Page 150 - GSTL_16 April 2020_Vol 35_Part 3

364 GST LAW TIMES [ Vol. 35
goods and services” in which the value of supply of goods constitutes not more
than 25 per cent. of the value of the said composite supply.
2.2 The Applicant submits that the recipient, being a municipal corpo-
ration, is a local authority. He submits copies of the work orders issued, specifi-
cation and terms and conditions of the work etc. to establish that he supplies
pure service and, therefore, the exemption under Sl. No. 3 of the Exemption Noti-
fication applies to his supplies.
3. Submission of the Revenue :
3.1 The concerned officer of the Revenue has commented that the
above-mentioned work of the applicant is covered under Notification No. 1136
F.T., dated 28-6-2017 and exempted from paying of tax.
4. Observations and findings of the Bench :
4.1 In its Circular No. 51/25/2018-GST, dated 31-7-2018 the Central
Government clarifies that the service tax exemption at Serial No. 25(a) of Notifi-
cation No. 25/2012, dated 20-6-2012 (hereinafter the ST Notification) has been
substantially, although not in the same form, continued under GST vide Sl. No. 3
and 3A of the Exemption Notification. Sl. No. 25(a) of the ST notification under
the service tax exempts “services provided to the Government, a local authority
or a governmental authority by way of water supply, public health, sanitation,
conservancy, solid waste management or slum improvement and upgradation.”
The Circular further explains in relation to the specific issue of ambulance service
to the Government by a Private Service Provider (PSP) that such service is a func-
tion of ‘public health’ entrusted to Municipalities under Art. 243W of the Consti-
tution, and, therefore, eligible for exemption under Sl. No. 3 or 3A of the Exemp-
tion Notification.
4.2 The above Circular leaves no doubt that the phrase ‘in relation to
any function’, as applied to Sl. No. 3 or 3A above, makes no substantial differ-
ence between Sl. No. 25(a) of the ST Notification and Sl. No. 3 or 3A of the Ex-
emption Notification. Under the previous service tax regime, the exemption was
limited to certain functions specified in Sl. No. 25(a) of the ST Notification,
whereas, under the GST the ambit has been broadened to include any such func-
tions that are performed by a panchayat or a municipality under specific provi-
sions of the Constitution. These functions are in the nature of public welfare ser-
vice that the Governments on their own, and sometimes through Governmental
authorities/entities, do provide to the citizens. When the activity is in relation to
any such function, the supply to the Governments or Governmental authori-
ties/entities or local authorities is exempt from paying GST under Sl. No. 3 or 3A
of the Exemption Notification, provided it is either a pure service or a composite
supply, where supply of goods does not constitute more than 25% of the value.
4.3 The Applicant’s eligibility under Sl. No. 3 or 3A of the Exemption
Notification should, therefore, be examined from three aspects : (1) whether the
supply being made is pure service or a composite supply, where supply of goods
does not exceed more than 25% of the value of the supply, (2) whether the recipi-
ent is Government, local authority, Governmental authority or a Government
entity, and (3) whether the supply is being made in relation to any function en-
trusted to a panchayat or a municipality under the Constitution, as clarified in
the above paragraphs.
4.4 The recipient is a municipal corporation, which is a local authority
as defined under Section 2(69) of the GST Act.
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