2021 (4) TMI 934 - AAAR - GST

Classification of supply of services - pure services relating to waste collection, segregation, treatment, transportation and disposal services under the service agreements entered with both concessionaries - N/N. 11/2017- C.T.(Rate) dated 28 th June 2017 - Exempt form GST or not - HELD THAT - When the bid for services to GCC is directly with the appellant and the services are to be done by the appellant to GCC, why appellant entered into agreement with concessionaire, who has been promoted by the appellant itself, though out of question here, appears somewhat strange. However, the answer lies in the fact that the very nature of concessionaire agreement / bid with GCC involves supply of bins, construction of sheds, vehicles, mechanical sweepers, etc., along with other goods and services; therefore, the appellant who only won the bid and should have performed the activities directly to the GCC, floated two concessionaires who will procure the goods and supply to the appellant, who in turn will provide the services, so as to be termed to be pure services allegedly to enable them qualify themselves under the exemption notification. This artificial separation of activities to be performed wholly by the successful bidders and to be provided to the GCC, is a colourable device to avail the exemption under GST and legally and factually not tenable. Appellant is a totally different entity than from concessionaires in as much as they are all separately incorporated and separately registered with GST and they are distinct persons as per GST Act. So, on the basis of holding equity, they cannot claim to be on par with the concessionaire, who otherwise too are ineligible for the exemption, being the provider of composite supply of goods and services to GCC anyway. The order of the Advance Ruling Authority is upheld - appeal disposed off.

Summary

Issues:
1. Interpretation of provisions under the Central Goods & Services Tax Act and the Tamil Nadu Goods & Services Tax Act.
2. Classification and tax liability of services related to waste management under GST.

Analysis:

Issue 1: Interpretation of provisions under the Acts
The judgment clarifies that unless specifically mentioned, provisions under the Central Goods & Services Tax Act are applicable to the Tamil Nadu Goods & Services Tax Act. The order can be rectified by the Appellate authority within six months if an error is noticed, but rectifications affecting tax liability require the appellant to be heard. The ruling by the Appellate Authority is binding on the applicant and concerned officers unless there are changes in law, facts, or circumstances. If an advance ruling is obtained by fraud, it can be declared void.

Issue 2: Classification and tax liability of waste management services
The appellant sought an advance ruling on the classification and tax liability of waste management services provided under service agreements. The AAR classified these services under SAC 9994 and ruled them taxable under GST, not exempted. The appellant appealed this decision, arguing that the services should be exempt based on specific notifications. During the personal hearing, the appellant's representatives presented their case.

The Appellate Authority rejected the appeal, stating that the AAR had already considered the appellant's arguments. The AAAR found that exemption benefits were not automatically extended to subcontractors under GST. It was noted that the appellant provided services to their JV partners, not the local authority directly. The agreement between concessionaires and the appellant was on a principal-to-principal basis, not agent-to-principal. The AAAR analyzed the nature of the services provided by the appellant and the contractual relationships involved. It was concluded that the separation of activities through concessionaires was a device to avail GST exemption, which was not legally tenable. The AAAR ruled in favor of the AAR's decision, dismissing the appeal.

In conclusion, the judgment upheld the AAR's ruling on the classification and tax liability of waste management services, stating that there was no reason to interfere with the original decision.