GST Taxability....................

[milan bamal]

I was awarded a sanitation tender by the Municipal Corporation.

This supply is exempt from GST.

I assigned this tender to my friend.

At the end of the month, I will submit an invoice to the Municipal Corporation for the exempt supply

On the other hand, my friend issued an invoice in the name of my firm for sanitation services.

So, will my friend charge GST on the invoice or not?

[Raam Srinivasan Swaminathan Kalpathi]

Your friend should positively impute GST on the invoice. You will file umpteen AARs on this issue.

[KASTURI SETHI]

In this scenario this is not correct way to claim exemption. In order to claim exemption, you are required to supply sanitation services direct to Municipal Corporation. No exemption is available to your friend. Exemption in this scenario is conditional.Your friend would not be supplying sanitation services directly to Municipal Corporation. Here is the decision of AAR, Telangama :-

2023 (11) TMI 592 - AUTHORITY FOR ADVANCE RULING, TELANGANA - In Re : Immense Construction Company

 

[Sadanand Bulbule]

I welcome the replies.

However my concern is deeper than what it looks at surface:

Where sanitation and similar public welfare functions entrusted to Municipal Corporations are Constitutionally intended to receive tax exemption, denying the same benefit to subcontractors executing the very same activity results in embedded GST cost without ITC availability, thereby indirectly burdening the local authority and frustrating the constitutional objective behind such exemptions. Hence, exemption provisions require a purposive interpretation based on the nature of the function executed rather than the contractual layering of the supply chain.

[Shilpi Jain]

The exemption that you are claiming is service recipient specific (Local authority/State Governemtn/ CG) and service specific. So if when your friend is providing the services, it is not provided to the notified recipient then it will be taxable and not exempt.

AI Summary

GST exemption for sanitation services is recipient-specific, so subcontracted supplies to a third party remain taxable.
GST exemption for sanitation services is recipient-specific and service-specific, so it applies only when the service is supplied directly to the notified recipient such as a municipal corporation or local authority. If the work is assigned or subcontracted and a third party invoices for the sanitation services, the exemption is not available to that third party because the supply is not made directly to the exempt recipient. The discussion also notes the concern that this approach may create embedded GST cost in public welfare functions where input tax credit is unavailable.