In re Dredging And Desiltation Company Private Limited (GST AAR West Bengal)
Introduction: In the recent ruling by the GST AAR West Bengal, the case of In re Dredging And Desiltation Company Private Limited was examined concerning the supply of services for the removal of hump (silt/earth/manure/sludge) by dredging at Najafgarh Drain. The article delves into the details of the case, the applicant’s submission, and the ruling’s implications.
Detailed Analysis:
i. Background and Contract Details: The applicant secured a work order from the Irrigation and Flood Control Department, Government of Delhi, for dredging in Najafgarh Drain. The contract involved desilting and removal of various materials from the drain bed, including earth and sludge, over a specified stretch.
ii. Nature of Work and Exemption Claim: The applicant asserted that the contract primarily constituted dredging and earthwork excavation, qualifying as pure service work. They highlighted that the material cost was less than 5% of the total work order value. Key questions raised included the categorization of the Government of Delhi as a Union Territory and the applicable GST rate.
iii. Applicant’s Submissions and Legal Basis: The applicant argued that the work fell under the ambit of public health sanitation conservancy and solid waste management, citing relevant constitutional provisions. Additionally, they referred to specific clauses in the Twelfth Schedule of the Constitution and presented similar advance rulings to support their case.
iv. Observations and Findings of the Authority: The GST AAR, after thorough examination, found that the work performed by the applicant aligned with the matter listed under Sl. No. 6 of the Twelfth Schedule related to public health sanitation conservancy and solid waste management. The ruling acknowledged a composite supply of goods and services, with the value of goods constituting less than 25% of the total supply.
v. Exemption and Final Ruling: Considering the nature of the supply and its alignment with the criteria specified in Notification No. 12/2017, the GST AAR ruled that the services provided for the removal of hump by dredging at Najafgarh Drain would be exempted from tax under Sl. No. 3A of the said notification.
Conclusion: The ruling provides clarity on the GST implications for services related to dredging and desilting in projects awarded by government departments. The exemption under Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 is a crucial aspect for businesses involved in similar activities, offering insights into the taxation framework governing such contracts.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, WEST BANGAL
1.1 At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression ‘GST Act’ would mean the CGST Act and the WBGST Act both.
1.2 The applicant submits that he has been rewarded work order by Government of Delhi (Irrigation and Flood Control Department) for “dredging in Najafgarh Drain from RD. 5800m near Ghumanhera Bridge to RD. 13000 m near Jhatikar Bridge” and the applicant has entered into a contract with the concerned department of Government of Delhi for the execution of above-mentioned work.
1.3 The applicant submits that the said work includes the provision for desilting/ removal of silt/ earth/ manure/ sludge etc. from the bed of Najafgarh Drain in entire width of Najafgarh Drain including in or under foul condition up to desired level as per direction of the Engineerin-Charge using suitable and adequate and latest technology machinery without obstructing the flow of drain. This also includes leveling and dressing of stacking area on the bank/ berm and construction of dykes within the reach if required for drying, disposal of excavated silt/ earth/ manure/ sludge etc. within the reach as per directions of Engineer-in-Charge within lead of 08 kms. The desilted/ excavated material is to be taken away by agency for environmental safe disposal at his direction with all lead and lift.
1.4 The applicant further submits that that the contract constitutes mainly of dredging and earthwork excavation which is pure service work and the cost of material transferred and consumed for execution and completion of the works contract is less than 5 (five) percent of the total work order value.
1.5 The applicant has made this application under sub section (1) of section 97 of the GST Act and the rules made there under raising following questions vide serial number 14 of the application in FORM GST ARA-01:-
1) Whether Government of Delhi – Irrigation and Flood Control Department comes under the purview of Union Territory?
2) Will our supply be covered under Sl. No. 3 of Notification No. 9/ 2017 Integrated Tax (Rate) dated 28.06.2017– or Sl. No. 3A of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 as amended from time to time?
3) What will be the rate of GST in our case?
1.6 An applicant desirous of obtaining an advance ruling is required to file an application on the common portal in FORM GST ARA-01 in respect of subject matter as specified in subsection (2) of section 97 of the GST Act. However, the question raised by the applicant under serial number (1) is found not to be covered under any of the clauses of the said sub-section.
1.7 The questions under serial number (2) and (3) on which the advance ruling is sought for is found to be covered under clause (b) and (e) of sub-section (2) of section 97 of the GST Act.
1.8 The applicant states that the questions raised in the application have neither been decided by nor is pending before any authority under any provision of the GST Act.
1.9 The officer concerned from the revenue has raised no objection to the admission of the application.
1.10 The application is, therefore, admitted in respect of question number (2) and (3) only.
Submission of the Applicant
2.1 The applicant submits that the work being undertaken by him pursuant to the contract made with the Irrigation and Flood Control Department, which is a department of the Government of National Capital Territory of Delhi. The applicant further submits that the Tender Contract has been signed by the authorized signatories of “Irrigation and Flood Control Department, Government of NCT of Delhi” and that it also clearly states that the tender is for “execution of the work specified for the President of India”. The applicant contends that supply made to the Irrigation and Flood Control Department must imply supply made to the Government of Delhi, which is a Union Territory.
2.2 The applicant submits further that the powers and functions of the Irrigation and Flood Control Department include the following:-
(a) Protecting the city of Delhi from floods in River Yamuna, by construction, strengthening and maintenance of marginal embankments including planning execution and maintenance of flood protection & river training works.
(b) Protecting the city of Delhi against floods in Sahibi Nadi-Najafgarh Nallah basin by maintenance of Dhansa Bund, Najafgarh Drain and construction of a new drain called Supplementary Drain.
(c) To provide drainage to Delhi area through various trunk storm-water drains having more than 1000 cusecs capacity.
(d) Effective monitoring of the flood situation in the river basin during floods and to take all precautionary/ preventive measures to avoid any untoward situation including emergent flood protection/ flood fighting measures, if such a situation arises.
(e) To provide irrigation facilities to the cultivators of Delhi through State Tube Wells, and to provide treated effluents water (available from various Sewerage Treatment Plants at Okhla, Keshopur & Coronation Pillar) for farming.
2.3 Besides the above main functions, Irrigation & Flood Control Department is also entrusted with planning and execution of various types of civil works to be executed on behalf of different Departments of Government of Delhi such as Rural Development, SC/ST works, DUDA, Panchayat, Trans Yamuna Area Development Board, U.D. Deptt., Wild Life and Forest, Horticulture etc.
2.4 According to the applicant, the scope of work falls within the ambit of matter listed at Sl. No. 29 of Schedule Eleven of Article 243 G of the Constitution of India, i.e “Maintenance of community assets”. Maintenance of a drainage system also constitutes maintenance of community assets.
2.5 The applicant further submits that the scope of work is also in relation to matter listed at Sl. No. 6 of the Twelfth Schedule of 243 W of the Constitution of India, i.e. “Public health sanitation conservancy and solid waste management”. Any cleaning or desiltation activity carried out in the Najafgarh Drain constitutes Public Health, Sanitation Conservancy and Solid Waste Management.
2.6 The applicant also contends that that the contract constitutes mainly of dredging and earthwork excavation which is pure service work and the cost of material transferred and consumed for execution and completion of the work will be less than 5% (Five percent) of the total work value, if any required.
2.7 In support of his argument, the applicant has placed his reliance on the following advance rulings:-
