In re Nepra Resource Management Pvt. Ltd. (GST AAAR Gujarat)
As the appellant has not been providing services to the Central Government, State Government or Union Territory or local authority or a Governmental authority or a Government Entity, the benefit of Sl. No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 is not admissible to the appellant even if the appellant is providing ‘pure service’ in relation to solid waste management which is a matter enlisted in Twelfth Schedule of the Constitution.
In view of the foregoing, we hold that the activities being carried out by the appellant viz. solid waste management service provided to the NAA, Vapi under the agreement, is not covered under Sr. No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017, as amended, and Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017, as amended
FULL TEXT OF ORDER OF APPELLATE AUTHORITY OF ADVANCE RULING, GUJARAT
M/s. Nepra Resource Management Pvt. Ltd. (herein after referred to as the “appellant”) filed an application for advance ruling before the Gujarat Authority for Advance Ruling (herein after referred to as the ‘GAAR’) wherein it has been submitted that it is eligible for the exemption provided under Sr. No.3 of the Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 which reads as “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. The appellant cited the judgement of the Income Tax Appellate Tribunal, Ahmedabad in the case of the Income Tax Officer, Surat Vs. Sachin Notified Area, [ITA No. 1315/Ahd/2007] and the judgement of the Hon’ble Supreme Court of India in case of Saij Gram Panchayat Vs. State of Gujarat & others., (1992) 2 SCC 366 wherein it was held that a notified area, so created, would be governed by all the provision of the Gujarat Municipalities Act, 1963, applicable to notified areas under that act.
2. An agreement was entered into between the appellant and the Notified Area Authority, Vapi (herein after referred to as the ‘NAA, Vapi’) on 04.02.2019, where under the appellant is required to provide services for collection, sorting, recovery of solid waste and establish / set up Material Recovery Facility for sustainable waste management in Vapi Notified Area on DBFOOM (Design, Build, Finance, Own, Operate & Maintain) model for five years, for an amount of Rs. 1,71,10,000/-.
3. The appellant raised the following question for advance ruling before the GAAR:-
(i) Whether the solid waste management service provided by the applicant to Notified Area Authority, Vapi under the above referred agreement is exempted under Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017?
4.1 The GAAR examined various provisions of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017 (herein after referred to as the “CGST Act, 2017” and the “GGST Act, 2017” respectively and “GST Acts” collectively), including Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 which contains the Chapter, Section and Heading of classification of services along with GST Rate Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 which contains a list of exempted services and other relevant material.
4.2 The GAAR has observed that Entry No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 exempts Pure Services 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 Municipality under Article 243W of the Constitution. Since pure service has not been defined under the GST Acts, the same can be constructed in general terms as if a person provides only service to any person without involvement of supply of goods along with supply of services, then the same would be termed as supply of pure service. On going through the work order/ agreement of the applicant with the NAA, Vapi, it has been observed by the GAAR that the rate of supply of services include cost of the collection vehicle with license holder driver, fuel, oil, pick axes, tools, plants, suction machine, machinery, gumboots, hand gloves etc. and so the service provided by the applicant includes supply of goods also, hence it could not be considered as Pure Service. Further, one of the clauses of Agreement specifically mentions that the rate should be filled inclusive of all taxes which mean rate should be inclusive of GST. The GAAR has observed that this clause itself nullifies the contention of the appellant that they are providing pure services to the NAA, Vapi. In view of the foregoing, the GAAR passed the following ruling.
(i) The solid waste management service provided by the applicant M/s Nepra Resources Management Pvt. Ltd, Ahmedabad to Notified Area Authority, Vapi under the mentioned agreement is not exempted under the Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017.
5. Aggrieved by the aforesaid ruling, the appellant has filed the present appeal.
6.1 The appellant has submitted that an agreement was entered into between the appellant and NAA, Vapi on 04.02.2019. Under the said agreement the appellant has to provide services for collection, sorting, recovery of solid waste and establish/set up Material Recovery Facility for sustainable waste management in Vapi Notified Area on DBFOOM (Design, Build, Finance, Own, Operate & Maintain) model for five years. In entire process the appellant provides only services to NAA, Vapi and there is no supply of goods whatsoever during providing such solid waste management and recycling service to NAA, Vapi.
6.2 It has been submitted by the appellant that the waste management services include door to door collection of garbage / waste; that sorting and recovery of waste is pure service as there is no supply of goods involved in this activity. Setting up of material recovery facility and Food Compost Facility operation and maintenance does not involve any transfer in goods and these are not the activities for which consideration is given by the NAA, Vapi to the appellant. Neither the agreement provides anywhere for supply of goods to the NAA, Vapi. Therefore, as per the agreement, the activities undertaken by the appellant are nothing but a pure service.
6.3 The appellant has further submitted that the GAAR has relied upon clauses of the agreement entered into between the appellant and the NAA, Vapi, wherein it is stated that the work includes all cost of collection vehicles, fuel, oil, workers, licensed drivers, tolls etc. and on the basis of this clause only it is decided that the appellant has not provided pure services to NAA, Vapi. None of the clauses of the said agreement provides that the appellant is required to supply any goods to the NAA, Vapi. The appellant has further submitted that these are expenses which are incurred by the appellant for itself for providing its output services to NAA, Vapi. The appellant has submitted that it is not the case of the GAAR that the appellant has provided any goods to the NAA, Vapi. The GAAR has come to conclusion merely on the basis of finding that the cost of appellant’s expenses is included in the price of the contract, but the agreement nowhere specifies that the appellant supplies goods to the NAA, Vapi. The appellant has provided only solid waste management services to the NAA, Vapi. Therefore, it has been submitted that the GAAR has come to wrong conclusion that the appellant has not provided pure services to the NAA, Vapi for claiming exemptions under Serial No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017.
6.4 The appellant has also submitted that the GAAR has not disputed any other submissions made by the appellant for claiming exemption under Serial No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017.
6.5 In view of the foregoing submissions, the appellant has prayed to quash and set aside the impugned advance ruling dated 17.09.2020 passed by the the GAAR along with request to grant the appellant personal hearing.
FINDINGS :-
7. We have considered the submissions made by the appellant in the appeal filed by them as well as submissions at the time of personal hearing, Ruling given by the GAAR and other materials available on record.
8. The issue involved in this case is whether the activities being carried out by the appellant viz. solid waste management service provided to the NAA, Vapi under the agreement referred to in their submission, is covered under Sr. No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 and Notification No. 12/2017-State Tax (Rate) (the Central Tax (Rate) Notification referred to includes the reference to corresponding State Tax (Rate) Notification also] and thereby exempted from payment of Goods and Services Tax or otherwise.
9. The appellant has submitted that it has provided ‘pure service’ to ‘local authority’ i.e. NAA, Vapi in relation to function entrusted to Municipality under Article 243W of the Constitution. The appellant has submitted that the GAAR has not disputed other submissions made by the appellant for claiming exemption under Sl. No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017. However, we observe that the GAAR has only examined whether the activity of the appellant is ‘pure service’ or otherwise and on that basis itself, it has been held that the services provided by the appellant are not exempted under Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017. The GAAR has not found it necessary to examine other aspects relevant for deciding admissibility of exemption under Sl. No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 and it has been specifically mentioned so in the advance ruling issued by the GAAR. Even otherwise, since the issue before us is whether the service being provided by the appellant to the NAA, Vapi is covered under Sl. No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 or otherwise, the issue needs to be examined in its entirety and we need not confine ourselves to only one of the facets of this case.
10. It would, therefore be appropriate to refer to the relevant entry at Sl. No. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017, which reads as follows :-
