2024 (11) TMI 1327 - AAR - GST

Scope of supply - supply of works contract services - Sl. No. 3A Notification No.9/2017 dated 28-06-2017 Integrated Tax (Rate) or Sl. No. 3A of N/N. 12/2017-Central Tax (Rate) dated 28.06.2017 as amended from time to time - effective GST tax rate applicable to the supply - whether the services are in relation to any functions entrusted to a Panchayat under article 243G or to a municipality under article 243W of the Constitution of India? - HELD THAT - The expression public property has been defined in the Prevention of Damage to the Public Property Act, 1984 which inter alia includes any property, whether immovable or movable which is owned by, or in the possession of, or under the control of (i) the Central Government; (ii) any State Government; or (iii) any local authority. Lamphelat Lake, which is a natural water body, therefore comes under the purview of public property . However, dredging of a natural water body cannot be considered as services in regard to Removal of Encroachment on Public Properties . We are therefore unable to accept the contention of the applicant that maintenance of the natural water body can be regarded as maintenance of community assets as specified in the Eleventh Schedule Article 243G of the Constitution (Seventy-Third Amendment) Act, 1992 . The work to alleviate urban flooding is not listed in the Eleventh and/or Twelfth Schedule supra. However, the functions entrusted to a Panchayat or to a municipality as listed in the Twelfth Schedule include the functions viz. (i) drinking water or water supply for domestic, industrial and commercial purposes and (ii) protection of the environment and promotion of ecological aspects. In the instant case, the objective of the project inter alia includes improvement of water security and enhancement of environmental situation which is a subject matter of Twelfth Schedule Article 243W of the Constitution (Seventy-Fourth Amendment) Act, 1992 . The supply made by the applicant to the Government of Manipur is in relation to a function entrusted to a Municipality under article 243W of the Constitution. Supplies made by the applicant for rejuvenating Lamphelpat waterbody to alleviate urban flooding, providing sustainable water source for Imphal City and promoting eco tourism to the State Government of Manipur are exempted from payment of tax vide serial number 3A of the N/N. 12/2017 Central Tax (Rate) dated 28.06.2017 corresponding State N/N. 1136 F.T. dated 28.06.2017 , as amended or Sl. No. 3A N/N. 9/2017 dated 28-06-2017 Integrated Tax (Rate).

Summary

Issues Involved:

1. Determination of whether the supply of works contract services by the applicant is covered under Sl. No. 3A of Notification No. 9/2017 Integrated Tax (Rate) or Notification No. 12/2017-Central Tax (Rate).
2. Determination of the effective GST tax rate applicable to the supply.

Issue-wise Detailed Analysis:

1. Coverage under Notification No. 9/2017 or 12/2017:

The applicant provides works contract services to the Government of Manipur for the development of a water body at Lamphelpat, Imphal. The primary activities include dredging and earthwork excavation, with the cost of construction material being less than 5% of the total work order value. The applicant seeks to determine if these services are exempt under Sl. No. 3A of Notification No. 9/2017 or Notification No. 12/2017, which exempts composite supplies where the value of goods does not exceed 25% of the total value, provided to government entities for functions entrusted to Panchayats or Municipalities under the Constitution.

The Authority examined whether the services are a composite supply, if they are provided to a government entity, and if they relate to functions entrusted to Panchayats or Municipalities. It was established that the services are composite, provided to the State Government, and relate to functions under Article 243W, such as water supply and environmental protection. Therefore, the supply is exempt under the mentioned notifications.

2. Effective GST Tax Rate:

Given the exemption under Sl. No. 3A of the notifications, the effective GST tax rate applicable to the applicant's supply of services is 0%, as the supply is exempt from tax.

Observations and Findings:

The Authority confirmed that the applicant's services to the Government of Manipur involve the rejuvenation of the Lamphelpat water body, which aligns with the functions listed under the Twelfth Schedule of Article 243W of the Constitution. The project aims to alleviate urban flooding, improve water security, and promote eco-tourism, which are considered functions of a municipality. Consequently, the supply is exempt from GST under the specified notifications.

Ruling:

The supply of services by the applicant for the rejuvenation of the Lamphelpat water body to the State Government of Manipur is exempt from payment of tax under Sl. No. 3A of Notification No. 12/2017-Central Tax (Rate) and Notification No. 9/2017 Integrated Tax (Rate), as amended.