2019 (10) TMI 795 - AAR - GST

Levy of GST - Inward supplies from the vendors - landscape development and maintenance of garden work for State and Central Government Departments, all government local bodies (Municipalities and Corporations) etc. and other government undertakings through contract from sub-contracts - exemption under entry 3A of the Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017 as amended by Notification No.2/2018- Central Tax (Rate) dated 25.01.2018. HELD THAT - The precondition for this is that the activity of the applicant is exempt either as a pure services covered under entry no.3 or a composite supply or works contract involving goods covered under entry no.3A of the Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017 as amended by Notification No.2/2018 - Central Tax (Rate) dated 25.01.2018 - The applicant offers this contract on sub-contract basis to subcontractors and any activity done by these contractors are not exempted either under entry 3 or entry 3A of the Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017. The entry no.3 states that the Pure Services (excluding works contract service or other composite supplies involving supply of any goods) must be provided to the Central Government or State Government or Union territory or local authority or a Governmental authority are exempted from tax. Further entry no.3A states that Composite supply of goods and services in which the value of supply of goods constitutes not more than 25% of the value of the said composite supply must be provided to the Central Government, State Government or Union Territory or a local authority or a Government Authority or a Government Entity are exempted from tax - In the present case, in both the scenarios, the supply of the sub-contract service is to the applicant by the sub-contractor and the applicant is not covered under the class specified either under entry 3 or entry 3A of the said Notification.

Summary

Issues:
1. Whether landscape development and maintenance work for government departments through sub-contracts attracts GST as inward supplies?

Analysis:
1. The applicant, a cooperative society, sought an advance ruling on the GST applicability for landscape development and maintenance work for government bodies through sub-contracts.

2. The applicant provided pure services to government entities, exempted under Notification No. 12/2017. They subcontracted this work and questioned the tax liability on these sub-contracts.

3. The Authority examined two types of activities by the applicant: pure services without goods and composite supply of goods and services. The former was exempted, and the latter was subject to conditions under Notification No. 12/2018.

4. For activities involving goods, the value of goods should not exceed 25% of the composite supply value, provided to government entities for specific functions as per the Constitution.

5. The applicant's landscape work was assumed to meet the conditions. However, the recipient must be a government entity, and the activity must relate to functions entrusted to municipalities or panchayats under the Constitution.

6. If all conditions are met, the applicant's activity is exempted under the mentioned notifications.

7. Sub-contracted work by the applicant to subcontractors was found not exempted under the same notifications. The recipient of the sub-contract service was not covered under the specified classes in the notifications.

8. The ruling stated that sub-contract work by the applicant would not be exempt from GST under the notifications, as the applicant did not fall under the specified recipient classes.