‘Improving Water Management’ and ‘Construction of State Highways’ fall under Eleventh Schedule are Exempted Supplies: AAR [Read Order]

The West Bengal Authority of Advance Ruling in an application filed by Sumitabha Ray held that service by the applicant in pursuance of government projects pertaining to improving water management and construction of State Highways are eligible for exemption under GST - Service Exemption Notification.

The issue before the present Authority is whether the exemption in terms of Sl. No. 3 of Notification No. 9/2017 – IT (Rate) is available to the service as a Financial Management Specialist and Institutional Development Specialist engaged by the Government of Mizoram.

Government of Tamil Nadu, Water Resource Department, is implementing a project namely, ‘Climate Adaptation in Vennar Sub-basin in Cauvery Delta’ with fund from Asia Development Bank (ADB) for which the applicant has been engaged as a Financial Management Specialist to look after the financial management of the project fund. Also, Government of Mizoram, Public Works Department is implementing under the regional Transport Connectivity Project, which carries forward and depends various institutional development initiatives I the road sector and the applicant as the Institutional Development Specialist handles its implementation.

The applicant contends that since he is supplying services to the government involving no supply of goods, these services are in relation to the functions enlisted under the Eleventh and Twelfth Schedules of the Constitution.

The Bench constituting of Joint Commissioner Ms Susmita Bhattacharya and Mr Parthasarathi Dey held that the applicant involved in government project aiming at improving water management and in government project for improvement and construction of State highways involve functions entrusted to a Panchayat or a Municipality and hence are eligible for exemption.

The Bench analyzed that the with respect to the application of the Exemption Notification, in both the cases stated above, “the Applicant’s service is that of a consultant and does not apparently involve supply of any goods.” On whether the Applicant’s service is relatable to a function listed under the Eleventh or Twelfth Schedule it has been held that Entry 3 of the Eleventh Schedule of the Constitution includes minor irrigation, water management and watershed development and hence the applicant is providing pure service to the State government. Further, Entry 13 of the Eleventh Schedule lists roads, etc., but since Article 243M(2) states that the provision would not apply to the State of Mizoram, a reference to Entry 4 of the Mizoram Municipalities Act, 2007 which includes roads and bridges, etc. it can be inferred that the project involves a function entrusted to a Municipality.

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