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2023 (3) TMI 1250 - AAR - GSTTaxability under GST or not - pure services - Engagement of system integrator for implementation water revenue management system, creation and maintenance of database, spot billing/meter reading and bill distribution (MRBD) services for water supply & sewerage connections under the jurisdiction of Municipal Corporation, Gurugram - SAC Code - rate of output tax liability on services - exemption under clause 3 of notification 12/2017 dated 28.06.2017. HELD THAT:- A water distribution system is a part of water supply network with components that carry potable water from a centralized treatment plant or tubewells to the consumers. It also includes the water supply for commercial, industrial and fire fighting requirements. The Government has notified the list of services or activities which are exempted under the GST Act 2017. Relevant entry no. 3 of Pure Services in the exemption notification dated 12/2017-CT(R) which got amended on 18.11.2021 w.e.f. 01.01.2022 is as: Pure Services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243 G of the Constitution or in relation to any function entrusted to a Municipality under Article 243 W of the Constitution - From this, it can be construed that for any supply to be covered under the Pure Services if there is no supply of goods and the recipient should be Central government/State government/Union territory/ Local Authority and services should 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 243 W of the Constitution. The main function of water distribution services is of MCG and the same can be considered as pure services. But the services received by MCG from the applicant are not in the nature of Pure Services and not the support services as these are support services and not in relation to any function which is entrusted to the MCG. The goods (tangible and Intangible) and services provided by the applicant cannot be regarded as an integral part of the water distribution system itself. These are add on activities. The definition of the Scope of Supply and Business under the CGST Act, 2017 is quite extensive. The taxability of any supply of goods and services is covered under these definitions. There should be an express/explicit provision for the availment of any exemption under the CGST Act, 2017. Exemptions are not optional and the conditions/constrained prescribed under the provisions must be fulfilled. And in the present case, it is clearly observe that the said services provided by the applicant to the MCG are not part and parcel of the water supply system. The services provided by the applicant to MC, Gurugram is a taxable supply - applicable SAC Code is 998633, taxable at 18% - further, Service is not exempt under clause 3 of notification 12/2017 dated 28.06.2017.
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