2025 (7) TMI 1387 - AAR - GST

Classification of supply - dredging and de-silting service - pure service or composite supply - covered under Sl. No. 3 Notification No. 9/2017 Integrated Tax (Rate) dated 28-06-2017 or not - applicable rate of GST - HELD THAT - The applicant s works of dredging by Cutter Suction Dredger (CSD) in Channel I III 2A and 3A in the river Muriganga in order to achieve the desired water level for navigation throughout the period of Ganga Sagar Mela 2025 irrespective of tides at Kakdwip and Sagar Police Stations of the district of South 24 Parganas has been awarded by the Chief Engineer (South) of Irrigation Waterways Directorate of Government of West Bengal. So there is no dispute that the service has been provided to the Government of West Bengal represented by the Chief Engineer (South) of Irrigation Waterways Directorate of Government of West Bengal. The Cambridge dictionary has defined dredging as to remove unwanted things from the bottom of a river lake etc. using a boat or special device . In Merriam-Webster dredging in respect of civil engineering has been defined as to deepen (a waterway) with a machine that removes earth usually by buckets on an endless chain or a suction tube . From the above references including the one to be found in the erstwhile Service Tax Act it is evident that dredging is an activity of removing mud stones silt from the bottom of a water body like river lake etc. usually with the help of a machine capable of excavating the said materials from the said water body. The machine (usually dredger) is floated in the water body and the materials are excavated through suction dredger from the bottom. Then the dredged materials are transported to an earmarked area for dumping. The work undertaken by the applicant is a service where there is no supply of goods in any form. The work of dredging of silts itself does not represent any supply of goods. The dumping of the dredged silts is to be done in the designated dumping grounds or in Down stream Water Pocket which is already there. There is no construction work involved to create either the dumping ground or the water pocket - the service rendered by the applicant in this case is a supply of pure service which excludes works contract or other composite supplies involving supply of any goods. So all the three conditions mentioned in Entry No. 3 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 have been fulfilled in the case of the applicant s activity as mentioned in the application. The supply (of dredging service and removal of dredged materials) be covered under serial no. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - The applicable GST rate is NIL.

Summary

ISSUES:

Whether the supply of dredging service and removal of dredged materials qualifies as a "pure service" under GST law.Whether the supply is covered under serial no. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.Whether the supply is provided to a Central Government, State Government, Union Territory, local authority, or governmental authority.Whether the service relates to any function entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W of the Constitution of India.What is the applicable GST rate on such supply.Whether Notification No. 9/2017 Integrated Tax (Rate) dated 28-06-2017 (IGST Notification) applies to the supply or the corresponding Central and State notifications for intra-state supply.

RULINGS / HOLDINGS:

The supply of dredging and removal of dredged materials is a "pure service" excluding works contract service or other composite supplies involving supply of any goods, as the activity involves no supply of goods and only removal and disposal of materials from a water body.The supply is covered under serial no. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, which exempts "Pure services ... provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G or in relation to any function entrusted to a Municipality under Article 243W of the Constitution."The supply is provided to the State Government of West Bengal through the Irrigation & Waterways Directorate, which qualifies as a governmental authority.The dredging service relates to functions entrusted to Panchayats under Article 243G, specifically entries no. 5 (minor irrigation, water management and watershed development) and 14 (roads, culverts, bridges, ferries, waterways and other means of communication) of the Eleventh Schedule.The applicable GST rate on the supply is NIL under the said notification.The IGST Notification No. 9/2017 dated 28-06-2017 does not apply as the supply is intra-state; the correct exemption notification is Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and the corresponding State notification.

RATIONALE:

The legal framework applied includes the Central Goods and Services Tax Act, 2017, the West Bengal Goods and Services Tax Act, 2017, Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, and constitutional provisions under Articles 243G and 243W of the Constitution of India.Notification No. 12/2017-Central Tax (Rate) serial no. 3 requires three cumulative conditions: (1) supply must be a pure service excluding works contract or composite supplies involving goods; (2) service must be provided to a government or governmental authority; and (3) service must relate to functions entrusted to Panchayats or Municipalities under Articles 243G or 243W respectively.The supply was held to be a pure service as dredging involves removal of silt, sediment, and debris without supply of goods, supported by definitions from the erstwhile Service Tax Act and dictionary meanings.The recipient is a State Government department, fulfilling the second condition.The nature of the dredging service aligns with functions listed in the Eleventh Schedule under Article 243G, fulfilling the third condition.The intra-state nature of the supply excludes applicability of the IGST Notification No. 9/2017 dated 28-06-2017; the applicant's initial reference to this notification was a typographical error corrected during proceedings.Precedents from earlier Advance Rulings confirm exemption applicability under similar facts.