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2025 (7) TMI 198 - AAR - GSTExemption from GST - activity of the applicant involving the provision of pure services for the repair and maintenance of public street lighting infrastructure and the supply of manpower based on the work order issued by the local authorities of Kayamkulam Municipality - services of street light maintenance provided to various government authorities and government entities by the applicant - applicability of Serial No. 3 of N/N. 12/2017-Central Tax (Rate) dated 28.06.2017 and Serial No. 3A of the amended N/N. 12/2017-Central Tax (Rate) dated 25.01.2018 - Applicable SAC entry. Exemption from GST - activity of the applicant involving the provision of pure services for the repair and maintenance of public street lighting infrastructure and the supply of manpower based on the work order issued by the local authorities of Kayamkulam Municipality - applicability of Serial No. 3 of N/N. 12/2017-Central Tax (Rate) dated 28.06.2017 and Serial No. 3A of the amended N/N. 12/2017-Central Tax (Rate) dated 25.01.2018 - HELD THAT - Under the GST law a Municipality is treated as a local authority by virtue of the definition provided under Section 2(69) of the CGST Act 2017 which states that local authority includes a municipality as defined in clause (e) of Article 243P of the Constitution. Therefore for the purposes of GST exemptions under Entry 3 of Notification No. 12/2017-Central Tax (Rate) a Municipality qualifies as a local authority as it is a constitutionally recognized body entrusted with functions under Article 243W. Accordingly services provided to a Municipality are eligible for exemption when they relate to such constitutional functions. The applicant s pure services of repair and maintenance of public street lighting infrastructure and supply of manpower based on the work order issued by Kayamkulam Municipality are covered under the said exemption and are not exigible to GST. However this exemption applies only to pure services or to a composite supply where the value of goods involved does not exceed 25% of the total value. Applicable SAC entry - HELD THAT - While the nature of the supply is indeed taxable under GST as it falls under the category of services it has been held to be exempt under Entry 3 and Entry 3A of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017. Therefore the question of applicable tax rate does not arise. If the exemption under Notification No. 12/2017 is not applicable the supply would be taxable under SAC Heading 9987- Maintenance Repair and Installation (except construction) Services based on the description provided by the applicant. Whether the services of street light maintenance provided to various government authorities and government entities by the applicant i.e. Kayamkulam Municipality where the value of goods consumed is less than 25% of the total contract value are eligible for exemption from GST as provided under Sr. No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017 as amended by Notification No. 16/2021-Central Tax (Rate) dated 18-11-2021 being pure services as per the definition and relating to the functions listed under Articles 243G and 243W of the Constitution? - HELD THAT - In cases where the value of goods involved does not exceed 25% of the total contract value the supply falls under the NIL rate of tax as per Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017 as amended by Notification No. 2/2018-Central Tax (Rate) dated 25-01-2018. Notification No. 16/2021-Central Tax (Rate) dated 18.11.2021 amended Entries 3 and 3A of Notification No. 12/2017-Central Tax (Rate) by omitting the words or a Governmental authority or a Government Entity from the list of eligible recipients. However this amendment does not affect the exemption for supplies made to a local authority which continues to be covered under both Entry 3 and Entry 3A provided the supply is either of pure services or a composite supply involving goods not exceeding 25% of the total contract value and the services relate to functions entrusted to Panchayats or Municipalities under Article 243G or Article 243W of the Constitution.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Authority for Advance Ruling (AAR) are: (a) Whether the applicant's activity of providing pure services for repair and maintenance of public street lighting infrastructure and supply of manpower under a contract with the Kayamkulam Municipality is subject to Goods and Services Tax (GST). (b) If taxable, what is the applicable Service Accounting Code (SAC) entry and the rate of tax for the said services. (c) Whether the supply of street light maintenance services to various departments under the local authority (Kayamkulam Municipality) qualifies for exemption from GST under Serial No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017, as amended, considering the services as pure services relating to functions listed under Articles 243G and 243W of the Constitution. (d) Whether the services of street light maintenance provided to various government authorities and entities by the applicant, where the value of goods consumed is less than 25% of the total contract value, are eligible for exemption from GST under Serial No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017, as amended. 2. ISSUE-WISE DETAILED ANALYSIS Issue (a): GST applicability on repair and maintenance services of public street lighting infrastructure Relevant legal framework and precedents: The CGST Act, 2017 and Notifications No. 11/2017-Central Tax (Rate) and No. 12/2017-Central Tax (Rate) are pivotal. Specifically, Sl. No. 29 of Notification No. 11/2017-Central Tax (Rate) imposes GST at 18% on Maintenance, Repair and Installation (except construction) Services under SAC 9987. Exemptions are provided under Notification No. 12/2017-Central Tax (Rate), particularly Entry 3 for pure services supplied to local authorities relating to functions entrusted under Articles 243G and 243W of the Constitution. Court's interpretation and reasoning: The AAR examined the nature of the contract and the services rendered, which involve repair and maintenance of public street lights installed by the Municipality. The services fall under SAC 9987 and are prima facie taxable at 18%. However, the AAR emphasized that exemption provisions need to be considered. Key evidence and findings: The applicant submitted the contract with Kayamkulam Municipality, showing the service is a pure service of repair and maintenance. The applicant also holds GST registration for providing such services. The contract requires use of ISO-certified items and timely maintenance of street lights. Application of law to facts: The AAR found that the activity is taxable under GST law but is exempted under Notification No. 12/2017-Central Tax (Rate) Entry 3, which exempts pure services supplied to local authorities relating to functions under Articles 243G and 243W. Treatment of competing arguments: The applicant relied on a precedent from the Appellate Authority for Advance Ruling, West Bengal, which granted exemption under similar facts. The jurisdictional officer had no objection or comments, indicating no dispute from the tax authorities. Conclusion: The activity is within GST ambit but exempted under Entry 3 of Notification No. 12/2017-Central Tax (Rate). Issue (b): Applicable SAC entry and tax rate if supply is taxable Relevant legal framework: SAC 9987 covers Maintenance, Repair and Installation (except construction) Services, taxable at 18% as per Notification No. 11/2017-Central Tax (Rate). Court's reasoning: Since the supply is exempted under Entry 3 and 3A of Notification No. 12/2017, the question of applicable SAC and tax rate does not arise. Conclusion: Not applicable due to exemption. Issue (c): Eligibility of exemption under Serial No. 3 of Notification No. 12/2017 for supply of street light maintenance services to local authority departments Relevant legal framework: Entry 3 of Notification No. 12/2017-Central Tax (Rate) exempts pure services supplied to Central/State Government, Union Territory, local authority, or governmental authority by way of activity in relation to functions entrusted to Panchayats under Article 243G or Municipalities under Article 243W of the Constitution. The definition of "local authority" under Section 2(69) of the CGST Act includes municipalities as per Article 243P(e) of the Constitution. Court's interpretation and reasoning: The AAR confirmed that street lighting is a function of the Municipality under the Kerala Municipality Act, 1994, and is listed under Entry 17 of the Twelfth Schedule to the Constitution, which enumerates functions entrusted to municipalities under Article 243W. Therefore, services relating to maintenance of street lighting infrastructure fall within the constitutional functions of local authorities. Application of law to facts: The applicant's services are pure services related to street light maintenance supplied to a local authority (Municipality) in connection with its constitutional functions. Treatment of competing arguments: The applicant's reliance on the constitutional provisions and the notifications was accepted. No contrary submissions were made by the jurisdictional officer. Conclusion: The supply is eligible for exemption under Entry 3 of Notification No. 12/2017-Central Tax (Rate). Issue (d): Eligibility of exemption under Serial No. 3A of Notification No. 12/2017 for composite supplies involving goods not exceeding 25% of contract value Relevant legal framework: Entry 3A of Notification No. 12/2017-Central Tax (Rate), inserted by Notification No. 2/2018-Central Tax (Rate), exempts composite supplies of goods and services where the value of goods does not exceed 25% of the total value, supplied to Central/State Government, Union Territory, local authority, governmental authority, or government entity in relation to functions under Articles 243G or 243W. Notification No. 16/2021-Central Tax (Rate) amended Entries 3 and 3A by removing "governmental authority or government entity" from the list of eligible recipients but retained "local authority" as an eligible recipient. Court's interpretation and reasoning: The AAR noted that the exemption continues to apply to local authorities, including municipalities. The applicant's contract includes some goods consumed during the contract period, but the value of these goods is less than 25% of the total contract value. Application of law to facts: Since the value of goods is less than 25%, the composite supply qualifies for exemption under Entry 3A. Treatment of competing arguments: The applicant's submissions and supporting notifications were accepted. The amendment removing "governmental authority or government entity" does not affect exemption to local authorities. Conclusion: The supply is exempt under Entry 3A of Notification No. 12/2017-Central Tax (Rate) as amended. 3. SIGNIFICANT HOLDINGS The AAR issued the following key rulings: On GST liability of street light maintenance services: "The said activity falls within the purview of GST. However, the same is exempted under Notification No. 12/2017-Central Tax (Rate) dated 28-06-2017." On applicable SAC entry and tax rate if taxable: "Not applicable since the supply is exempted." On exemption eligibility under Entry 3 for pure services to local authorities: "The supply is eligible for exemption from GST, as per Sr. 3 of Notification Number 12/2017-Central Tax (Rate) New Delhi, dated 28th June, 2017." On exemption eligibility under Entry 3A for composite supplies with goods not exceeding 25% of value: "The services of Street Light Maintenance to various Government Authorities and Government Entities provided by the applicant, ie., Kayamkulam Municipality where the value of goods consumed is less than 25 percentage of total contract value is eligible for exemption from GST, as provided under Sr. 3A of Notification Number 12/2017-Central Tax (Rate) New Delhi, dated 28th June, 2017 as amended vide notification No. 2/2018-Central Tax (Rate) dated 25-01-2018." Core principles established:
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