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TMI Blog2018 (12) TMI 1155X X X X Extracts X X X X X X X X Extracts X X X X ..... to the applicant includes the cost of acquisition of the business assets i.e. ‘the energy efficient street light infrastructure’ set up by the applicant at the end of the contract period. Such transfer of business assets from the applicant to BMC is admittedly not covered in clause (c) of para 1 of Schedule II of the CGST/OGST Acts - Thus, it is not a case of supply of pure service but rather a case of supply with substantial use of goods. At the time of personal hearing, on a query raised by the authority it was explained by the applicant that during the period from 01.07.2017, till the date of hearing materials such as street Lights Control Panel and LED Bulbs etc. of value ₹ 3,89,72,117/- have been moved to Bhubaneshwar project from the manufacturing plant. This is a substantial amount and with material movement at this scale, the ultimate supply to BMC cannot be held as a case of supply of puce service. Thus, on this account, the condition is not fulfilled. The activities undertaken by the applicant do not constitute supply of ‘pure services’ as it involves significant use of goods/materials. It is also a case of supply of works contract service by the Applicant to BM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treet lighting services including OM of the street lighting installations to Bhubaneswar Municipal Corporation (BMC). The appellant enclosed copies of challans as proof of payment of ₹ 5,000/- for SGST bearing CIN No HDFC18062100079651 dated 29.06.2018 and ₹ 5000/- for CGST bearing CIN No. HDFC18C82100008289 dated 05.08.2018 towards the fee for Advance Ruling After due verification of the application, the application is admitted. 2.0 Notification No. 12/2017-CentraI Tax of Government of India has been issued u/s 11 of the CGST Act exempting the notified services from levy of CST. Entry SI No. 3 of the said Notification, which is reproduced below, exempts pure services provided to the Central Government or any State Government or any Union Territory Administration or any Local Authority or a Government 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. Entry S/ No. 3 of Notification No. 12/2017 - Central Tax (Rate) Dated 28.06.2017 Sl.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d) At the end of 10 years, when the ownership of Energy saving equipment is transferred to BMC, the applicant would be making a supply of goods to BMC. Such a supply would not be chargeable to GST, since transfer of capital goods after being put to use are subject to valuation as per Section 18(6) of the CGST Act. As per Section 18(6), in case of supply of capital goods or plant machinery, on which Input tax credit ( ITC ) has been taken, the registered person shall pay an amount equal to ITC taken in respect of such capital goods or plant machinery reduced by such percentage point as may be prescribed or the tax on the transaction value determined under section-15, whichever is higher. Rule 40(a) of the CGST Rules prescribe reduction of 5% for each quarter or pan thereof. Going by the provision of Section 18(6) read with Rule 40(a), no GST would be payable, since the WDV of the Electric Fixture would become Nil after use for 5 years (5% * 20 quarters) and the transaction value would be also be Nil. 5.0. The Personal Hearing was fixed on 27.09.2018. As per the request of the applicant for adjournment of PH, another date was fixed on 09.10.2018. Shri Anand Parakash Rai, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be considered. (i) There is supply of pure service, i.e. there is no composite supply including supply of goods or supply is not in the nature of Works Contract. (ii) Supply is made to a local authority (iii) The supply is made for one of the constitutional functions of the local authority. e) There is no doubt that the applicant has supplied services to a local authority (a municipal corporation) as defined under Section 2(69) of the CGST Act. Further, provision of public amenities such as street lighting listed under Twelfth schedule of the Constitution is one of the functions entrusted to the municipality under Article 243W of the constitution f) Since there is no transfer of property in energy saving equipment from the applicant to the BMC during the term of the contract, the applicant would not be making any supply of goods during such period. The only supply made by the applicant during the period of the contract is the supply of service of management, operation and maintenance of the Energy Saving equipment. Therefore, the activity of management, operation and maintenance of Energy saving equipment undertaken by the applicant under the Ener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferred on a later date but such supply is agreed to be made for a consideration in the course of business. The parties to the contract have given their consent freely and there is mutual consideration. Further, they stated that the activities undertaken by the applicant do not constitute supply of pure services as it involve supply of goods. Therefore, benefit of exemption from tax in terms of S 1.3 of the notification No. 12/2017- Central Tax (Rate), dated 28.06.2017 is not available to the applicant. 7.0 Since the supply under consideration of the Authority is in pursuance to a format existing contract signed between the applicant and BMC, the relevant portion of the contract i.e. the applicant s responsibilities and scope of services listed under para 5 read with schedule-I of the contract/agreement are extracted below : Conducting a detailed asset survey, feeder wise marking of pales in Phase 1 and creation and maintenance of asset database during the Term of the Project; Metering all fixtures supplied through street lighting phase/feeders considering optimizations required for enabling metering/ installation of feeder panels on switching points: W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f service being Energy conservation measures in street lighting within BMC area is admittedly in relation to a function entrusted to the Municipality under Article 243W in as much as street lighting is listed at Sr. 17 in the Twelfth Schedule of the Constitution. 7.2 However, there is no clarity as to whether the service supplied is a case of pure service and whether the contract in pursuance to which the service is being supplied by the applicant to BMC is not a works contract. In fact, the present ruling entirely hinges on answer to the first question i.e., whether the supply is a case of supply of pure service. The term pure service has not been deemed in the said notification for which it has to be understood by applying the common parlance test and general understanding. As per dictionary, pure means unadulterated and unmixed. Accordingly, pure service should mean pure unadulterated service not mixed with any other element (in this case without any mixture of goods). 7.3 As evident from the terms of the contract, the Applicant is contractually bound to replace the existing street light fittings with the energy efficient sets as per the energy conservation measures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this account, the condition is not fulfilled. 7.5 In addition, the contract between the applicant and BMC is essentially a works contract since the terms of the contract clearly fits into the definition in Section 2 (119) of the CGST/OGST Act. To elaborate, the contract envisages, survey and identification of the street light posts, replacing the existing lighting system with the energy efficient lighting system, setting up a monitoring system to ensure regulated illuminations and also setting up the metering device where necessary, in addition, the contract also envisages operation and maintenance of the lighting system so installed for the entire contract period of 10 years. With such terms as replacement, fitting out, repair and monitoring of the lighting system in the contract is indisputably a case of works contract. The contracted replacement and fitting out of energy efficient street lights will be in relation to the street light installations which are immovable property. Thus, on this account also the application is failing to meet the requirement of Sl. No.3 of Notification No. 12/2017-central Tax (Rate) dated 28.06.2017 and matching Notification issued by the Stat ..... 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