9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (5) TMI 1506 - AAR - GSTClassification of services - composite supply or Pure Services - scope of works executed/ proposed - contracts involving operation maintenance consultancy and management services without supply of goods - exempted from payment of tax vide Serial number 3 of the Notification No. 12/2017 Central Tax (Rate) - HELD THAT - We find from the produced documents that the two main questions raised in the application are based on fourteen work orders received by the applicant from the PHE Directorate. The rest of the three questions are basically follow ups of the first two questions. We have carefully examined all the relevant work orders in the reference frame of the questions raised by the applicant. It is also to be mentioned that all the works narrated in the Work Orders of the PHE Directorate are covered under Article 243G (vide Entry no. 11 of the Article) and Article 243W (vide Entry no. 5 of the Article) of the Constitution of India since the work orders are either related to the functions of JJM/ Jal Swapna Prakalpa or water quality management especially in drinking water sector water conservation and various programmes of mass sensitization in respect of use and conservation of drinking water. The Contract of Services for operation maintenance regular upkeep and updation of secure Server/Dashboard water quality applications for data collection alert generation system and engagement of consultant for coordination appears not to have any supply of goods involved in them. Also the work orders for operation of water testing laboratories (without any supply of goods) engagement of consultancy agency for setting up of District Project Management Unit and regular upkeep and management of FTK mobile application and web Interface of Water Quality Integrated to State Water Quality Dashboard and maintaining database fall in the same bracket. As such these services can be regarded as Pure Services and qualify for exemption under serial no. 3 of Notification No. 12/2017-Central Tax (Rate) Dated 28.06.2017. The work orders for (i) Annual maintenance of Mobile Laboratory Van under Water Quality Monitoring and Surveillance Programme with supply of consumables for the testing of water samples (ii) Regular preventive upkeep calibration of On-site Mobile Analysis System (in short OMAS) installed in various laboratories with supply of spare parts (iii) Supply distribution of portable multi-parameter water quality testing device and facilitating block level training/orientation program on testing awareness generation etc. (iiia) Supply and delivery of consumables for water quality monitoring through OMAS including packing and distribution to different laboratories and collection of sample testing as well as uploading of test result in State Water Quality Dashboard (iv) Supply of Spare Parts including Calibration regular upkeep of OMAS (v) Conceptualization design implementation of community sensitization /mobilization activities using various mediums on JJM through Tableau Bus Panel advertisement organizing school level awareness programme designing printing supply of IEC leaflets and design on JJM and (vi) On-site assessment with sample collection testing of AIRPs CWPPs water ATM including supply delivery of seven new OMAS with consumables for testing Arsenic Iron Manganese residue Chlorine in addition to monitoring and processing the data for precise analysis and evaluation of the plants and upload the data to the State Water Quality Dashboard appear to be contracts for supply of both goods and services according to the work orders placed before this authority. Each of the supplies will come under the definition of Composite Supply as noted in para 4.5. It is to be noted that in all the above cases the composite supply includes supply of goods more than 25% in terms of value as per the relevant contracts. So far as the work order related to Procurement of Mobile Laboratory Van (MLV) issued by the Executive Engineer Jhargram Division PHE Directorate is concerned this appears to be supply of goods. The work order relates to supply of MLV complete with internal fabrication refrigeration exhaust system air conditioning system waste disposal system and fully equipped with chemicals equipments etc. for on site testing smart phone with preloaded water quality app synchronized with PHED water quality dashboard and safety gear for resource personnel including external designing and painting for IEC propaganda with IEC audio visual aids. Thus it is evident that there is no supply of service involved in the above work order. It is a supply of goods i.e. supply of vehicle fitted with equipments and other fittings to serve a specific purpose.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Authority for Advance Ruling (AAR) pertain to the classification and tax treatment of various contracts awarded under the Jal Jeevan Mission (JJM) by the Public Health Engineering Directorate, Government of West Bengal, under the GST regime. Specifically, the issues are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Classification of Certain Contracts as Pure Services and Eligibility for Exemption Legal Framework and Precedents: The exemption under Serial No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 applies to "pure services" provided to Central or State Government or local authorities in relation to functions entrusted to Panchayats under Article 243G or municipalities under Article 243W of the Constitution of India. "Pure service" excludes works contracts or composite supplies involving goods. The relevant constitutional provisions (Articles 243G and 243W) and their schedules list "drinking water" and "water supply for domestic purposes" as entrusted functions. Court's Interpretation and Reasoning: The AAR examined the scope of the contracts involving operation and maintenance of servers and dashboards, operation of water testing laboratories without supply of goods, consultancy for District Project Management Units, and upkeep of mobile applications and web interfaces for water quality data management. These contracts do not involve any transfer or supply of goods and are thus "pure services." The services are rendered to the State Government through PHED and relate directly to drinking water supply, a function entrusted to Panchayats and municipalities. Key Evidence and Findings: The work orders and contract terms confirmed absence of goods supply. The services are integral to water quality monitoring and management under JJM, aligning with constitutional functions. Application of Law to Facts: Since these are pure services to a governmental authority in relation to an entrusted function, they qualify for exemption under Serial No. 3 of the Notification. Treatment of Competing Arguments: The applicant's claim of exemption was supported by the revenue officer's concurrence. No contrary evidence was presented. Conclusion: The contracts described in Question 1 (except those unspecified in sub-question (v) due to lack of evidence) are pure services exempt from GST under Serial No. 3. Issue 2: Composite Supply Classification of Contracts Involving Goods and Services Legal Framework and Precedents: Section 2(30) of the CGST Act defines composite supply as a supply consisting of two or more taxable supplies of goods or services naturally bundled and supplied in conjunction, with one being the principal supply. Section 8 mandates that tax liability on composite supplies is determined by the principal supply. Notification No. 2/2018-Central Tax (Rate) dated 25.01.2018 (Serial No. 3A) exempts composite supplies where goods constitute not more than 25% of the value. Court's Interpretation and Reasoning: The AAR analyzed contracts involving annual maintenance of Mobile Laboratory Vans with supply of consumables, upkeep and calibration of On-site Mobile Analysis Systems (OMAS) with spare parts, supply and distribution of water testing devices with training, supply of consumables for water quality monitoring, and community sensitization activities including supply of IEC materials. These contracts involve both goods and services bundled naturally. The value of goods supplied exceeds 25% in these cases. Key Evidence and Findings: Contract documents and work orders detailed both service and goods components, with valuations confirming goods exceed 25% of total value. Application of Law to Facts: These contracts qualify as composite supplies under Section 2(30). Since the goods' value exceeds 25%, exemption under Serial No. 3A does not apply. Treatment of Competing Arguments: The revenue officer agreed with the composite supply classification and the non-applicability of exemption due to goods' value exceeding 25%. Conclusion: The contracts in Question 2 (segments i to vi) are composite supplies with goods exceeding 25% in value and hence not exempt under Serial No. 3A. Issue 3: Tax Treatment of Composite Supplies and Principal Supply Determination Legal Framework and Precedents: Section 8 of the CGST Act mandates that the tax on composite supplies is determined by the principal supply. The principal supply is the one that predominates or is the main purpose of the contract. Court's Interpretation and Reasoning: The AAR examined each composite supply to identify the principal supply:
Key Evidence and Findings: Contract terms and nature of activities supported the above principal supply determinations. Application of Law to Facts: Tax liability and rate must be determined based on the principal supply identified for each contract. Treatment of Competing Arguments: No conflicting arguments were presented. Conclusion: The tax rate and liability on composite supplies must be based on the principal supply as identified. Issue 4: Classification and Taxation of Supply of Mobile Laboratory Van (MLV) Legal Framework and Precedents: Entry No. 401A of Schedule III to the CGST Act covers special purpose motor vehicles other than those designed principally for transport of persons or goods. Such vehicles are taxable at 9% CGST plus 9% SGST. Court's Interpretation and Reasoning: The MLV supplied is a fully equipped vehicle with internal fabrication, refrigeration, exhaust, air conditioning, waste disposal, chemicals, equipment, and safety gear, designed specifically for onsite water quality testing. No services are involved in this supply. Key Evidence and Findings: The work order and contract documents confirm the supply of a special purpose motor vehicle. Application of Law to Facts: The supply is a supply of goods, specifically a special purpose motor vehicle, taxable under Entry 401A of Schedule III. Treatment of Competing Arguments: No contrary submissions were made. Conclusion: The MLV supply is a taxable supply of goods at 9% CGST plus 9% SGST. 3. SIGNIFICANT HOLDINGS The Authority for Advance Ruling held:
Core principles established include:
|
