2026-VIL-122-AAR
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SGST Advance Ruling Authority

GST – Maharashtra AAR - Sections 2(30), 2(69), 2(119) of the CGST Act, 2017 - and Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, Entries 3 and 3A - Exemption of composite supply of goods and services to local authority in relation to municipal functions – Applicant is civil contractor executed an underground sewerage scheme comprising sewer networks, house connections, wet-wells, pump-houses, sewerage treatment plants, non-clog submersible pump-sets and allied electrical and mechanical equipment for a municipal corporation under a Central Government scheme - whether the activity undertaken by the applicant amounts to supply of services or a composite supply of goods and services – HELD - Since the activity involved transfer of property in goods such as pipes, pumps, equipment and materials as part of the execution of construction of immovable property, the supply constituted a composite supply of goods and services in the nature of a works contract and not a pure service - The definition of composite supply encompasses goods and services naturally bundled and supplied in conjunction with each other in the ordinary course of business, and works contracts by their very nature necessarily involve such bundling. The quantitative threshold of 25 percent prescribed under Entry 3A operates at the level of the composite supply taken as a whole and not at the sub-unit level. On the material presently on record, the aggregate value of goods at 11.17 percent did not exceed the 25 percent ceiling prescribed, though the final entitlement remained liable to be tested on the actual ratio at the time of conclusion of the contract, as the ongoing nature of the contract made the ratio susceptible to change on account of price escalation, scope variation or other eventualities – Ordered accordingly - Whether the recipient is Government, Local Authority, Governmental Authority or Government Entity – HELD - The recipient, being a Nagar parishad, qualified as a local authority within the statutory definition encompassing Municipalities and possessed the classical attributes of a local authority. The recipient is a “Local Authority” within the meaning of Section 2(69) of the CGST Act, 2017 - Whether supply is being made in relation to any function entrusted to a Panchayat or a Municipality under the Constitution – HELD - The supply related to public health, sanitation conservancy and solid waste management, which constitutes a function enumerated in the Twelfth Schedule that may be entrusted to a municipality under Article 243W of the Constitution - Whether the applicant is eligible for exemption of services being provided by way of pure service or composite supply based on Entry 3A w.e.f. 25.01.2018 vide Notification No. 2/2018-CT(R) – HELD - the applicant is eligible for the benefit of exemption under Entry at Sr. No. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as inserted by Notification No. 2/2018-Central Tax (Rate) dated 25.01.2018 and as further amended, in respect of the said composite supply, in respect of the composite supply of goods and services, subject to the condition that the value of goods supplied in the composite supply does not, at the time of conclusion of the contract, exceed 25 percent of the value of the composite supply, and in the event of such breach at the time of conclusion, the exemption would cease to be available and the department would be at liberty to take such consequential action as warranted in law – Ordered accordingly
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