The Hon’ble AAR, Maharashtra holds that contract entered with Nagpur Environmental Services Ltd.(“NESL”), a 100 percent subsidiary of City Municipal Corporation, for providing services for management of non-network tanker with help of GPRS system would be exempt from GST since it falls under various exempt services in article 243W of constitution of India as well as services rendered to a local authority.
Facts:
M/s. Vidarbha Infotech Pvt Ltd (“the Applicant” or “VIPL” or “Contractor”) a company carrying on the business comprising of dealership in computer hardware, software and peripherals and in the service sector segment covering the construction of IT Park, towing van activity.
The Applicant entered into a contract with NESL, Nagpur (a 100% subsidiary of the Nagpur Municipal Corporation), for providing services for the management of Non-Network Tanker with the help of GPRS system at Nagpur and is currently providing the same.
The contractor is basically providing water supply for domestic, industrial and commercial purposes at various locations in and around Nagpur city. This work was allotted in pursuance of a work order dated July 31, 2018 to the Applicant. Further, the Applicant was raising the bills on the NESL and was charging GST @ 18% in each bill.
Issue involved:
Whether the services for the management of Non-Network Tanker with the help of GPRS system, provided by the Applicant to NESL would be exempt from GST since it falls under the various exempt services in the article 243 W of the constitution of India as well as services rendered to a local authority?
Applicants’ contention:
The Applicant is providing services to the ‘local authority’ as defined in Section 2(69) of the Maharashtra Goods and Services Act, 2017 (“MGST Act”).
Further, it is a pure service rendered /provided to a local authority (excluding works contract since or other composite supplies involving supply of any goods) by way of any activity in or in relation to any function entrusted to a municipality under article 243 W of the Constitution of India, it is exempt as per entry no. 3. of exemption notification no. 12/2007-Central Tax (rate) dated June 28, 2017.
Held:
The Hon’ble AAR, Maharashtra vide Order No. GST-ARA-131/2018-19/B-70 dated June 13, 2019 held:
- NESL is established as per Nagpur Municipal Corporation Act, 1948 under section 58(B) and thereby permitting corporation to implement their duty allotted by the Government through this body i.e. NESL. Thus, from the perusal of Government Resolution and various definition i.e. Government authority, Government Entity and Local authority and MOU, we are of the opinion that NESL is an authority with the control or management with Municipal Fund. Also, NESL is a local authority as defined under section 2(69) of the MGST Act.
- The applicant is providing pure services to local authority and is squarely covered by Entry no.3 of Notification No. 12/2017- CT (Rate) dated 28th June, 2017.
- Therefore, the services provided by the Applicant to NESL are exempt under GST.
Citation: [2019] 107 taxmann.com 387 (AAR – MAHARASHTRA)
Important Provisions:
Section 2(69) of MGST Act
“Local authority” means.
(b) a “Municipality” as defined in clause (e) of article 243P of the Constitution;
(c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or. management of a municipal or local fund;”
Entry 3 of the Notification (supra)
“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 or a Governmental authority 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 to a municipality under article 243W of constitution.”
Definitions as per Section 2 of Notification (supra)
(zf) “Governmental Authority” means an authority or a board or any other body, –
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government, with 90 per cent. or more participation by way of equity or control, to carry out any function entrusted to a Municipality under article 243 W of the Constitution or to a Panchayat under article 243 G of the Constitution.
(zfa) ‘Government Entity” means an authority or a board or any other body including a society, trust, corporation,-
(i) set up by an Act Of Parliament or State Legislature; or
(ii) established by any Government, with 90per cent. or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Territory or a local authority.”.