Digital water supply support services under Jal Jeevan Mission treated as pure services, exempt from GST under Notification 12/2017-CT

The West Bengal AAR held that the applicant's activities for the State PHE Directorate-digitalisation and monitoring of water supply schemes, enhancement of applications, digitisation of drawings, GIS-based data management, technical consultancy, and related orientation programmes-constitute "pure services" with no supply of goods. As these services support implementation of the Jal Jeevan Mission and are directly connected to supply of safe drinking water, they relate to functions under Entry 11 of the Eleventh Schedule and Entry 5 of the Twelfth Schedule to the Constitution. Accordingly, they fall under Sl. No. 3 of Notification No. 12/2017-CT (Rate) and are exempt from GST.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the services relating to digitalisation and monitoring of water supply schemes, enhancement of Jal Mitra application, digitisation and GIS mapping of piped water supply schemes, data management and documentation, organisation of orientation programmes, and other related technical consultancy services provided to the Public Health Engineering Directorate 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 relating to acquisition of field-level data, designing and development of mobile and web applications for Unique Tap Water Identity (UTWID), upkeep and hosting of WhatsApp bot platform, preparation of maps and other technical consultancy services provided to the Public Health Engineering Directorate qualify as "pure services" exempt under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

1.3 Consequentially, whether any question of classification and rate of tax arises if the above services are held to be exempt under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Exemption for services relating to digitalisation, monitoring, Jal Mitra enhancement, GIS, data management, and orientation programmes under Sl. No. 3 of Notification No. 12/2017-CT (Rate)

Legal framework

2.1 The Court considered Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate), 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 reproduced and relied on the definitions/concepts of:

(a) "Pure services" as understood from the Notification - supply of services not involving any supply of goods and not being works contract or other composite supplies involving goods; and

(b) "Composite supply" as defined in section 2(30) of the GST Act.

2.3 The Court referred to Article 243G and the Eleventh Schedule (specifically entry 11 - "Drinking water") and to Article 243W and the Twelfth Schedule (specifically entry 5 - "Water supply for domestic, industrial and commercial purposes"), to identify the constitutionally entrusted functions relevant for Sl. No. 3.

Interpretation and reasoning

2.4 The Court noted that the applicant had been awarded work orders by the Public Health Engineering Directorate (PHE Directorate) of the Government of West Bengal for various activities, broadly categorised as:

(A) Comprehensive digital transformation and monitoring of mega schemes, including design and development of mobile applications, field data collection, and GIS-based data preparation and visualisation of water supply scheme components.

(B) Enhancement, maintenance, upgradation and modification of the Jal Mitra Android and web application for functionality assessment of household tap connections.

(C) Digitisation of transmission and distribution systems and assets of piped water supply schemes, conversion to .kml for PM Gati Shakti portal, and digitisation/upload of lithologic drawings.

(D) Collection, scanning and digitisation of printed distribution drawings into geo-referenced CAD files, their upload to the Scheme Drawing & Litholog module, and development of GIS tools and data entry panels for technical attributes.

(E) Organisation of orientation programmes for Implementation Support Agencies, DPMU staff and Engineer Officers on functionality assessment (through Jal Mitra application), including training infrastructure, training materials, documentation and reporting.

2.5 The Court found, on examination of these work orders, that all such activities were directed to digitalisation, monitoring, data management, GIS integration and training in relation to implementation and monitoring of piped water supply schemes and Functional Household Tap Connections (FHTCs) under the Jal Jeevan Mission (JJM).

2.6 As to the recipient condition, the Court held that all services were provided to the State Government, represented by the PHE Directorate, which controls and implements water supply schemes. The second condition of Sl. No. 3 (service provided to Central/State Government, Union Territory, local authority or Governmental authority) was thus satisfied.

2.7 As to the functional nexus requirement, the Court observed that:

- The PHE Directorate's primary function is delivery of safe and reliable drinking water to rural households through piped water supply schemes as part of JJM.

- The services in question relate to monitoring of FHTCs, PWSS asset mapping, GIS-based coverage analysis, functionality assessment, and capacity-building of field functionaries.

- These activities are integrally connected to the function of "Drinking water" under entry 11 of the Eleventh Schedule (Article 243G) and "Water supply for domestic, industrial and commercial purposes" under entry 5 of the Twelfth Schedule (Article 243W).

The Court therefore held that the third condition of Sl. No. 3 (activity in relation to a function entrusted under Articles 243G/243W) was fulfilled.

2.8 On the nature of supply, the Court, after a detailed review of all relevant work orders, concluded that:

- The activities involved software/application development, digitalisation, GIS mapping, data processing, documentation and training-related services.

- No transfer or supply of goods of any kind formed part of these contracts.

- The work orders did not constitute "works contracts" or "composite supplies" involving goods.

Consequently, the services were characterised as "pure services" within the meaning of Sl. No. 3.

Conclusions

2.9 The Court held that the services relating to digitalisation and monitoring of mega schemes, enhancement and maintenance of Jal Mitra application, digitisation and GIS processing of piped water supply schemes, data management and documentation, and organisation of orientation programmes and related technical consultancy services provided to the PHE Directorate:

(i) Are pure services without any supply of goods;

(ii) Are provided to the State Government (PHE Directorate); and

(iii) Are activities in relation to drinking water / water supply functions entrusted under Articles 243G and 243W.

Accordingly, such services are classifiable under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) and are exempt from GST.

Issue 2 - Exemption for services relating to field data acquisition, UTWID application, WhatsApp bot platform, and mapping/technical consultancy under Sl. No. 3 of Notification No. 12/2017-CT (Rate)

Legal framework

2.10 The Court applied the same three cumulative conditions under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate): (a) pure services (no works contract or composite supply involving goods), (b) provided to specified Government/Governmental entities, and (c) in relation to functions entrusted to Panchayats/Municipalities under Articles 243G/243W.

Interpretation and reasoning

2.11 The Court noted that, although initially described by the applicant as "potential services", the applicant had subsequently obtained and produced work orders covering these activities, which the Court took into account. These works were categorised, inter alia, as:

(F) Designing and development of mobile and web applications for generation of Unique Tap Water Identity (UTWID) numbers for FHTC beneficiaries, including Web-GIS based monitoring, data validation tools, dashboards and analytical reporting.

(G) Up-keeping and hosting of a WhatsApp bot platform for optimising data accessibility, service delivery and operational efficiency, including programmable messaging infrastructure, backend/system maintenance, AI/LLM model enhancement, and integration with Jal Mitra and WBJJM dashboards.

(H) Validation of field-level data of FHTCs and acquisition of field-level data of distribution systems and transmission mains, GNSS-based pipeline surveys, mapping of assets (intake points, WTPs, pump houses, reservoirs, etc.), and preparation/uploading of scheme-wise AutoCAD and .kml maps into the WB-JJM dashboard and PM Gati Shakti portal.

2.12 The Court observed that these activities are all tools and processes for:

- Creation and maintenance of an accurate, geo-tagged database of water supply assets and household tap connections;

- Real-time and post-implementation monitoring of FHTC coverage and functionality; and

- Improved service delivery and grievance handling in rural water supply schemes.

Their purpose and use are therefore directly linked to the planning, implementation, monitoring and sustainability of drinking water supply systems under JJM.

2.13 On the "recipient" condition, the Court found that these services too were provided to the PHE Directorate of the Government of West Bengal, and therefore to the State Government, satisfying the second condition of Sl. No. 3.

2.14 On the "functional nexus" requirement, the Court held that the activities pertaining to UTWID, WhatsApp bot and field-level data acquisition/validation are all integral to the management and monitoring of piped drinking water supply to rural households under JJM. These are functions squarely falling under:

- "Drinking water" (entry 11, Eleventh Schedule, Article 243G); and

- "Water supply for domestic, industrial and commercial purposes" (entry 5, Twelfth Schedule, Article 243W).

Accordingly, they meet the third condition that the service be "in relation to" a function entrusted under Articles 243G/243W.

2.15 On the nature of supply, the Court again analysed the work orders and found:

- The contracts involve software/application design and development, digital data handling, AI/LLM configuration and hosting, and survey / data-validation services;

- No supply of goods is embedded in these contracts; and

- The contracts are not works contracts and do not constitute composite supplies involving goods.

They are therefore to be treated as "pure services" as used in Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate).

Conclusions

2.16 The Court concluded that the services relating to acquisition and validation of field-level data, design and development of UTWID mobile and web applications, upkeep and hosting of the WhatsApp bot platform, preparation of maps and other related technical consultancy services provided to the PHE Directorate:

(i) Constitute pure services without any associated supply of goods;

(ii) Are provided to the State Government through the PHE Directorate; and

(iii) Are activities in relation to the constitutionally entrusted drinking water/water supply functions under Articles 243G and 243W.

Accordingly, these services are covered by Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) and are exempt from GST.

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

Interpretation and reasoning

2.17 The applicant had framed alternate questions on classification and rate of tax assuming that the services might not qualify under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate). The Court, having answered Issues 1 and 2 in the affirmative and held that the impugned services are exempt as pure services in relation to drinking water functions, found that the contingency underlying the alternate questions did not arise.

Conclusions

2.18 The Court held that, in view of its findings that all the relevant services are exempt under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate), no issue of further classification under specific SAC codes or determination of applicable positive tax rates arises, and the alternate questions are rendered redundant.

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