2026-VIL-33-AAAR
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SGST AAAR

GST – Telangana AAAR - Exemption under Sl. No. 3 and Sl. No. 3A of Notification No. 12/2017-Central Tax (Rate) - Recipient condition - Sub-contractor supplying manpower to Principal Contractor – Appellant-sub-contractor engaged for operation and maintenance of water supply projects awarded by the State Government to the Principal Contractor, contended that its supply is a pure service exempt under Sl. No. 3 or a composite supply with goods not exceeding 25% of value exempt under Sl. No. 3A - Whether the services supplied by the Appellant to the Principal Contractor are covered by Sl. No. 3 or Sl. No. 3A of the Notification No. 12/2017-Central Tax (Rate) - HELD - The exemption is conditional, and all the prescribed conditions have to be satisfied. The expression provided to the Central Government, State Government or Union territory or local authority links the exemption to the recipient of the supply. The immediate recipient of the services under the sub-contract is the Principal Contractor and not the State Government or a local authority - The fact that the ultimate project is a Government project does not by itself change the identity of the recipient. The work order shows that manpower was engaged for twelve months with rates quoted per man day excluding GST, and payment was to be released against GST invoice. The supply under the sub-contract is therefore a separate taxable supply, and the Principal Contractor, being a private company, does not fall within the specified class of recipients. Sl. No. 3A likewise requires the composite supply to be provided to the specified recipients, and the basic recipient condition is not satisfied. The description of the activity as pure services or manpower supply does not by itself confer exemption. Even assuming that the supply is a pure service in relation to a function covered by Article 243W or 243G, or a composite supply with goods not exceeding 25%, the recipient condition remains unsatisfied - The supply is not covered by Sl. No. 3 or 3A and is liable to GST at 18%, - The ruling of the lower authority is upheld and the appeal is dismissed - Reliance on a Service Tax circular and judicial precedents to claim exemption for sub-contractor - Express conditions of exemption notification - Appellant relied on Circular No. 147/16/2011-ST issued under the erstwhile Service Tax regime, on State of Andhra Pradesh v. Larsen and Toubro Ltd., and on State of Karnataka v. Taghar Vasudeva Ambrish, which adopted a purposive interpretation of an exemption entry - HELD - The Circular and Larsen and Toubro pertain to the earlier indirect tax regime or to the transfer of property in goods. They cannot override the express conditions of the exemption notification under the GST law. Taghar Vasudeva Ambrish is distinguishable, as it concerned the interpretation of the expression use as a residence in the exemption relating to renting of a residential dwelling, which did not contain a recipient-specific condition - Entries 3 and 3A, in contrast, expressly restrict the exemption to specified services supplied to specified recipients, so the identity and status of the recipient is an essential condition. Following Commissioner of Customs (Import), Mumbai v. Dilip Kumar and Company, an exemption notification should be interpreted strictly. Where the words are clear, plain and unambiguous, the said meaning has to be given effect to irrespective of consequences. The Appellant must independently establish that its supply satisfies all the conditions of the relevant entry - The ratio of these decisions cannot dispense with the recipient condition, and the appeal is rejected
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