GST Exemption for Municipal Solid Waste Management Services
Solid waste management services for municipalities are GST-exempt if the value of spare parts used does not exceed 25% of the total contract.
- Ruling
- 13/WBAAR/2022-23 dated 21.10.2022
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- The company asked if their waste management services were exempt from GST.
- The authority ruled the work is a composite supply, not a pure service.
- Exemption applies only if goods represent 25% or less of the total value.
In short
The company asked the West Bengal Authority for Advance Ruling (AAR) if their solid waste management work for the Howrah Municipal Corporation qualifies for a GST exemption. Because the contract includes both maintenance services and the supply of spare parts, the authority had to decide if this counts as a pure service or a mix of goods and services.
What has changed
How it worked before
Businesses often assumed that all municipal sanitation contracts were automatically exempt as pure services, regardless of whether spare parts were included.
What has changed
The authority clarified that maintenance contracts involving machinery are composite supplies. You can only claim the GST exemption if the cost of the spare parts provided is 25% or less of the total contract value.
Who this affects
Businesses providing solid waste management, sanitation, or maintenance services to municipal corporations.
An example
A cleaning company manages waste compactors for a local municipality. Their contract includes both labor and the replacement of hydraulic parts. If the parts cost 20% of the total contract, they qualify for the GST exemption. If the parts cost 30%, the entire contract becomes taxable.
What you should do
Review your municipal contracts to calculate the exact value of goods and spare parts provided. Note that an advance ruling only binds the business that asked and its specific tax office; it is not a general law for all businesses.
If you do nothing
If you assume this ruling applies to you and stop collecting GST without meeting the 25% threshold, you risk a tax demand. A tax officer may audit your contracts and charge you the unpaid GST plus interest and penalties for non-compliance.
The terms explained
- Composite supply
- A contract that includes two or more taxable items, such as both a service and goods, provided together for a single price.
- Pure service
- A contract that involves only the provision of labor or expertise without the supply of any physical goods or spare parts.
- Advance ruling
- A formal decision from tax authorities on how GST laws apply to a specific business situation.
The ruling in detail
Authority for Advance Ruling
Banchu Das
13/WBAAR/2022-23 dated 21.10.2022 · West Bengal
Questions before the authority
- Whether conservancy/solid waste management services provided by us is exempt from GST?
Facts
The applicant is engaged in providing conservancy and solid waste management services to the Howrah Municipal Corporation under the trade name PEAU TRANSPORT. The work involves the annual operation and maintenance of capacity portable compactors and hook loaders, which includes the supply of spare parts.
Ruling
| Question | What the authority ruled |
|---|---|
| Exemption of conservancy/solid waste management services | Eligible for exemption under serial number 3A of Notification No. 12/2017 – Central Tax (Rate) Subject to the condition that the value of goods involved in the composite supply does not exceed 25% of the total value of supply |
The Authority ruled that the supply is a composite supply of goods and services rather than a pure service. It is eligible for exemption under serial number 3A of the specified notification, provided the value of goods involved does not exceed 25% of the total value of the supply.
Reasoning
The Authority determined that the annual maintenance of machinery involves the supply of spare parts, disqualifying it as a 'pure service' under serial number 3 of the exemption notification. However, it qualifies as a 'composite supply' under serial number 3A of the same notification. The Authority confirmed that sanitation and solid waste management are functions entrusted to a municipality under the Twelfth Schedule of Article 243W of the Constitution. Therefore, the exemption applies if the goods component remains within the 25% threshold.
Provisions relied on
- Section 97(2)(e) of the GST Act
- Article 243W of the Constitution
- Twelfth Schedule of the Constitution
- Notification No. 12/2017 – Central Tax (Rate) dated 28/06/2017
- West Bengal State Notification No. 1136 – FT dated 28/06/2017
For the practitioner
This ruling clarifies that maintenance contracts involving machinery for municipal functions are treated as **composite supplies** rather than pure services. It provides a clear **25% value threshold** for goods in such contracts to qualify for tax exemption. Practitioners should ensure that the value of spare parts or goods used in similar municipal maintenance contracts is strictly monitored to maintain eligibility for this exemption.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/banchu_das_advance_ruling.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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