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2019 (6) TMI 488 - AAR - GSTPure Service - supply of goods does not constitute more than 25% of the value - supply of services to government in relation to any function entrusted to a panchayat or a municipality - Exemption under Sl No. 3 or 3A of Notification No 9/2017-Integrated Tax (Rate) dated 28/06/2017 - contract for the resuscitation by re-excavation of river Palaspai from Banskhal to Mahisghata along with raising and strengthening of embankment on both sides of the river in Block Daspur - 1 2 and P.S Daspur in Paschim Medinipur - recipient is the State Government - HELD THAT - As such compacting in the course of which goods are to be supplied constitutes only 2% of the value of the contract. It is therefore a composite supply primarily of various services principal supply being the service of resuscitation of the river where the supply of goods constitutes well below the threshold mentioned in Sl No. 3A of the Exemption Notification. The services are relatable to the function listed under Sl No. 5 of the Eleventh Schedule especially when undertaken by a department of the State Government which is primarily entrusted to execute such functions. The Applicant s service to the recipient therefore is exempt under Sl No. 3A of the Exemption Notification. The Applicant s supply to the Irrigation and Waterways Directorate Govt of West Bengal is exempt from the payment of GST under Sl No. 3A of Notification No 9/2017 - Integrated Tax (Rate) dated 28/06/2017 as amended from time to time.
Issues:
1. Admissibility of the Application 2. Interpretation of Exemption Notification for GST applicability 3. Analysis of functions entrusted to Panchayats under the Constitution Issue 1: Admissibility of the Application The Applicant sought a ruling on the applicability of exemption under Sl No. 3 or 3A of Notification No 9/2017 - Integrated Tax (Rate) for a contract awarded by the Irrigation and Waterways Directorate, Govt of West Bengal. The concerned officer from the Revenue did not object to the admission of the application, confirming that the question raised was not pending or decided in any forum. Therefore, the application was admitted. Issue 2: Interpretation of Exemption Notification for GST applicability The Applicant argued that the work provided to the State Government constituted a pure service or a composite supply where the supply of goods was minimal, making it eligible for exemption under Sl No. 3 or 3A of the Exemption Notification. However, the concerned officer from the Revenue contended that the Exemption Notification applied only to pure services and not to supplies involving goods. The Bench referred to Circular No. 51/25/2018-GST, which clarified that functions performed by a panchayat or municipality under the Constitution for public welfare services were eligible for exemption under Sl No. 3 or 3A. The Bench analyzed the nature of the supply, the recipient being the State Government, and the functions entrusted to a panchayat under the Constitution to determine the applicability of the Exemption Notification. It was concluded that the Applicant's service was primarily a composite supply of services, making it eligible for exemption under Sl No. 3A of the Exemption Notification. Issue 3: Analysis of functions entrusted to Panchayats under the Constitution The Bench examined the functions entrusted to Panchayats under Article 243G of the Constitution, which included various activities related to economic development and social justice. The resuscitation of the river by the Applicant for the State Government fell under the function listed in the Eleventh Schedule, specifically related to minor irrigation, water management, and watershed development. As the Applicant's service was in relation to a function entrusted to a panchayat, it was deemed exempt under Sl No. 3A of the Exemption Notification. In conclusion, the ruling stated that the Applicant's supply to the Irrigation and Waterways Directorate, Govt of West Bengal, was exempt from GST payment under Sl No. 3A of Notification No 9/2017 - Integrated Tax (Rate), subject to the provisions under Section 103 of the GST Act.
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