2019 (6) TMI 1342 - AAR - GST

Taxability - contract for sectioning of Sunamuhin Drainage Channel (From Narsinghapatna Bridge to Brahmadeva Resort) and from pond near Harachandi mouth to outfall of Chilika in Orissa - Government Entity - clause 2 (zfa) of N/N. 9/2017 Integrated Tax (Rate) dated 28/06/2017 - applicability of Sl 3A vide Notification No. 2/2018-Integrated Tax (Rate) dated 25/01/2018 - whether the supply being made is a composite supply, where supply of goods constitutes not more than 25% of the value of the composite supply? - whether the recipient is government, local authority, governmental authority or a government entity? - whether the supply is in relation to any function entrusted to a Panchayat or a Municipality under the Constitution? HELD THAT - The functions of a Panchayat under the Constitution needs to be discussed. Article 243G of the Constitution discusses the powers, authority and responsibilities of Panchayats. It states, Subject to the provisions of this Constitution the Legislature of a State may, by law, endow the Panchayats with such powers and authority as may be necessary to enable them to function as institutions of self-government..subject to such conditions as may be specified therein, with respect to..the implementation of schemes for economic development and social justice as may be entrusted to them including those in relation to the matters listed in the Eleventh Schedule, . It appears from the description of the work that it improves the navigability of the riverbed and channels - an activity toward development of irrigation and waterways. It is, therefore, an activity in relation to the function listed under Sl No. 5 of the Eleventh Schedule, as entrusted to a Panchayat under Article 243G of the Constitution of India. Exemption under Sl No. 3A of the Exemption Notification is, therefore, applicable to the Applicant s supply of the above works contract service.

Summary

Issues:
1. Admissibility of the application

Admissibility of the application:
The Applicant sought a ruling on the taxability of the supply contract awarded by a government entity under specific GST notifications. The application was admitted as it fell under the purview of section 97(2)(b) of the GST Act and was not objected to by the Revenue officer.

Submissions of the Applicant:
The Applicant argued that the recipient was a government entity based on supporting documents and communications received from the Executive Engineer. The work undertaken was related to a function entrusted to a Panchayat under the Constitution.

Submission of the concerned officer from the Revenue:
The Revenue officer refrained from offering any comment on the merit of the issue.

Observations and findings of the Bench:
The Bench analyzed the nature of the work contract, which predominantly involved earthwork related to dredging channels and riverbeds. It was noted that the recipient was indeed a government entity. The work being part of an irrigation project under the Department of Water Resources made it taxable at 5% under specific GST notifications.

The Bench delved into the applicability of the Exemption Notification, emphasizing the importance of the value of goods in the composite supply and the functions entrusted to Panchayats under the Constitution. The ruling concluded that the Applicant's supply qualified for exemption under the relevant notification.

Ruling:
The ruling declared the recipient as a government entity and detailed the taxability of the supply contract under different GST notifications. The Applicant's supply was initially taxable at 18% and later at 5%, eventually being exempted under a specific provision. The ruling's validity was subject to the provisions of the GST Act until declared void under the relevant sections.