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2024 (10) TMI 876 - AAR - GSTExemption under GST - Composite supply - scope of Local Authority - Whether the activity of providing, laying, jointing, testing and commissioning of sewer system and all ancillary works is exempt under entry 3B of the NN 13/2017-CT (Rate) dated 28.06.2017? - HELD THAT - In the instant case the applicant is engaged in providing works contract services . The applicant also admits the fact that they are engaged in supply of goods along with services for an immovable property. Thus, the services provided by the applicant are found to be works contract services, where goods along with services are supplied. KOTA NAGAR NIGAM is covered under the definition of Local Authority. In the instant case, the applicant is providing services to KOTA NAGAR NIGAM which is a local authority. Vide Notification No. 16/2021-Central Tax (Rate) dtd 18.11.2021 w.e.f. 01.01.2022, a Government Authority or a Government Entity words are omitted from SR No. 3 and 3A of the Notification No. 12/2017-CTR dtd 28.06.2017. From the para 5.52, it is clear that the Sr No. 3B was inserted to provide the exemptions on supply of certain services supplied to Government Authority, which was previously curtailed by the above referred Notification dtd 18.112021 w.e.f. 01,01.2022. Thus, entry Sr No. 3B is not a new entry, rather it is extension of existing entries of Sr No. 3 and 3A. The Sr No. 3 and 3A of the Notification No.12/2017-CTR dtd 28.06.2017 are applicable only in the case of pure services or composite supply having value of supply of goods not more than 25 percent. Since, Sr No 3B is also extension of Sr No 3 and 3A and all these entries are inter-related and it won t be appropriate to read all these entries in isolation or individually. Therefore, Sr No. 3B will also be applicable in case of pure services or composite supply, where value of the goods is not more than 25 percent. The applicant provides services to Nagar Nigam, Kota, which is a local authority and all the three entries Sr No 3, 3A and 3B of the Notification No. 12/2017-CTR dtd 28.06.2017 are consistent and should not be read individually, the rate of tax on services provided by the applicant should be decided in terms of Sr No. 3 and 3A, since the said entries cover services provided to local authority , there is no need to go to Sr No. 3B. The applicant is providing its services to NAGAR NIGAM, KOTA (local authority) of laying, jointing, testing and commissioning of Sewerage System and all ancillary works along with Design, construction, supply, installation, testing and commissioning (Civil, Mechanical, electrical, instrumentation other necessary works) of Sewage Pumping Stations, Upgradation of effluent of existing Sewage Treatment Plant with provision for treated waste water reuse including I year defect liability with 10 years O M for towns under package AMRUT-2.O/RAJ/SEWERAGF-21 for Kota North, Rajasthan. So, exemption entry No. 3B is not applicable to the applicant. The activity of providing, laying, jointing, testing and commissioning of sewer system and all ancillary works by the applicant to Nagar Nigam Kota, being a local authority is not exempted under entry 3B of the NN 13/2017-CT (Rate) dated 28.06.2017.
Issues Involved:
1. Applicability of GST exemption under entry 3B of Notification No. 13/2023-CT (Rate) for services provided by the applicant. 2. Classification of the applicant's activities as a composite supply of works contract. 3. Determination of whether the applicant's services qualify as pure services or composite supplies with a goods component not exceeding 25%. Issue-wise Detailed Analysis: 1. Applicability of GST Exemption under Entry 3B: The applicant sought an advance ruling to determine if their activities, involving the provision, laying, jointing, testing, and commissioning of a sewer system, are exempt under entry 3B of Notification No. 13/2023-CT (Rate) dated 19.10.2023. The applicant argued that the services they provide qualify as "sanitation conservancy" services supplied to a governmental authority, which should be exempt under the said entry. However, the ruling clarified that the exemption under entry 3B is not applicable to the applicant's activities. The ruling emphasized that entry 3B is an extension of entries 3 and 3A, which apply to pure services or composite supplies with a goods component not exceeding 25%. Since the applicant's services do not meet these criteria, they are not eligible for the exemption under entry 3B. 2. Classification as a Composite Supply of Works Contract: The ruling examined whether the applicant's activities qualify as a composite supply of works contract. It was determined that the applicant is engaged in providing works contract services, which involve the supply of goods and services for an immovable property. The applicant's activities include the construction, installation, and commissioning of a sewerage system, which is classified as a works contract under Section 2(119) of the CGST Act, 2017. The ruling confirmed that the applicant's services are indeed a composite supply of works contract, as they involve the transfer of property in goods and services related to immovable property. 3. Determination of Pure Services or Composite Supplies with Goods Component Not Exceeding 25%: The ruling addressed whether the applicant's services could be classified as pure services or composite supplies in which the value of goods does not exceed 25% of the total supply value. The ruling concluded that the applicant's activities do not qualify as pure services due to the significant involvement of goods in the supply. Additionally, the value of goods in the composite supply exceeds 25%, disqualifying the services from the exemptions provided under entries 3 and 3A of Notification No. 12/2017-CT (Rate). Therefore, the services are subject to GST at the applicable rate. Conclusion: The ruling concluded that the applicant's activities are not exempt under entry 3B of Notification No. 13/2023-CT (Rate) as they do not meet the criteria for exemption. The services provided by the applicant are classified as a composite supply of works contract, involving a significant goods component, and are therefore subject to GST. The ruling emphasized that the entries 3, 3A, and 3B should not be read in isolation, and the applicant's services do not qualify for exemption under these entries.
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