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2022 (3) TMI 1479 - AAR - GSTExemption from GST - services of survey and preparation of detailed project report (DPR) for water supply schemes for Panchayats/Municipalities under Jal Jeevan Mission - pure services - applicability of 2% MS deduction on the payments made - N/N. 12/2017-Central Tax (Rate) New Delhi, dated 28 th June, 2017 - HELD THAT - It is observed that SI. No. 3 of the Notification No. 12/2017-Central Tax (Rate) dated 28 June, 2017 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. Whether the services provided by the applicant are services, provided 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? - HELD THAT - To avail the benefit of the aforesaid exemption, three conditions should be satisfied. Firstly, pure services (excluding works contract service or other composite supplies involving any goods) should be provided, secondly, it should be provided to the Central Government, State Government or Union territory or local authority or a Governmental authority and thirdly it should be 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. Supply of man power as discussed above provided by business entities like the applicant, not involving any supply of goods would be treated as supply of pure services also the applicant has submitted that they are providing the same to Central / State Government. It is dear from the documents furnished by the applicant that the provision of services of survey and preparation of Detailed Project Report for water supply systems for Panchayats/ Municipalities by the applicant through Public Health Engineering Department, Chhattisgarh, qualifies as being Pure Services as per the definition and the services rendered thereby being listed in article 243G of Constitution as functions pertaining to Panchayat, eligible for exemption as provided under Sr. no. 3 to Notification No. 12/2017- Central Tax (Rate) New Delhi, dated 28th June, 2017 as amended. IDS deduction of 2% on the payment made by the PHED, Chhattisgarh - HELD THAT - TDS under GST under CGST Act, 2017 is applicable only on taxable goods or services and not on all Taxable supplies . Taxable supply stands defined under Section 2 (108) of CGST Act, 2017 to mean a supply of goods or services or both which is leviable to tax under this Act, whereas TDS ibid stipulates about taxable goods and services and not on taxable supply . It would not be out of place to mention here that only taxable supply covers all supplies that are leviable to tax (even if exempt by Notification under Section 11 of CGST Act, 2017). Hence TDS ibid is not deductible if the underlying transaction is exempt or non-taxable (i.e.) the same is not leviable to GST - no deduction of TDS is warranted in respect of payment received by the applicant against the services rendered by the applicant which are exempted as per principal notification No.12/2017-Central Tax (Rate) dated 28th June, 2017, as amended.
Issues Involved:
1. GST exemption on the services of survey and preparation of Detailed Project Report (DPR) for water supply schemes for Panchayats/Municipalities under Jal Jeevan Mission. 2. Applicability of 2% TDS deduction on the payments made for the above services. Issue-wise Analysis: 1. GST Exemption on Services: The applicant, M/s Aarav Consultancy Services Pvt. Ltd., sought an advance ruling on whether their services of survey and preparation of DPR for water supply schemes for Panchayats/Municipalities under Jal Jeevan Mission are exempt from GST under Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017, as amended. - Scope of Services: The services include topographical surveys, preparation of detailed designs and cost estimates, preparation of drawings, and submission of reports and presentations. These services are classified as "Pure Services" since they do not involve the supply of materials or construction activities. - Notification No. 12/2017-Central Tax (Rate): This notification exempts "Pure Services" provided to the Central Government, State Government, Union territory, local authority, or a Governmental authority by way of any activity related to any function entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution. - Relevant Constitutional Articles: The services provided by the applicant are listed under the functions pertaining to Panchayats and Municipalities as per Articles 243G and 243W, respectively. Specifically, water supply services are included in these functions. - Conclusion: The Authority concluded that the services provided by the applicant qualify as "Pure Services" and are thus eligible for GST exemption under Sr. No. 3 of Notification No. 12/2017-Central Tax (Rate). 2. Applicability of 2% TDS Deduction: The applicant also sought clarification on whether 2% TDS on GST is applicable to the payments made by the Public Health Engineering Department (PHED) for these services. - Section 51 of CGST Act, 2017: This section mandates TDS at the rate of 1% from the payment made to the supplier of taxable goods or services where the total value exceeds Rs. 2.5 lakhs. However, it specifies that TDS is applicable only on "taxable goods or services" and not on "taxable supply." - Definition of Taxable Supply: As per Section 2(108) of the CGST Act, 2017, "taxable supply" means a supply of goods or services which is leviable to tax under this Act. Since the services in question are exempt from GST, they do not qualify as "taxable supply." - Standard Operating Procedure (SOP) on TDS under GST: The SOP clarifies that TDS is not required on services that are exempt under Notification No. 12/2017-Central Tax (Rate). - Conclusion: The Authority concluded that no deduction of TDS is warranted on the payments received by the applicant for the exempted services rendered. Order: Ruling: 1. The services of survey and preparation of DPR for water supply schemes for Panchayats/Municipalities under Jal Jeevan Mission provided by the applicant are eligible for GST exemption as per Sr. No. 3 of Notification No. 12/2017-Central Tax (Rate). 2. No deduction of TDS is warranted on the payments received by the applicant for these exempted services.
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