2021 (1) TMI 586 - AAR - GST

Pure service - solid waste management service - Scope of the terms of service agreement - Exemption provided under Sr.No.3 of the Notification No.12/2017-Central Tax(Rate) dated 28.06.2017 - solid waste management service provided by the applicant to Notified Area Authority, Vapi - Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government entity by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. HELD THAT - Entry No.3 of aforementioned Notification No.12/2017-Central Tax(Rate) dated 28.06.2017 exempts Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental Authority or a Government Entity by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. Hence, three conditions are required to be satisfied for a service to be covered under subject entry of the notification which is as below (1) It must be pure service not involving any supply of goods. (2) It must be provided to the Central Government or State Government or Union Territory or Local Authority or a Governmental Authority or a Government Entity. (3) It must be an activity in relation to any function entrusted to a (i) Panchayat under Article 243G of the Constitution; or (ii) Municipality under Article 243W of the Constitution. On going through the work order/agreement of the applicant with Notified Area Authority, Vapi, we find that it is for the purpose of collection, sorting and recovery of waste and setting up of Material Recovery Facility under DBFOOM model as per Rules, Norms and Regulations of SWM Rules-2016, PWM Rules-2016, MoEFCC, CPCB, GPCB etc. at Notified Area, GIDC, Vapi. However, while going through the Scope of Work of the agreement, we find that there are certain clauses under the portion Detailed Specification and terms and conditions of the agreement which raise a question mark over the contention of the applicant that they are supplying/providing pure services. As per the agreement, the rate of supply of services includes the cost of the Collection vehicle with licensed holder driver, fuel, oil, pick axes, tools, plants, suction machine, machinery, gumboots, hand gloves, raincoat in the monsoon period etc. Thus, from a plain reading of the aforementioned clause, it appears that the services provided by the applicant includes supply of goods also, hence it cannot be considered as Pure Services. Further, one of the clauses specifically mentions that the rate should be filled inclusive of all taxes which means that as per the agreement, rate should be inclusive of all taxes which would also include GST. This clause itself nullifies the contention of the applicant that they are providing pure services to Notified Area Authority, Vapi which they claim, are exempt from GST by virtue of Sr.No.3 of Notification No.12/2017-Central Tax(Rate) dated 28.06.2017. In view of the above, we conclude that the services provided by the applicant to Notified Area Authority, Vapi are not Pure Services. Since the applicant have failed to satisfy the very first condition in order to be eligible for the exemption, there is no need for us to discuss other conditions at all - the exemption under Entry No.3 of Notification No.12/2017-Central Tax(Rate) dated 28.06.2017 is not available to the applicant.

Summary

Issues Involved:
1. Classification of services provided by the applicant.
2. Eligibility for GST exemption under Notification No.12/2017-Central Tax (Rate) dated 28.06.2017.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Applicant:
The applicant, engaged in solid waste management and recycling services, entered into an agreement with Notified Area Authority, Vapi for collection, sorting, and recovery of waste, and setting up a Material Recovery Facility (MRF). The services provided by the applicant are classifiable under Heading 9994 of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017, which pertains to "Sewage and waste collection, treatment and disposal and other environmental protection services" and attracts a GST rate of 18% (9% SGST + 9% CGST).

2. Eligibility for GST Exemption under Notification No.12/2017-Central Tax (Rate) dated 28.06.2017:
The applicant contended that their services qualify as "pure services" and should be exempt under Entry No.3 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017. The conditions for exemption under this entry are:
- The service must be a pure service, not involving any supply of goods.
- The service must be provided to the Central Government, State Government, Union Territory, Local Authority, Governmental Authority, or Government Entity.
- The service must be related to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution.

Analysis of Pure Service Condition:
The term "pure service" is not defined under GST, but generally refers to services without any supply of goods. The agreement between the applicant and Notified Area Authority, Vapi, includes clauses indicating the supply of goods such as collection vehicles, tools, and other equipment. Specific clauses in the agreement state:
- "Collection of garbage... inclusive of supply of workers and Collection Vehicles... with all tools and plants like brooms, masks, aprons, hand gloves, gumboots, rain coats in monsoon period etc."
- "The rate should be inclusive of the cost of the Collection vehicle with licensed holder driver, workers, pick axes, tools, plants, machinery, gumboots, hand gloves, raincoat in the monsoon period etc."
- "The rate should be filled inclusive of all taxes."

These clauses indicate that the service includes the supply of goods, thereby disqualifying it as a "pure service." Consequently, the services provided by the applicant do not meet the first condition for exemption under Entry No.3 of Notification No.12/2017-Central Tax (Rate).

Conclusion:
Since the services provided by the applicant include the supply of goods, they do not qualify as "pure services." Therefore, the exemption under Entry No.3 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 is not applicable. The ruling concludes that the solid waste management service provided by the applicant to Notified Area Authority, Vapi is not exempt from GST.

Ruling:
The solid waste management service provided by the applicant M/s. Nepra Resources Management Pvt. Ltd., Ahmedabad to Notified Area Authority, Vapi under the referred agreement is not exempted under Notification No.12/2017-Central Tax (Rate) dated 28.06.2017.