Case Law Details

Case Name : In re Lokenath Builders (GST AAR West Bengal)
Appeal Number : Order No. 12/WBAAR/2020-21
Date of Judgement/Order : 13/11/2020
Related Assessment Year :

In re Lokenath Builders (GST AAR West Bengal)

The applicant‟s supply to Bagrakot Military Station and Sukna Military Station, as described in para 3.5, is exempt from the payment of GST under Sl No. 3 of Notification No. 12/2017 – Central Tax (Rate) dated 28/06/2017 (corresponding State Notification No. 1136 – FT dated 28/06/2017), as amended from time to time.

FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, WEST BENGAL

1. Admissibility of the Application

1.1 The Applicant is stated to be providing conservancy service to the (i) Station Commander, Bagrakot Military Station, (ii) Office of Chief Medical Superintendent N.F. Railway, Alipurduar Junction and (iii) Sukna Military Station. The applicant seeks a ruling on whether the above supply is exempted in terms of Sl No. 3 or 3A of Notification No. 12/2017 – Central Tax (Rate) dated 28/06/2017 (corresponding State Notification No. 1136 – FT dated 28/06/2017), as amended from time to time (hereinafter collectively referred to as Exemption Notification).

1.2 The question is admissible under section 97(2)(b) of the GST Act. The concerned officer from the revenue has not objected to the admission of the application.

1.3 The application is, therefore, admitted.

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2. Submissions of the Applicant

2.1 Sl No. 3 of the Exemption Notification exempts from payment of GST any “pure service” (excluding works contract service or other composite supplies involving the supply of any goods) provided to the Central Government, State Government, Union territory, local authority or 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 to a Municipality under Article 243W of the Constitution. Sl No. 3A of the Exemption Notification extends it to a “composite supply of goods and services” in which the value of supply of goods constitutes not more than 25 per cent of the value of the said composite supply.

2.2 The Applicant submits that the recipient is the Central Government as the work orders were issued by the Ministry of Defence or the Ministry of Railway, as the case may be. He submits copies of the work orders issued, specification and terms and conditions of the work etc. to establish that he supplies pure service and, therefore, the exemption under Sl No. 3 of the Exemption Notification applies to his supplies.

2.3 The applicant seeks a ruling for recipients mentioned in para 1.1 [Point no (ii)], but submits contract agreements only for Sukna Military Station and Bagrakot Military Station. During final hearing dated 28/09/2020, the applicant places three contract agreements (i) Work Order of Binnaguri Military Station (ii) Pedong Military Station (iii) Narang Military Station. Though in the application in GST ARA 01[ Point no 14] applicant don‟t seek ruling for Binnaguri, Pedong and Narang Military Station.

Observations and findings of the Bench

3.1 In its Circular No. 51/25/2018-GST dated 31/07/2018 the Central Government clarifies that the service tax exemption at serial No. 25(a) of Notification No. 25/2012 dated 20/06/2012 (hereinafter the ST Notification) has been substantially, although not in the same form, continued under GST vide Sl No. 3 and 3A of the Exemption Notification. Sl No. 25(a) of the ST notification under the service tax exempts “services provided to the Government, a local authority or a governmental authority by way of water supply, public health, sanitation, conservancy, solid waste management or slum improvement and up-gradation.” The Circular further explains in relation to the specific issue of ambulance service to the government by a private service provider (PSP) that such service is a function of „public health‟ entrusted to Municipalities under Art 243W of the Constitution, and, therefore, eligible for exemption under Sl No. 3 or 3A of the Exemption Notification.

3.2 The above Circular leaves no doubt that the phrase „in relation to any function‟, as applied to Sl No. 3 or 3A above, makes no substantial difference between Sl No. 25(a) of the ST Notification and Sl No. 3 or 3A of the Exemption Notification. Under the previous service tax regime, the exemption was limited to certain functions specified in Sl No. 25(a) of the ST Notification, whereas, under the GST the ambit has been broadened to include any such functions that are performed by a panchayat or a municipality under specific provisions of the Constitution. These functions are in the nature of public welfare service that the governments on their own, and sometimes through governmental authorities/entities, do provide to the citizens. When the activity is in relation to any such function, the supply to the governments or governmental authorities/entities or local authorities is exempt from paying GST under Sl No. 3 or 3A of the Exemption Notification, provided it is either a pure service or a composite supply, where the supply of goods does not constitute more than 25% of the value.

3.3 The Applicant‟s eligibility under Sl No. 3 or 3A of the Exemption Notification should, therefore, be examined from three aspects: (1) whether the supply being made is pure service or a composite supply, where the supply of goods does not exceed more than 25% of the value of the supply, (2) whether the recipient is government, local authority, governmental authority or a government entity, and (3) whether the supply is being made in relation to any function entrusted to a panchayat or a municipality under the Constitution, as clarified in the above paragraphs.

3.4 In the work orders of Bagrakote Military Station and Sukna Military Station, it is found that all the agreements were between the Central Government and applicant. The applicant has not furnished any copy of the contract with the Railways.

3.5 In the work orders issued to the applicant, the recipient describes the nature of the work as removal, collection and disposal of garbage, rubbish, filth etc., sweeping and clearing of roads, drains and open areas, cutting and pruning of tree including removal of undergrowth and foliage on drain and roads, and lifting of dead animals. The applicant performs waste disposal activities by engaging garbage lifting vehicles and other cleaning equipment. There is, however, no reference to any supply of goods in the course of executing the work. The vehicles used and the fuel consumed and the machinery used do not result in any transfer of property in goods to the recipient. Based on the above documents, it may, therefore, be concluded that the applicant‟s supply to the recipient is a pure service.

3.6 Furthermore, Article 243W of the Constitution that discusses the powers, authority and responsibilities of a municipality, refers to the functions listed under the Twelfth Schedule as may be entrusted to the above authority. Sl No. 6 of the Twelfth Schedule refers to public health, sanitation, conservancy and solid waste management. The applicant‟s supply, as discussed above, is a function mentioned under Sl No. 6 of the Twelfth Schedule.

3.7 The Applicant‟s supply to Bagrakote and Sukna Military Stations, therefore, is exempt under Sl No. 3 of the Exemption Notification. As no agreement is available regarding supplies to the Railways, this authority offers no comment thereon.

Based on the above discussion, we rule as under,

RULING

The applicant‟s supply to Bagrakot Military Station and Sukna Military Station, as described in para 3.5, is exempt from the payment of GST under Sl No. 3 of Notification No. 12/2017 – Central Tax (Rate) dated 28/06/2017 (corresponding State Notification No. 1136 – FT dated 28/06/2017), as amended from time to time.

This ruling is valid subject to the provisions under Section 103 until and unless declared void under Section 104(1) of the GST Act.

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