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GST Registration not needed for Exempted Supplies: AAR

Case Law: Time Tech Waste Solutions Private Limited (Applicant) vs AAR 

Facts of the Case:

  • The Applicant is stated to be providing conservancy/solid waste management service to the Bally Municipal Corporation (BMC).
  • The Applicant claims that their services to the BMC are exempt. (Reference Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017).
  • However, The BMC is deducting TDS while paying consideration for the above supply in terms of Notification No. 5012018 – Central Tax dated 13.09.2018.
  • Due to deduction of TDS, BMC says that Applicant needs to get himself registered under the GST Act.

Issue arised: whether the notifications regarding TDS are applicable in his case and whether he is required to obtain registration under the GST Act even if he is making exempt supplies only.

The application for AAR was made as per the specified questions of section 97 of CGST Act, 2017 i.e. “Applicability of a notification issued under the provisions of this act, classification of good or services or both”.

Hence admitted.

Points to be considered:

  • Circulars No.51125/2018-GST dated 31/07/2018 has been taken into observation, which clarifies that

“The service tax exemption provided at serial No.25(a) of Notification No.25/2012 dated 20106/2012 is not in the same form, continued under GST vide Sl No. 3 and 3A of the Exemption Notifications (Service).

  • 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.”

  • Sl No. 3 or 3A of the Exemption Notifications (Service) is required to be examined in 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 recipient is government, local authority, governmental authority or a government entity, and
    3. whether the supply is being made in relation to any function entrusted to a panchayat or a municipality under the Constitution.

The applicant has submitted its agreement with BMC. As per the terms of agreement :

  • Applicant is responsible for collection, segregation, storing, transport and disposal of municipal solid waste from the municipal area of the BMC.
  • The garbage will be segregated into nonbio-degradable and dump it at the Landfill within the Project premise.
  • The Applicant shall bear the expenditure for maintenance of the collection equipment and pay rental on the equipment taken on lease from the BMC.
  • The consideration to be paid on the basis of the work done in terms of the quantity of the garbage lifted and removed.

While examining the terms and conditions of the agreement, it is concluded that the Applicant’s supply to BMC is pure service.

Conclusion:

  • As per Section 51 of CGST Act, 2017, only specified persons are liable to deduct TDS while making payment to a supplier of taxable goods or services or both.

As the Applicant is making an exempt supply, the provisions of Section 51 shall not be applicable.

  • The applicant’s turnover consists entirely of exempt supplies, he is not liable to registration in terms of section 23(1)(a) of the GST Act.
Author: Niranjan Reddy

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