-2017; the applicant's initial reference to this notification was a typographical error corrected during proceedings.Precedents from earlier Advance Rulings confirm exemption applicability under similar facts.

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