In re Gokulram Shanmugam Kantharajan (Jay Kay Trans) (GST AAR Tamilnadu)
Q1. What is the classification of the service viz., ‘Maintaining the microcompost centres and processing the wet waste provided by the Greater Chennai Corporation at designated locations in Center Region Zones 7, 9 & 10’ in Chennai?
A1. The Maintenance of Micro Compost Centres by the applicant to Greater Chennai Corporation, is classifiable under SAC 9994 as per the Annexure to Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 for the reasons discussed in Para 8 above.
Q2. Whether the aforesaid service provided by the Applicant is entitled to exemption under Serial No 3 of Notification No 12/2017-Central Tax (Rate)., dated 28/07/2017, as amended from time to time?
A2. The work order received from Greater Chennai Corporation for ” Maintaining the Micro Compost Centers and processing of wet waste’ are exempted from GST vide SI.No.3 of Notification 12/2017 CT(rate) dated 28.06.2017 (as amended) and the corresponding Notification issued under TNGST Act.
FULL TEXT OF THE ORDER OF AUTHORITY OF ADVANCE RULING, TAMIL NADU
Note: Any appeal against the Advance Ruling order shall be filed before the Tamil Nadu State Appellate Authority for Advance Ruling, Chennai under Sub-section |1) of Section 100 of CGST ACT/TNGST Act 2017 within 30 days from the date on which the ruling sought to be appealed against is communicated.
At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.
Tvl. GOKULRAM SHANMUGAM KANTHARAJAN, M/s JAY KAY TRANS No. 9/11, First Floor Valarmathi Nagar 2nd Street Kolathur, Chennai, Tami Nadu. 600 099. (hereinafter called the Applicant) are registered under GST with GSTIN 33BYXPS6648Q2ZZ. The applicant has sought Advance Ruling on the following questions:-
1. What is the classification of the service viz., “Maintaining the microcompost centres and processing the wet waste provided by the Greater Chennai Corporation at designated locations in Center Region Zones 7, 9 & 10” in Chennai?
2. Whether the aforesaid service provided by the Applicant is entitled to exemption under Serial No 3 of Notification No 12/2017-Central Tax (Rate)., dated 28/07/2017, as amended from time to time?
The Applicant has submitted the copy of application in Form GST ARA – 01 and also submitted a copy of Challan evidencing payment of application fees of Rs. 5,000/-each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017.
2.1 The applicant has stated that the Greater Chennai Corporation (hereinafter referred as GCC) had floated a tender for “Maintaining the Micro Compost Centres and Processing the Wet Waste provided by the GCC at the designated locations for a period of 3 years in Center Region Zones 7, 9 and 10 in Chennai City” with the reference SWM.C.No.A7/0l08A/2020. The Applicant had submitted its bid with the reference ID 323135 in response to the tender floated by the Corporation for maintaining the Micro Compost Centres and Processing the Wet Waste provided by the GCC at the designated locations for a period of 3 years in Center Region Zones 7, 9 and 10 in Chennai City. In the Request for Proposal (RFP) for “Maintaining the micro compost centres and processing the wet waste provided by GCC at designated locations in Center Region Zones 7,9 & 10”, on the role of the bidder it is stated that:-
> The role of the service provider was defined to be maintenance of the microcompost centres and processing of wet waste provided by GCC. Such waste is generated by residences, commercial firms, and industries of Chennai City
> The Applicant should maintain and process the solid wet waste by employing labourers and operators. The processing of the waste should be free from odour, non-polluting, safe, emission-free and non-contaminating. The byproduct of manure should be handed over to the GCC
> GCC would provide the support infrastructure like shed, shredding machines, sieving machines, weighing machine, storage space, etc. It will also bear service charges such as electricity bill and water charges. The storage space for harvested manure would also be provided by the GCC. The repair works of the infrastructure in the micro composting centre would be provided by the GCC. All necessary statutory approvals shall be obtained by the GCC.
> The Applicant is required to only deploy the work force of 353 workers in the micro composting centres. Such work force shall be provided with personal safety gadgets and uniforms. The Applicant is responsible for preparation and utilization of the required quantities of inoculum and the by-product of manure shall be handed over to the GCC without any charge. The work force insurance is the responsibility of the Applicant and it has to maintain the register of receiving wet waste from GCC, feeding and manure generated daily, and such details must be communicated to the respective zonal officer.
2.2 The applicant has stated that pursuant to the Council Resolution No 481/2020 dated 16/07//2020, the Superintending Engineer, Solid Waste Management Department, GCC, vide letter dated 23/07/2020, with the reference S.W.M.C No A7/0108A/2020 communicated that the Council had approved the award of work of “Maintaining the Micro Compost Centres and Processing the Wet Waste” provided by Greater Chennai Corporation at designated locations in Center Region Zones 7, 9 & 10″ to the Applicant at the quoted processing fees of ?1690/- PMT and for a total contract value of Rs. 9,09,36,027.50/- for a period of three years subject to the conditions stipulated thereunder; The relevant conditions, for the purposes of the present application, are that:-
> They should maintain and process the wet waste design capacity of 49.14 MT/day at 45 locations of Center Region Zones 7, 9 & 10.
> They should deploy the working force as per the RFP condition and commence the processing work within 3 days from the date of take-over of the micro-composting centres. Processing should be free from odour and also assure security for the micro composting center including all assets. Eco friendly and non-polluting process in order to reduce the impact of the processing site in the adjacent areas.
> The process should be free from emission, pollution, and contamination of the environment including atmosphere, air, water and earth including control of dust and noise pollution as per TNPCB norms.
> The by-product of manure to be handed over to the GCC.
They have entered into an agreement with the GCC for maintenance of microcomposting centres. The agreement adopted the obligations stipulated in the request for proposal, work order and the proposal.
2.3 On interpretation of law, they had referred to SI.No.3 of exemption Notification 12/2017 CT(R); Circular No 51/25/2018-GST, dated 31/07/2018, wherein the Central Government clarified that the service tax exemption at Serial No. 25(a) of Notification No. 25/2012 dated 20/06/2012 has been substantially, although not in the same form, continued under the GST era. They have stated that to qualify for the exemption under Notification No 12/2017-Central Tax (Rate), three conditions have to be cumulatively satisfied:-
(a) The supply must be a pure service;
(b) Such service must be provided to the Central Government, State Government or Union territory or local authority;
(c) If provided to a local authority, such service must be 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.
They have stated that they satisfy all the three pre-conditions stipulated in Notification No 12/2017-Central Tax (Rate) and are entitled to the exemption conferred thereunder. They have stated that,-
> they are supplier of pure services in the nature of deployment of man power to maintain the micro-compost centres of the Corporation.; the solid wet wastes, the necessary infrastructure for the composting process, and the required utilities (water and electricity) are provided by the Corporation.; the supplies effected does not involve any goods. Their obligations under the tender contract with the Corporation is to merely deploy the manpower to maintain the micro-compost yards.
> they have supplied pure labour services in solid waste management to the GCC. The Corporation is the Oldest Municipal Institution in India established on the 29th September 1688. The Municipal administration properly commenced from the Parliamentary Act, 1792 making provision for the good order and administration of the city. The Municipal Act has been amended introducing from time to time major changes in the constitution and powers of the Corporation. The Madras Municipal Corporation Act, 1919 (as amended) provides the basic statutory authority for the administration now. Madras Municipal Corporation Act, 1919 was rechristened by The Tamil Nadu Act of 1996 as the Chennai City Municipal Corporation Act, 1919. Hence, Greater Chennai Corporation is a “municipality” as defined under Article 243-P(e) read with Article 243Q. Therefore, the second pre-condition for entitlement to the exemption under Serial No 3 of Notification 12/2017-Central Tax (Rate) is satisfies and the supply rendered to a “local authority”.
> Article 243W of the Constitution, provides for the powers, authority and responsibilities of municipalities. It states that, subject to the other provisions of the Constitution, the Legislature of a state may, by law, endow the Municipalities with such powers and authority as may be necessary to enable them to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Municipalities, subject to such conditions as may be specified therein, with respect to (i) the preparation of plans for economic development and social justice; and (ii) the performance of functions and the implementation of schemes as may be entrusted to them including those in relation to the matters listed in the Twelfth Schedule. The Twelfth Schedule to the Constitution contains 18 entries which are constitutionally designated as the functions of municipalities. Most notably, Entry 6 in the Twelfth Schedule provides that “Public health, sanitation conservancy and solid waste management” and Entry 8 of the Twelfth Schedule provides that “Urban forestry, protection of the environment and promotion of ecological aspects” shall be municipal functions. Hence, the services rendered by them to GCC are in relation to a function entrusted to a Municipal Corporation under Article 243-W of the Constitution in as much as they pertain to solid waste management in the City of Chennai.
2.5 The applicant has placed reliance on the following case laws to substantiate their contentions:-
> Zigma Global Environ Solutions Pvt Ltd [2020 (43) GSTL 96 (AAR-GST-TN)],
> New Tirupur Area Development Corporation Ltd., [2021 (51) GSTL 432 (AAR-GST-TN)],
> Zigma Global Environ Solutions Pvt Ltd [2020(39)GSTL 182(AAR-GP-AP]
> Time Tech Waste Solutions Pvt Ltd [2019 (27) GSTL 45 (AAR-GST)]
> Madivalappa Karveerapppa Belwadi [2021 (55) GSTL 597 (AAR-GST-Kar)]
3.1 The applicant was addressed through the Email Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital media. The applicant consented and the hearing was held on 17.05.2022. The Authorised Representative Shri S.Ramamurthy, Advocate reiterated the submissions made in their application and the additional submissions made on 11.05.2022. He stated that the applicant employs only the labourers to undertake the activity and the Micro Compost Centres, tools, inputs and outputs are of GCC. He stated that the question raised is on the classification of tire activity of the applicant which is the maintenance and operation of Micro Compost falling under Heading 99942 as per their understanding and whether it is exempted under SI.No.3 of Notification 12/2017 CT(R) dated 28.06.2017 for which he claimed that they satisfy all the conditions therein. The applicant was asked to furnish the following documents:-
i. write up on the activities undertaken referencing to the agreement entered into
ii. Accounting in respect of services rendered
iii. invoice copies raised on GCC by applicant
3.2 The applicant made the following submissions vide their letter dated 30.05.2022.
> write up on the activities undertaken by the applicant:
