In re Sunanda Enviromental International Private Limited (GST AAR West Bengal)
Kolkata, West Bengal: The West Bengal Authority for Advance Rulings (AAR) has issued a significant ruling concerning the Goods and Services Tax (GST) applicability on various contracts for services provided by Sunanda Environmental International Private Limited, primarily related to water quality monitoring and management. The ruling clarifies which services qualify as “pure services” exempt from tax and which constitute “composite supplies” subject to different tax treatments.
Pure Services and Exemptions (Question 1):
Sunanda Environmental International Private Limited sought clarification on whether several service contracts could be considered “pure services” and thus exempt from GST under Serial number 3 of Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017, as amended. This notification generally exempts “pure services” provided to the Central Government, State Government, Union territory, or local authority by way of any activity in relation to any function entrusted to a Panchayat or Municipality under the Constitution.
The AAR ruled that, with the exception of one broad category (v) “Other contracts only for services,” all other services listed in Question 1 are indeed “pure services” and qualify for exemption. These include:
- Operation & maintenance, regular upkeep, upgradation of secure Server/Dashboard, water quality applications for data collection, alert generation system, and engagement of consultants for coordination.
- Operation of water testing laboratories without any supply of goods.
- Engagement of a consultancy agency for setting up of District Project Management Unit.
- Regular upkeep and management of FTK mobile application and web Interface of Water Quality Integrated to State Water Quality Dashboard and maintaining a database.
The AAR refrained from giving a ruling on the general category of “Other contracts only for services” (v) due to its broad and unspecified nature, as noted in their detailed reasoning.
Composite Supplies and Taxability (Questions 2 & 3):
The applicant also sought clarification on whether various contracts involving both goods and services would be construed as “composite supplies” under GST law and, if so, whether they would be eligible for exemption under Serial number 3A of Notification No. 2/2018 – Central Tax (Rate) dated 25.01.2018 (an amendment to Notification No. 12/2017 – Central Tax (Rate)). Notification 3A provides an exemption for composite supplies where the value of goods constitutes not more than 25% of the total value of the composite supply, provided to government entities for functions entrusted to Panchayats or Municipalities.
For segments (i) to (vi) of Question 2, the AAR affirmed that these contracts are indeed “composite supplies.” These include:
