• Notification Date: 19-11-2022
• Notification No: N/A

Non-Govt SBM Work to Attract GST: AAR

According to the new circular of the state Authority for Advance Rulings (AAR), work that is done for State Urban Development Agency under the Swachh Bharat Mission (SBM) and Mission Nirmal Bangla would not be exempt from GST anymore.  

This ruling is applicable even for those supplies that are made under a government scheme. If these are not directly supplied to governments or local authorities, the work will be subjected to Goods and Services Tax (GST). This non-government SBM work will attract 18 per cent GST from now on. The AAR has ruled that the applicable GST will be broken into 9 per cent each for central and state GSTs.  

The mentioned ruling declared by AAR pertains to a contract that was received by Simoco Telecommunications (South Asia) Ltd from SUDA for sewage and waste collection treatment and disposal and other environmental protection services in a number of municipalities in West Bengal. AAR further ruled that composite supplies will also be exempt from GST if goods are up to 25 per cent of the total supply, since pure supplies to governments and local authorities are exempt from GST. But the company was unable to produce any document in support of this criterion. 

While judging this case, the AAR examined whether supply to SUDA constituted supply to governments or local authorities. It observed that SUDA happens to be a registered society that was formed in the year 1991, under the aegis of the erstwhile Municipal Affairs Department, West Bengal. The company was established with the motive of providing effective implementation of different development programmes in urban areas of West Bengal.  

Hence, AAR ruled that being a registered society, SUDA was not a panchayat or a municipality, or any board or cantonment. It could not provide any document which proves that the company was a legally entitled authority. Hence, SUDA was not entrusted by the government with the control or management of a local fund. 

The tax partner at AKM Global, Sandeep Sehgal pointed out that ruling of West Bengal AAR states that the services which are not provided directly to a local authority, will not be eligible for GST exemption. As a result, projects which are for public welfare will also not be granted a tax exemption, since the immediate recipient of the service is not any arm of the government.