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Services supplied to the State government under the ‘Noon Meal Scheme’ are exempt under the Goods & Services Tax, Tamil Nadu’s Authority for Advance Ruling (TNAAR) has ruled.
The applicant, Handloom Weavers Cooperative Society, was appointed by the Tamil Nadu government as a nodal agency to inspect, procure, store and transport cost free distribution of dhotis, sarees and school uniforms under various welfare schemes in the State.
Ruling sought on two issues
With the schemes introduced in 1983, the applicant moved AAR seeking ruling on two issues.
First, whether the claim of expenses incurred in handling free distribution of sarees, dhoti and school uniform and supplying them to the Revenue Department or the Social Welfare Department will attract GST at the rate of 18 per or not. Second, if the answer is yes, whether the handling charges related to the pre-GST period of 2015-16 and 2016-17 would also attract GST or not?
AAR observed that the services provided under gamut of handling by the applicant regarding free distribution of sarees and dhoties and the school uniform to the students of class 1 to 8 under ‘Noon Meal Scheme’ are activities related to the functions entrusted to the panchayats/municipality in the Article 243G/243W of the Constitution.
AAR found that as per serial number 3 of the Notification 12/2017 of Central Tax Rate dated June 28, 2017, “pure services”, excluding works contract or other composite supplies involving supply of any goods, provided to the State government were exempted from payment. It observed that the applicant had supplied the handling services to the committee set up by the State government. Further, such services rendered to the State government are pure services.
The authority also observed that the activity of supply of various services under the gamut of handling charges by the applicant without any involvement of goods either as supply or consumed while undertaking such services are “pure services” even if the supply is a composite supply of such services.
“The services rendered by the applicant towards handling of dhothies & sarees/school uniforms from co-operative societies to public distribution system/revenue department is exempted from payment of GST,” AAR ruled while relying on the notification (number 72 of 2017). However, the second question was not admitted as it is related to pre-GST period.
Expert’s view
Amit Maheshwari, Tax Partner with AKM Global, a tax and consulting firm says, the AAR has rightly ruled that the various services provided by the co-operative society under the government welfare scheme/noon meal scheme would be treated as “pure services” as per the relevant exemption notification, thus shall be exempt under GST.
“The legal principle enunciated is that a composition of various services leading to the fulfilment of the stated objective would be qualified for exemption,” he said.
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