2019 (4) TMI 1400 - AAR - GST

Levy of GST TDS - Cleaning services of road, garden, toilets undertaken by Municipal Corporation of Pratapgarh district - Pure services/ composite services - HELD THAT -The applicant is a local authority constituted under the provisions of Article 243W of Constitution of India. It provides various civic services directly or indirectly to citizens residing in Pratapgarh viz. cleaning of roads, gardens, toilets and waste collection etc. It at times also hires various contractors and receives the services from contractors on rate basis - The services received by the applicant are not only pure services but also involves supply of goods viz. construction of toilets involves supply of manpower services along with goods like bricks, pipes etc. The services received by the applicant from various contractors is a supply of both i.e. supply of goods and services and therefore may not exempted under serial no. 3 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 if supply of goods crosses threshold limit of 25%. For the activities undertaken by the applicant in which if there is only 'pure services' then it will attracts nil rate of tax. In other activities where there is composite supply and supply of goods is less than 25% out of total supply then also it attracts nil rate of duty. As for these activities, there is Nil rate of GST so provisions of TDS will also not be applicable on the applicant - If the activity undertaken by the applicant where there is Works Contract of Composite Supply composite supply of goods and services and quantum of supply of goods is more than 25% then rate of GST will be applicable as mentioned in respective Notification. As the activities attracts GST and are not Nil rated therefore, provisions of TDS will be applicable. In Composite supply of goods and services where supply of goods is more than 25% of the total value of supply, will attracts GST @ 12% (SGST 6% CGST6%) if the activity fall under purview of Serial No. 3 of Notification 11/2017 (CT-rate) dated 28.06.2017 as amended from time to time and if not, then GST @ 18% will be applicable. Provisions of GST TDS will apply as the activity in this case is taxable.

Summary

Issues:
Classification of services for a Municipal Corporation under GST laws.

Analysis:
The Municipal Corporation sought an advance ruling on the taxability of services received from contractors for cleaning roads, gardens, toilets, and waste collection. The applicant, being a registered person under CGST and SGST Acts, was admitted for advance ruling as per Section 97(2)(a),(e), and (g). The jurisdictional officer highlighted that services to local authorities are nil-rated under Notification No. 12/2017.

The applicant argued that most services received fall under Article 243W of the Constitution but were unsure if they were taxable. The services provided by the Municipality fall under the Twelfth Schedule of the Constitution, including cleaning roads, gardens, toilets, and waste collection. The ruling emphasized that services provided by the applicant are a mix of pure services and goods supply, such as construction services involving manpower and goods like bricks and pipes.

The ruling referred to Notifications No. 12/2017 and 12/2017-CT (Rate) to determine the tax treatment of composite supplies. If the value of goods in a composite supply does not exceed 25%, it attracts nil GST. However, if the value exceeds 25%, GST applies at 12% or 18% based on the specific activity. The ruling also discussed the applicability of GST TDS under Section 51 of the CGST/SGST Act, noting that the applicant, as a local authority, may be eligible to deduct TDS if services are taxable.

In conclusion, the ruling clarified the tax treatment for services received by the Municipal Corporation. Pure services and composite supplies with goods not exceeding 25% value attract nil GST and are exempt from GST TDS. However, if the value of goods exceeds 25%, GST applies at 12% or 18%, and provisions of GST TDS will be applicable.