2020 (3) TMI 412 - AAR - GST

Exemption from GST or not - deduction of TDS while paying consideration for the supply conservancy/solid waste management service to the Howrah Municipal Corporation - whether the above supply is exempted in terms of SI No. 3 or 3A of Notification No. 12/2017 - Central Tax (Rate) dated 28/06/2017 (corresponding State Notification No. 1136 - FT dated 28/06/2017)? HELD THAT - The recipient is a municipal corporation, which is a local authority as defined under section 2(69) of the GST Act - Applicant performs compaction service and transport compacted garbage to the dumping station with the help of hook loaders mounted in compactor machine. There is, however, no reference to any supply of goods in the course of executing the work. 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. Furthermore, 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. SI 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 SI No. 6 of the Twelfth Schedule - The Applicant's service to HMC, therefore, is exempt under SI 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. Submission of the Revenue
4. Observations and findings of the Bench

Admissibility of the Application:
The Applicant sought a ruling on whether their supply of conservancy/solid waste management service to the Howrah Municipal Corporation is exempted under specific notifications and if the TDS deductions by the HMC are applicable. The questions were found admissible under section 97(2)(b) of the GST Act, and the application was admitted as the Revenue officer did not object.

Submissions of the Applicant:
The Applicant argued that their service falls under the exemption notification for "pure service" provided to a local authority, citing relevant provisions and documents. They contended that their supply to the municipal corporation qualifies for exemption under the specific notification.

Submission of the Revenue:
The Revenue officer commented that the work of the Applicant is covered under a specific notification and is exempted from tax payment, supporting the Applicant's position.

Observations and findings of the Bench:
The Bench referred to a Circular clarifying the continuity of service tax exemptions under GST for services provided to local authorities like municipal corporations. The Bench analyzed the nature of the Applicant's service, the recipient being a local authority, and the functions entrusted to municipalities under the Constitution. It was found that the Applicant's supply to HMC qualifies as a pure service exempt under the relevant notification. Additionally, the TDS notifications were deemed inapplicable as the Applicant's supply was exempt from GST.

Ruling:
The Applicant's supply of conservancy/solid waste management service to the Howrah Municipal Corporation is exempt from GST under the specific notification. As the supply is exempt, the TDS provisions do not apply to the Applicant's transactions. The ruling is valid unless declared void under the GST Act provisions.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by the Applicant and the Revenue, and the final ruling by the Bench regarding the admissibility of the application and the exemption status of the Applicant's supply.