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Conservancy services like removal and disposal of garbage, sweeping and cleaning of roads, cutting and pruning of tree, lifting of dead animals etc are covered under pure services and are duly eligible for exemption under Notification No.12/2017 - Central Tax: Says AAR

Submissions of the Applicant

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?

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. 

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.

Held by AAR

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.

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.

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.

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.

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.

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.


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Author:

TaxReply


Dec 9, 2020


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