GST not payable on supply of services of lifting/ removing of garbage accumulated from vats, dumping yards, containers to Howrah Municipal Corporation

The AAR, West Bengal in response to Application presented by Mr. Vinayak Singh ("the Applicant") [Order No. 14/WBAAR/2021-22 dated October 8, 2021] has issued an advance ruling that the Applicant engaged in providing conservancy/solid waste management services as well as garbage collection and dumping services to the Conservancy Department of the Howrah Municipal Corporation ("HMC") is exempt from payment of tax vide entry serial number 3 of the Notification No. 12/2017 – Central Tax (Rate) dated June 28, 2017 ("Service Exemption Notification"):

The Applicant submitted that recipient being a Municipal Corporation ("MC") is a Local Authority ("LA") and further contended that the Applicant is engaged in supplying pure services and such supply of pure services, therefore, gets covered under entry serial number 3 of the Services Exemption Notification.

The AAR, West Bengal has observed that the Applicant has received payment against removing of garbage, road bumps, drain slits, rubbish by dumper with labour, fuel & payloader and further observed that the Applicant does not supply any goods and receives consideration only in respect of the quantity of garbage lifted and removed, thus held that the Applicant provides pure service.

Further held, that the Applicant's services to HMC is exempt under entry serial number 3 of the Services Exemption Notification because said services are in relation to functions entrusted to a municipality under Article 243W of the Constitution of India.

Held, as the applicant is making an exempt supply to the HMC, the provisions of Section 51 of the Central Goods and Services Act, 2017 ("CGST Act") and, for that matter, the TDS Notifications will not apply to Applicant’s supply.

Our Comments

Recently, the CBIC vide Notification No. 16/2021-Central Tax (Rate) dated November 18, 2021, has further amended the Services Exemption Notification w.e.f. January 1, 2022, in a following manner:

In Serial No. 3 (i.e., pure services) and 3A (i.e., Composite supply of goods and services in which the value of supply of goods constitutes not more than 25% of the value of the said composite supply) of the Services Exemption Notification, the words "or a Governmental authority or a Government Entity" have been omitted in order to exclude such services supplied to a Governmental Authority or Government Entity.

Thus, services mentioned in Serial No. 3 and 3A provided to Governmental authority and Government Entity shall no longer be exempt from January 1, 2022 and shall attract GST as applicable under Notification No. 12/2017 – Central Tax (Rate) dated June 28, 2017 ("Services Rate Notification").

Similar notifications have been passed under Integrated Goods and Services Tax Act, 2017 ("the IGST Act") and Union Territory Goods and Services Tax Act, 2017 ("the UTGST Act").