Contract Service related to water quality monitoring and management amounts to pure service, Exempt from tax: AAR [Read Order]

In a recent ruling , the West Bengal Authority for Advance Rulings (AAR) has ruled that Contract Service related to water quality monitoring and management amounts to  pure service and are exempted from tax.

Sunanda Enviromental International  Private Limited, the applicant is awarded several contracts, related to Jal Jeevan Mission (JJM), from Public Health Engineering Directorate, Govt. of West Bengal (PHED). The contracts are of two types, one type of contract is for supply of service only and another type of contract for combined supply of goods and service.

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The applicant questioned that whether the Contract of Services for (i) Operation & maintenance, regular upkeeping, upgradation of secure Server/Dashboard, water quality applications for data collection, alert generation system and engagement of consultant for coordination, (ii) Operation of water testing laboratories without any supply of goods, (iii) Engagement of consultancy agency for setting up of District Project Management Unit, (iv) Regular upkeep and management of FTK mobile application and web Interface of Water Quality Integrated to State Water Quality Dashboard and maintaining database and (v) Other contracts only for services can be construed as Pure services and exempted from payment of tax vide Serial number 3 of the Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017, as amended?

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Further questioned that whether the contract for (i) Annual maintenance of Mobile Laboratory Van under Water Quality Monitoring and Surveillance Programme, with supply of consumables for the testing of water samples, (ii) Regular preventive upkeep & calibration of On-site Mobile Analysis System installed in various laboratories with supply of spare parts, (iii) Supply & distribution of portable multi-parameter water quality testing device and facilitating block level training/orientation program on testing, awareness generation etc., (iii) Supply and delivery of consumables for water quality monitoring through OMAS including packing and distribution to different laboratories and collection of sample testing as well as uploading of test result in State Water Quality Dashboard, (iv) Supply of Spare Parts including Calibration & regular upkeep of OMAS and (v) Conceptualization, design, implementation of community sensitization /mobilization activities using various mediums on JJM through Tableau, Bus Panel advertisement, organizing school level awareness programme, designing, printing & supply of IEC leaflets and design on JJM be construed as composite supply?

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The scope of works executed/proposed to be executed by the applicant (i) Operation & maintenance, regular upkeeping, updradation of secure Server/Dashboard, water quality applications for data collection, alert generation system and engagement of consultant for coordination, (ii) Operation of water testing laboratories without any supply of goods, (iii) Engagement of consultancy agency for setting up of District Project Management Unit, (iv) Regular upkeep and management of FTK mobile application and web Interface of Water Quality Integrated to State Water Quality Dashboard and maintaining database and (v) Other bare service contracts does not involve any supply of goods. So these supplies of services are construed as Pure Service.

 A two member bench of Dr. Tanisha Dutta and Jaydip Kumar Chakrabarti found that these supply both pure service and composite are provided to The Public Health Engineering Directorate, Govt. of West Bengal, under Jal Jeevan Mission for supplying of drinking water which function is entrusted to a Panchayat under article 243G or to a  municipality under article 243W of the of the Constitution of India.

Further held that except the contract of services mentioned in (v) as above, all services referred to in the question can be regarded as Pure Service and as such they qualify for exemption under serial no. 3 of Notification No. 12/2017-Central Tax (Rate) Dated 28.06.2017, as amended.

To Read the full text of the Order CLICK HERE

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