2025 (3) TMI 471 - AAR - GST

Classification of the service - Maintaining the micro-compost centres and processing the wet waste provided by the Greater Chennai Corporation at designated locations in North Region Zones - entitlement to exemption under Serial No.3 of N/N. 12/2017-Central Tax (Rate) dated 28.07.2017 as amended from time to time - HELD THAT - From the scope of work and the obligation of applicant it is seen that the applicant deploys work forces to maintain the Micro Compost Centers processes the wet waste provided by GCC and hand overs all the by-product manure to GCC without any charges. The applicant will be paid the service charges which is quoted PMT. From the copy of the Bill submitted it is seen that the applicant has addressed the Zonal Officer Zone-5 a bill for the month of December 2020 with Tonnage of waste processed. The service charges are arrived at based on the tonnage of waste handled and GST is not charged on the service charges billed. The activity undertaken by the applicant is waste treatment/processing of wet waste provided by GCC and maintenance of the designated Micro compost centers of GCC by employing their own personnel. In our opinion the activity will more appropriately fall under the Group 99943-waste treatment and disposal services rather than group 99942-Waste collection Services. Under the facts and circumstances of the instant case we find that the applicant is not involved in the door to door collection of waste/garbage whereas they are actually entrusted with the work of treatment/processing of wet waste and thereafter disposing the same as stipulated. Therefore we hold that the classification of the activity of Maintaining Micro Compost Centers and processing the wet waste provided by GCC is classifiable under Heading 9994 and more specifically under group 99943- Waste Treatment and Disposal services . Applicability of serial No.3 of N/N. 12/2017-Central Tax (Rate) dated 28/06/2017 as amended in N/N.2/2108 Central Tax (Rate) dated 25.01.2018 - HELD THAT - Rule 15 of the Solid Waste Management Rules 2016 vests the Local Authorities with the responsibilities to prepare and implement effective Solid Waste Management of the waste generated in the limits of said authority. On a cogent reading of Sl.No.6 of the Twelfth Schedule to the Constitution and Rule 15 of the Solid Waste Management Rules 2016 it is evident that it is the duty of the local authority to effectively handle Solid Waste Management . In the case at hand GCC for Solid waste management has offered the service of the maintenance of Micro composting center to the applicant through the bid process and therefore the final criterion is also satisfied. The supply of service provided to the GCC by the applicant for maintenance of the Micro Compost Centres is Pure services rendered to GCC a local authority and the said service are activities entrusted to a municipality under Article 243W of the Constitution. Hence the applicant is eligible for exemption from GST vide SI.No.3 of Notification 12/2017-CT. (Rate) dated 28.06.2017(as amended). Conclusion - i) The Maintenance of Micro Compost Centres by the applicant to Greater Chennai Corporation is classifiable under Heading SAC 9994 and more specifically under group 99943- Waste Treatment and Disposal services as per the Annexure to Notification No. 11/2017-C.T. (Rate) dated 28.06.2017. ii) he supply of service provided to the Greater Chennai Corporation by the applicant for Maintaining the Micro Compost Centers and processing of wet waste are exempted from GST vide Sl.No.3 of Notification 12/2017-CT(Rate) dated 28.06.2017 (as amended) and the corresponding Notification issued under TNGST Act.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

1. What is the classification of the service provided by the applicant, specifically "Maintaining the micro-compost centres and processing the wet waste" for the Greater Chennai Corporation (GCC) at designated locations in Chennai?

2. Whether the service provided by the applicant is entitled to exemption under Serial No. 3 of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017, as amended.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of Service

Relevant legal framework and precedents:

The classification of services is governed by the Scheme of Classification of Services provided in the Annexure to Notification No. 11/2017-C.T(Rate) dated 28.06.2017. The relevant Service Accounting Code (SAC) is 9994, which covers 'Sewage and waste collection, treatment and disposal and other environmental protection services'.

Court's interpretation and reasoning:

The Court examined the nature of the service provided by the applicant, which involves maintaining micro-compost centers and processing wet waste provided by the GCC. The applicant's role is to deploy manpower for these tasks, and the service does not involve the collection of waste from households.

Key evidence and findings:

The applicant is engaged in processing the wet waste and maintaining the compost centers. The work order and agreement with GCC specify the responsibilities, which include processing the waste free from odor and pollution, and handing over the by-product manure to GCC.

Application of law to facts:

The activity is classified under Heading 9994, specifically under group 99943 - 'Waste Treatment and Disposal services', as the applicant is responsible for processing the waste rather than collecting it.

Treatment of competing arguments:

The applicant argued for classification under Heading SAC-99942. However, the Court found that the service involves waste treatment and disposal, not collection, thus falling under group 99943.

Conclusions:

The service provided by the applicant is classified under SAC 9994, specifically group 99943 - 'Waste Treatment and Disposal services'.

Issue 2: Eligibility for Exemption under Notification No. 12/2017

Relevant legal framework and precedents:

Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017, exempts certain services from GST if they are 'Pure Services' provided to a local authority in relation to functions entrusted to a Municipality under Article 243W of the Constitution.

Court's interpretation and reasoning:

The Court considered whether the service qualifies as 'Pure Services' and whether it is provided to a 'local authority' for functions under Article 243W.

Key evidence and findings:

The applicant's service involves maintaining compost centers and processing waste, which is a function related to 'Public health, sanitation conservancy and solid waste management' under the Twelfth Schedule of the Constitution.

Application of law to facts:

The service is deemed 'Pure Services' as it involves labor for waste processing without goods. The recipient, GCC, is a 'Municipality' and thus a 'local authority'. The service pertains to functions under Article 243W.

Treatment of competing arguments:

The applicant's claim for exemption was supported by their compliance with the criteria for 'Pure Services' and the recipient being a local authority performing municipal functions.

Conclusions:

The service provided by the applicant is exempt from GST under Serial No. 3 of Notification No. 12/2017-Central Tax (Rate), as amended.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

"The supply of service provided to the GCC by the applicant for maintenance of the Micro Compost Centres is 'Pure services' rendered to GCC, a local authority and the said service are activities entrusted to a municipality under Article 243W of the Constitution."

Core principles established:

The classification of services under GST must align with the nature of the service provided. 'Pure Services' provided to a local authority for municipal functions are exempt from GST under the specified notification.

Final determinations on each issue:

1. The service of maintaining micro-compost centers and processing wet waste is classified under SAC 9994, specifically group 99943.

2. The service is exempt from GST under Serial No. 3 of Notification No. 12/2017-Central Tax (Rate), as amended, due to its nature as 'Pure Services' provided to a local authority for municipal functions.