Supplies made under a government scheme may not be out of the purview of Goods and Services Tax (GST) if they are not directly made to governments or local authorities. The West Bengal Authority for Advance Rulings (AAR) has clarified that any projects done for State Urban Development Agency (SUDA) under the Swachh Bharat Mission (SBM) and Mission Nirmal Bangla will not be exempt from GST.
GST on such works will be applicable at the rate of 18 per cent, comprised of 9 per cent each for central and state GSTs, it ruled. The AAR made this ruling in a case concerning a contract given to Simoco Telecommunications (South Asia) Ltd by SUDA for sewage and waste collection treatment and disposal and other environmental protection services in a number of municipalities in West Bengal.
Maintaining that while pure supplies to governments and local authorities are exempt from GST, the AAR stated that composite supplies are also exempt if goods are up to 25 per cent of the total supply. However, the company failed to produce a document to prove this criterion, according to a report in Business Standard.
The ruling body also took into account whether the supply to SUDA constituted supply to governments or local authorities and noted that SUDA is a registered society formed in 1991 under the aegis of the erstwhile Municipal Affairs Department, West Bengal. It was created with an aim to ensure the effective implementation of different development programmes in urban areas of the state.
SUDA, being a registered society, was not a panchayat or a municipality, or any board or cantonment. Moreover, there were no documents presented to establish that SUDA was an authority that is legally entitled to and entrusted by the government with the control or management of a local fund, the AAR said.
Hence, the AAR ruling clarified that where the services are not provided directly to a local authority, they shall not be eligible for exemption, even if it is a project for public welfare, since the immediate recipient of service is not any arm of the government.
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