2021 (4) TMI 881 - AAR - GST

Exemption from GST - Services provided by the applicant to the recipient i.e. The Greater Chennai Corporation is a pure service provided to the local authority by way of activity in relation to functions entrusted to a Panchayat under article 243G and Municipality under article 243W of the Constitution - Benefit under Serial No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 - HELD THAT - The applicant under the said contract has supplied the RO Plant and undertakes O M of such plant. The Operation of the plant involves treatment of the raw water supplied to them to treated/purify water for dispensing the same to the designated beneficiaries of the GCC. The operation of the Plant includes providing the security for the plant and also issuance of smart cards whenever necessary - the supplies made by the applicant is not 'pure service' but is a composite supply of purified water(goods), smart cards(goods), maintenance of RO Plant, vending machines(Service), providing security(service). The supply being not a 'Pure Service', the same is not covered by the Description of Service at SI.No.3 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017. As the primary condition, that the supply must be 'Pure Service' is not satisfied, further conditions are not examined and it is held that the exemption at SI.No.3 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017 as amended is not available for the applicant.

Summary

Issues Involved:
1. Whether the services provided by the applicant to the Greater Chennai Corporation qualify as "pure services" provided to a local authority.
2. Eligibility for exemption under Serial No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017.

Issue-wise Detailed Analysis:

1. Pure Services Qualification:
The applicant, engaged in the operation and maintenance of high-quality treated drinking water plants, entered into a contract with the Greater Chennai Corporation (GCC) for the "Amma Kudineer (Drinking Water Plant) Project." The applicant sought an advance ruling on whether their services qualify as "pure services" provided to a local authority, which would make them eligible for exemption under Serial No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017.

The applicant argued that their services constitute "pure services" as defined generally, meaning any supply for consideration without the transfer of property in goods. They claimed that their services involve only the operation and maintenance of the water treatment plant without any supply of goods, thus qualifying as pure services.

2. Eligibility for Exemption:
To qualify for the exemption under Serial No. 3 of Notification No. 12/2017, two conditions must be met:
- The service recipient should be the Central Government, State Government, local authority, or a governmental authority.
- The service should be related to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution.

The applicant provided services to the Greater Chennai Corporation, which is a municipal corporation and hence a local authority as defined under Section 2(69) of the CGST Act, 2017. The functions entrusted to municipalities under Article 243W include water supply for domestic, industrial, and commercial purposes, which aligns with the applicant's services.

Ruling and Analysis:
Upon examining the facts, documents, and submissions, it was found that the applicant's contract with GCC involved not only the operation and maintenance of the RO plant but also the supply and installation of the plant itself. The contract included providing smart cards, maintaining the plant, and ensuring security, which involves both goods and services.

The authority determined that the applicant's services are not "pure services" but a composite supply of goods and services. The supply of the RO plant, maintenance, smart cards, and security services are naturally bundled and cannot be separated. Therefore, the primary condition of being "pure service" is not met.

Conclusion:
The supply provided by the applicant to the Greater Chennai Corporation, involving the provision of an RO plant and its operation and maintenance, is not considered "pure service" but a composite supply of goods and services. Consequently, the applicant is not eligible for the exemption under Serial No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017.