2020 (3) TMI 445 - AAR - GST

Exemption from GST or not - deduction of TDS while paying consideration for the supply conservancy/solid waste management service to the Howrah Municipal Corporation - whether the above supply is exempted in terms of SI No. 3 or 3A of Notification No. 12/2017 - Central Tax (Rate) dated 28/06/2017 (corresponding State Notification No. 1136 - FT dated 28/06/2017)? HELD THAT - The recipient is a municipal corporation, which is a local authority as defined under section 2(69) of the GST Act - Applicant performs compaction service and transport compacted garbage to the dumping station with the help of hook loaders mounted in compactor machine. There is, however, no reference to any supply of goods in the course of executing the work. The consideration to be paid measures the work only in terms of the quantity of the garbage lifted and removed. Based on the above documents, it may, therefore, be concluded that the Applicant's supply to HMC is a pure service. Furthermore, Article 243W of the Constitution that discusses the powers, authority and responsibilities of a Municipality, refers to the functions listed under the Twelfth Schedule as may be entrusted to the above authority. SI No. 6 of the Twelfth Schedule refers to public health, sanitation, conservancy and solid waste management. The Applicant's supply to HMC is a function mentioned under SI No. 6 of the Twelfth Schedule - The Applicant's service to HMC, therefore, is exempt under SI No. 3 of the Exemption Notification. The TDS Notifications bring into force section 51 of the GST Act, specifying the persons under section 51 (1)(d) of the Act and have mandated and laid down the mechanism for deduction of TDS. These notifications, therefore, are applicable only if TDS is deductible on the Applicant's supply under section 51 of the GST Act. Section 51(1) of the Act provides that the Government may mandate inter alia a local authority to deduct TDS while making payment to a supplier of taxable goods or services or both - As the Applicant is making an exempt supply to HMC the provisions of section 51 and, for that matter, the TDS Notifications do not apply to his supply.

Summary

Issues:
1. Admissibility of the Application
2. Submissions of the Applicant
3. Observations and findings of the Bench

Admissibility of the Application:
The Applicant provides solid waste management and sewer cleansing services to a municipal corporation, which deducts TDS. The Applicant seeks a ruling on the exemption of these supplies under specific notifications. The questions are deemed admissible under the GST Act, and the application is admitted.

Submissions of the Applicant:
The Applicant argues that the services provided fall under the exemption notifications applicable to pure services or composite supplies with limited goods value. The Applicant establishes that the recipient, a municipal corporation, qualifies as a local authority, supporting the claim for exemption under the relevant provisions.

Observations and findings of the Bench:
The Bench refers to Circulars clarifying the continuation of exemptions under GST for services like solid waste management provided to local authorities. The analysis focuses on the nature of the supply, the recipient's status, and the function's relation to a local authority. Detailed examination of the work orders and constitutional provisions confirms the Applicant's services qualify as pure services under the exemption notification.

The judgment concludes that the Applicant's supply to the municipal corporation is exempt from GST under the specified notification. Since the supply is exempt, the TDS provisions do not apply to the Applicant's transactions. The ruling ensures the validity of the exemption subject to relevant provisions of the GST Act.

This comprehensive analysis delves into the admissibility of the application, the Applicant's submissions, and the Bench's detailed observations leading to the final ruling on the exemption of the Applicant's services from GST and the inapplicability of TDS provisions.