2025 (12) TMI 545 - AAR - GST

Waste processing machinery to municipal body held taxable goods, not pure services; no GST exemption under Notification 12/2017

The AAR held that supplies made by Applicant to the Anand Municipal Corporation constitute supply of goods alone and not 'pure services' or a composite ... Levy of GST or exemption from GST - supply of goods to Anand Municipality Corporation (Local Authority of Anand City) - applicable GST on the supply of goods to Anand Municipality Corporation - pure services or not - rate of GST - HELD THAT:- As per SI. No.3 of the Notification, if the services provided are ‘Pure Services’ i.e. where there is only a supply of service with no corresponding supply of goods, and if it is provided to the Central Government, State Government or Union territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243 W of the Constitution, then the same is exempted. While SI. No. 3A of the Notification gives exemption if there is Composite supply of goods and services, in which the value of supply of goods constitutes not more than 25 per cent of the value of the said composite supply and is provided to the Central Government, State Government or Union territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243 W of the Constitution. As per the letter F.No:-AM/SAN/168/1 dtd. 29.09.2022 issued by the Nagarpalika, the contract is for the supply of machinery for 'Fresh Waste Processing' and the three Tax invoices namely ANND/SAN/MSW/01 dtd. 08.01.2024, ANND/SAN/MSW/02 dtd. 08.02.2024 and ANND/SAN/MSW/03 dtd. 19.02.2024 are also to this effect. Exemption from payment of GST under SI. No. 3 of Notification No. 12/2017-CT(R) dtd. 28.06.2017 is only available for pure services and under SI. No. 3A for composite supply of goods and services, in which the value of supply of goods constitutes not more than 25 per cent of the value of the said composite supply - Since, in the instant case, there is only a supply of goods, both the entries i.e. SI. No. 3 or 3A will not be applicable and consequently, no exemption is available for the supply of goods by the appellant to the Nagarpalika. GST rate applicable on the goods - HELD THAT:- Chapter 84 of the Tariff covers Machinery and mechanical appliances. Therefore, the machinery covered by the three invoices, fall under Chapter 84 more particularly under HSN 8479, 8428, 8462 and 8474. The GST rate for all these HSNs is 18%. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether supply of machinery (goods) for 'Fresh Waste Processing' made to a municipal local authority is exempt from GST under Sr. Nos. 3 or 3A of Notification No. 12/2017-CT(R) dated 28.06.2017. 1.2 If not exempt, what is the applicable GST rate on the specified waste-processing machinery classifiable under HSN 8479, 8428, 8462 and 8474 supplied to the local authority. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Exemption from GST on supply of machinery to a municipal local authority Legal framework 2.1 The Court examined Sr. Nos. 3 and 3A of Notification No. 12/2017-CT(R) dated 28.06.2017, which grant exemption to (a) pure services (Sr. No. 3) and (b) composite supplies of goods and services where the value of goods does not exceed 25% of the value of the composite supply (Sr. No. 3A), when provided to specified government entities, including local authorities, by way of any activity in relation to functions entrusted under Articles 243G or 243W of the Constitution. Interpretation and reasoning 2.2 The contract awarded by the municipal authority was specifically for 'supply of machinery for Fresh Waste Processing', and the corresponding tax invoices showed only supply of machinery, without separate service components. 2.3 Sr. No. 3 of Notification No. 12/2017-CT(R) applies only to 'pure services', i.e., where there is no supply of goods; thus, it cannot cover a transaction consisting solely of supply of goods. 2.4 Sr. No. 3A of the same Notification applies only to 'composite supply of goods and services' where the value of goods is not more than 25% of the value of such composite supply; this condition is also not satisfied because the impugned transaction is exclusively supply of goods. 2.5 Since the supply in question is not 'pure services' and not a composite supply with goods value capped at 25%, the exemption entries at Sr. Nos. 3 and 3A are inapplicable to the impugned supplies, notwithstanding that the recipient is a local authority and the activity relates to municipal solid waste management. Conclusions 2.6 Supply of machinery (goods) for Fresh Waste Processing to the municipal local authority is not covered by Sr. Nos. 3 or 3A of Notification No. 12/2017-CT(R) and is, therefore, liable to GST. Issue 2: Applicable GST rate on specified waste-processing machinery Legal framework 2.7 The Court referred to Chapter 84 of the GST Tariff, which covers 'Machinery and mechanical appliances', and to the applicable GST rate for headings 8479, 8428, 8462 and 8474. Interpretation and reasoning 2.8 The machinery supplied under the relevant invoices, including waste hopper machines, conveyor systems, segregation screens, sorting platforms, shredders, baling machines, separators, material recovery facility and organic waste composter, was classified by the applicant under HSN codes 84798200, 84282019, 84798999, 84742090, 84626100 and 8479. 2.9 These HSN codes fall within Chapter 84 of the Tariff and, for the headings 8479, 8428, 8462 and 8474, the prevailing GST rate is 18%. Conclusions 2.10 All the listed waste-processing machinery supplied under the identified HSN codes is classifiable under Chapter 84, and the applicable GST rate on such supplies is 18%.