GST exemption for Jal Jeevan Mission pure services under Sl. 3, Notification 12/2017-CT(R), Entries 11 and 5

The WB AAR held that the applicant's activities relating to field-level data validation of Functional Household Tap Connections, organizing orientation programmes on functionality assessment (Jal Mitra application), evaluation of performance under Jal Jeevan Mission, and collection/visualization of piped water supply scheme components constitute "pure services" without any element of supply of goods. As these services are provided in relation to implementation of Jal Jeevan Mission and are intrinsically connected with supply of safe drinking water, they fall within functions listed in Entry 11 of the Eleventh Schedule and Entry 5 of the Twelfth Schedule to the Constitution. Accordingly, they are classifiable under Sl. No. 3 of Notification No. 12/2017-CT(R) and eligible for exemption from GST.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the services of (a) field level data validation of Functional Household Tap Connections and database preparation for Piped Water Supply Schemes, and (b) organizing orientation programmes and performance evaluation under the Jal Mitra / Jal Jeevan Mission framework, supplied to a State Government department, qualify as "pure services" exempt under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

1.2 Whether the services of collection of components of Piped Water Supply Schemes, land information of head work site area, GIS-based visualization and functionality assessment, supplied to a State Government department, qualify as "pure services" exempt under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

1.3 Whether any classification and rate determination is required in respect of the above services in the event the exemption under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) is not available.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Exemption for FHTC data validation and Jal Mitra orientation services under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate)

Legal framework

2.1 The judgment reproduces Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, which exempts: "Pure services (excluding works contract service or other composite supplies involving supply of any goods) 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 of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution."

2.2 The Court sets out three cumulative conditions for applicability: (i) the service must be "pure services" (no works contract or composite supply involving goods), (ii) it must be provided to Central/State Government, Union Territory, local authority or Governmental authority, and (iii) it must be by way of any activity in relation to a function entrusted under Articles 243G (Eleventh Schedule) or 243W (Twelfth Schedule).

2.3 Articles 243G and 243W, together with the Eleventh and Twelfth Schedules, are reproduced and relied upon, with specific emphasis on: Eleventh Schedule entry 11 ("Drinking water") and Twelfth Schedule entry 5 ("Water supply for domestic, industrial and commercial purposes").

Interpretation and reasoning

2.4 The services examined under this issue are: (A) field level data validation of FHTCs (elimination of multiple entries, verification with electricity or other unique documents, and creation of an error-free database for different Piped Water Supply Schemes across several divisions), and (B) organizing orientation programmes for ISAs, DPMU and engineer officers on the Jal Mitra web and mobile application, along with evaluation of performance under support activities of Jal Jeevan Mission.

2.5 The Court notes that all these activities are undertaken for the Public Health Engineering Directorate of the State Government, which is responsible for rural and certain urban water supply and is implementing Jal Jeevan Mission to provide Functional Household Tap Connections and safe drinking water. Accordingly, condition (ii) of the notification (service to State Government / Governmental authority) is held to be satisfied.

2.6 On the nature of the activities, the Court finds they are integrally connected with the provision and monitoring of safe drinking water through Piped Water Supply Schemes and FHTCs, including data validation, GIS-based monitoring, digital asset management and capacity-building (orientation/training) of stakeholders under JJM/Jal Mitra. These are held to be activities "in relation to" the constitutional functions of drinking water and water supply, thus satisfying condition (iii) by reference to entry 11 of the Eleventh Schedule (Article 243G) and entry 5 of the Twelfth Schedule (Article 243W).

2.7 For the "pure services" requirement, the Court notes that the work orders relate to development and use of software and applications, data management, surveys and trainings, without any transfer or supply of goods. No element of works contract or composite supply involving goods is found in the scope of work. The services are therefore treated as pure services within the meaning of Sl. No. 3 of the notification.

Conclusions

2.8 The services of field level data validation of FHTCs and creation of an error-free database for Piped Water Supply Schemes, and the services of organizing orientation programmes and performance evaluation under Jal Mitra / Jal Jeevan Mission, when supplied to the Public Health Engineering Directorate of the State Government, are "pure services" provided to the State Government in relation to the functions of drinking water/water supply entrusted under Articles 243G and 243W. They qualify for exemption under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate), and no GST is payable.

Issue 2 - Exemption for survey, GIS visualization and functionality assessment services under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate)

Legal framework

2.9 The same Notification No. 12/2017-Central Tax (Rate), Sl. No. 3, and the same three cumulative conditions identified in paragraph 2.2 above are applied. Articles 243G and 243W with their Schedules are applied in the same manner, primarily by reference to "Drinking water" and "Water supply for domestic, industrial and commercial purposes".

Interpretation and reasoning

2.10 The Court identifies, on the basis of work orders now on record, the following relevant services: (C) digital structurisation of pipeline alignment and asset evaluation through survey and map preparation for a specific Piped Water Supply Scheme, and (D) capturing detailed field-level information of head work sites and pump houses, including images, operational status, designing and drawing of scheme-based maps visualizing key features related to drinking water supply, and measurement of head work site area using DGPS for identification of existing and vacant land area.

2.11 These services are found to be part of the same overall scheme of providing safe and reliable drinking water through PWSS under Jal Jeevan Mission, involving GIS tools, Web GIS, digital asset management, scheme mapping, and asset evaluation. They are therefore characterized as activities directly related to and facilitating the core drinking water and water supply functions entrusted to Panchayats and Municipalities; condition (iii) of Sl. No. 3 is thus held satisfied.

2.12 The services are all carried out for the Public Health Engineering Directorate of the State Government. Accordingly, condition (ii) (services provided to State Government / Governmental authority) is held to be fulfilled.

2.13 On the "pure services" requirement, the Court, after a detailed review of work orders C and D, concludes that the activities involve surveys, data capture, GIS-based mapping, digital structurisation, preparation of maps and representations, and functionality assessment, with no element of supply of goods or works contract. There is no composite supply involving goods. The services are thus held to be pure services for purposes of the notification.

Conclusions

2.14 The services involving collection of different components of Piped Water Supply Schemes, land information of head work site area, visualization of key features with functionality assessment, digital structurisation of pipeline alignment, and asset evaluation and mapping, when supplied to the Public Health Engineering Directorate of the State Government, are "pure services" provided to the State Government in relation to drinking water/water supply functions under Articles 243G and 243W. They qualify for exemption under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate), and no GST is payable.

Issue 3 - Necessity of classification and rate determination where exemption applies

Interpretation and reasoning

2.15 The questions seeking classification and rate of tax (Questions 3 and 4) are expressly posed as contingent on a negative answer to the exemption questions (Questions 1 and 2). Since the Court answers Questions 1 and 2 in the affirmative, holding the services exempt under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate), the contingency does not arise.

Conclusions

2.16 In view of the finding that all the relevant services are exempt as pure services under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate), no determination of alternate classification or applicable GST rate is required or made. The queries regarding classification and rate in the event of non-exemption "do not arise".

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