Exemptions meant for service provider of ‘Pure Services’ cannot be claimed by the service provider of Works contract services: AAAR, Odisha

Categories: Advance Ruling
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Facts:  M/s Super Wealth Financial Enterprises Pvt. Ltd. (“the Appellant”) filed an appeal before the Appellate Authority for Advance Ruling, Odisha aggrieved by advance ruling Order No. 04/Odisha-AAR/2018-19 dated October 31, 2018 passed by Odisha Authority for Advance Ruling. The Appellant is engaged in providing energy efficient street lighting services to Bhubaneshwar Municipal Corporation (“BMC”). The contract was awarded to the appellant on the basis of their offer of highest energy saving of approx. 80% for a period of 10 years. Advance ruling was sought on applicability of entry no. 3 of Notification No. 12/2017- Central Tax (Rate) dated June 28, 2017 (“Notification No. 12/2017”) to the services provided by the Appellant to BMC.

Further, the Odisha Advance Ruling Authority passed an order which held that services provided by BMC do not constitute as ‘pure services’ as it involves use of goods/materials with stipulation to transfer the total business assets to BMC at the end of contract period. On appeal, it approached the Appellate Authority for Advance Ruling, Odisha on grounds that they are not supplying any goods in instant case and hence qualify as pure services.

Issue Involved: Whether entry no. 3 of the Notification No. 12/2017 is applicable to services provided by the appellant by providing energy saving street lighting services including operation and maintenance of street lighting installation to BMC?

Held: The Appellate Authority for Advance Ruling, Odisha vide Order No. 04/ODISHA-AAAR/2018-19 dated March 05, 2019 held that as per Q No. 25 of FAQ clarification was issued by Central Board of Indirect Taxes and Customs wherein it was clarified that maintenance of street lights involves apart from maintenance, replacement of defunct lights and other spares falls under work contract service. The exemption is only available to pure services which don’t involve any supply of goods. The activities carried out by Appellant will be considered as a supply of goods in terms of provisions of Schedule II, Para 4-A of CGST Act, 2017/SGST Act, 2017. Hence, benefit of exemption from tax in terms of Entry No. 3 of Notification No. 12/2017 is not available to Appellant.

Citation: [2019] 105 taxmann.com 55 (AAAR-ODISHA)