Exemption for municipal solid waste services: pure service to a local authority qualifies under the GST notification and is tax exempt.

Collection, transportation and disposal of segregated municipal solid waste performed by a contractor using its own fuel operated vehicles, with consideration fixed per unit removed and no transfer of ownership of goods, constitutes a pure service supplied to a local authority. Applying the composite supply and works contract tests, there is no supply of goods component or works contract; the activity falls within municipal functions under Article 243W. Operatively, such services therefore qualify for exemption under Sl. No. 3 of Notification No. 12/2017 Central Tax (Rate), resulting in tax exemption.

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Issues: Whether services consisting of collection, transportation and disposal of segregated municipal solid waste by the applicant to a municipal corporation using the applicant's own fuel operated vehicles qualify for exemption under Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 (Sl. No. 3, alternatively Sl. No. 3A or Sl. No.4) as activities in relation to functions entrusted to a Municipality under Article 243W of the Constitution of India.

Analysis: The service is provided to a municipal corporation which falls within the statutory definition of "local authority". The work orders require collection, transportation and dumping of segregated waste at a designated dumpsite with the applicant supplying and maintaining its own vehicles and uploading quantity evidence; consideration is fixed per unit of waste removed. Sl. No. 4 of the notification applies only to a "governmental authority" as defined and is therefore inapplicable. Sl. No. 3A relates to composite supplies where goods constitute not more than 25% of value; the contractual terms and functional details show no transfer of goods to the local authority and no component of supply of goods forming part of the contractual consideration. The activity therefore does not constitute a works contract or a composite supply involving supply of goods but is a supply of pure services directly in relation to municipal solid waste management which is an activity listed at Sl. No. 6 of the Twelfth Schedule under Article 243W.

Conclusion: The service qualifies as a pure service supplied to a local authority in relation to a function entrusted to a Municipality under Article 243W and therefore falls within Sl. No. 3 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017; the supply is exempt from tax. This conclusion is in favour of the assessee.

Ratio Decidendi: A contractual supply of collection, transportation and disposal of municipal solid waste by a contractor using its own vehicles and equipment, where there is no transfer of ownership of goods and consideration is measured for the service of removal, qualifies as a "pure service" to a local authority and is exempt under Sl. No. 3 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 when the activity relates to functions entrusted to a Municipality under Article 243W of the Constitution of India.

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