2019 (10) TMI 1139 - AAR - GST

Classification of supply - pure service or a composite supply? - supply of goods does not exceed more than 25% of the value of the supply - the recipient is government, local authority, governmental authority or a government entity - whether the supply is being made in relation to any function entrusted to a panchayat or a municipality under the Constitution? - deduction of TDS - HELD THAT - The consideration to be paid measures the work only in terms of the quantity of the garbage lifted and removed. Based on the above documents, it may, therefore, be concluded that the Applicant s supply to HMC is a pure service - Article 243W of the Constitution that discusses the powers, authority and responsibilities of a Municipality, refers to the functions listed under the Twelfth Schedule as may be entrusted to the above authority. Sl No. 6 of the Twelfth Schedule refers to public health, sanitation, conservancy and solid waste management. The Applicant s supply to HMC is a function mentioned under Sl No. 6 of the Twelfth Schedule - Applicant s service to HMC, therefore, is exempt under Sl No. 3 of the Exemption Notification. The TDS Notifications bring into force section 51 of the GST Act, specifying the persons under section 51(1)(d) of the Act and have mandated and laid down the mechanism for deduction of TDS. These notifications, therefore, are applicable only if TDS is deductible on the Applicant s supply under section 51 of the GST Act. Section 51 (1) of the Act provides that the Government may mandate inter alia a local authority to deduct TDS while making payment to a supplier of taxable goods or services or both - As the Applicant is making an exempt supply to HMC the provisions of section 51 and, for that matter, the TDS Notifications do not apply to his supply.

Summary

Issues:
1. Admissibility of the Application
2. Submissions of the Applicant
3. Observations and findings of the Bench

Admissibility of the Application:
The Applicant provides conservancy/solid waste management services to a municipal corporation, which deducts TDS while making payments. The Applicant seeks clarification on whether the supply is exempted under specific notifications and if the TDS notifications are applicable. The questions are deemed admissible under the GST Act, with no objections from the Revenue officer, leading to the admission of the application.

Submissions of the Applicant:
The Applicant argues that the services provided qualify for exemption under specific sections of the Exemption Notification due to being pure services supplied to a local authority. The Applicant supports this claim with documentation related to the work orders and terms of service provided to establish the nature of the services rendered.

Observations and findings of the Bench:
The Bench refers to a Circular by the Central Government, clarifying that services like conservancy and solid waste management provided to local authorities are exempt under the GST regime. The Circular emphasizes that functions related to public health entrusted to municipalities fall under the exemption category. The Bench notes that the Applicant's services to the municipal corporation are pure services, as evidenced by the work orders and the absence of any transfer of goods. Additionally, the services align with functions listed in the Constitution under public health, sanitation, conservancy, and solid waste management. Hence, the Applicant's services are exempt under the Exemption Notification. The Bench also clarifies that the TDS notifications do not apply to the Applicant as the services provided are exempt, and TDS is not applicable in this scenario.

In conclusion, the ruling states that the Applicant's services to the municipal corporation are exempt from GST under the specified notification. Furthermore, the TDS provisions do not apply to the Applicant's exempt supply. The ruling remains valid unless declared void under the relevant provisions of the GST Act.