GST Exemption: Government Dredging Services

Introduction:

In a recent ruling by the West Bengal Authority for Advance Ruling (AAR), the GST exemption status for dredging services provided to the government was clarified. This ruling, issued in the case of In Re. Dredging and Desiltation Company (P.) (Ltd.), sheds light on an important aspect of GST applicability in government contracts.

Background:

Dredging and Desiltation Company (P.) (Ltd.) engaged in a contract with the Irrigation and Flood Control Department, Government of Delhi, involving the removal of hump by dredging. Seeking clarification on the GST exemption for this service provided to a government entity, the applicant approached the AAR for guidance.

Key Issue:

At the heart of the matter was the question of whether the supply of dredging services to the government qualifies for exemption from GST.

Ruling by AAR, West Bengal:

1. Classification: Evaluating whether the activities of delisting and cleaning of drains align with the category of “Public Health Sanitation Conservancy and Solid Waste Management” as outlined in Article 243W of the Indian Constitution.
2. Exemption Criteria: Noting the provisions of Sl. No. 3A of the Service Rate Exemption Notification, which exempts composite supply of goods and services to government entities if the value of goods does not exceed 25 percent of the total supply.
3. Composite Supply: Determining that the supply in question constitutes a composite supply where the value of goods remains below the threshold of 25 percent of the total value, thereby fulfilling the exemption criteria.

Conclusion:

In its ruling, the AAR, West Bengal, affirmed that the supply of dredging services for the removal of hump by dredging to the government falls within the ambit of Sl. No. 3A of the Service Rate Exemption Notification. Consequently, such services are exempted from the levy of GST. This ruling serves to provide clarity on the GST exemption status of dredging services rendered to government entities, offering valuable guidance for similar scenarios in the future.