2022 (11) TMI 140 - AAR - GST

Exemption from GST - pure services or not - Composite supply or not - providing conservancy/solid waste management services - HELD THAT - In the instant case, the work order issued by the Conservancy Department of Howrah Municipal Corporation describes the nature of the work for annual operation and maintenance of capacity portable compactor and hook loader. Further, from the copies of invoices as furnished by the authorized representative in course of personal hearing, it is noticed that the applicant has issued invoices describing particulars as annual operation and maintenance of Compactor Machine for lifting and removal of garbage . The term pure services has not been defined under the Act. However, a bare reading of the description of services as specified in serial number 3 of the Exemption Notification denotes supply of services which does not involve any supply of goods can be regarded as pure services. In the present case, the work order has been issued for operation and maintenance of compactor and hook loader. Annual maintenance of compactor and hook loader involves supply of goods like spare parts. The instant supply cannot be held to be pure services. The instant supply for annual operation and maintenance of compactor and hook loader is a composite supply of goods and services and such supply can qualify for exemption vide serial 3A of the Exemption Notification only when the value of goods involved in such composite supply does not exceed 25% of the value of supply and the same is provided to the Central Government, State Government or Union territory or local 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 - the functions entrusted to a municipality as listed in the Twelfth Schedule include the functions like sanitation conservancy and solid waste management. The applicant's services to HMC may be exempted under serial number 3A of the Exemption Notification if the value of goods involved in such composite supply does not exceed 25% of the value of supply.

Summary

Issues:
1. Whether conservancy/solid waste management services provided are exempt from GST?

Analysis:
The applicant sought an advance ruling regarding the exemption of conservancy/solid waste management services from GST. The applicant, engaged in providing these services to the Conservancy Department of a Municipal Corporation, claimed that their services qualify as "pure services" exempted under specific notifications. The applicant contended that their services fall under the exemption for services provided to government authorities related to functions entrusted to Panchayats or Municipalities under the Constitution. The Authority observed that the work order described the services as the annual operation and maintenance of specific equipment for garbage disposal. While the term "pure services" was not defined, the Authority noted that the supply involved goods like spare parts, making it a composite supply. The Authority ruled that the services could be exempted under a specific notification if the value of goods in the composite supply does not exceed 25% of the total value.

The Authority analyzed the functions entrusted to Municipalities under the Constitution, particularly focusing on sanitation, conservancy, and solid waste management. It was determined that the applicant's services to the Municipal Corporation could be exempted under the relevant notification if the value of goods in the composite supply did not exceed 25% of the total value. The ruling clarified that the applicant's supply for the operation and maintenance of equipment for waste management is eligible for exemption from tax under the specified notification, subject to the condition of the goods' value not exceeding 25% of the total supply value.

This detailed analysis by the Authority provides clarity on the exemption status of conservancy/solid waste management services under GST laws. The ruling highlights the importance of understanding the nature of services provided, the composition of supply, and the specific criteria for exemption eligibility under relevant notifications.