GST Exemption for Transfer of Water Supply Digitization Business as a Going Concern
1. The Issue
The case involved two primary questions regarding the provision of technological and data management services for the Public Health Engineering Directorate (PHED) of West Bengal:
Business Takeover: Whether the transfer of assets and liabilities from a sole proprietorship (M/s. Horizen) to a newly incorporated company (Horizen Edge Technologies Pvt. Ltd.) qualifies as a Transfer of a Going Concern (TOGC) and is exempt from GST.
Service Classification: Whether the digitization and monitoring services provided to the State Government (PHED) are “Pure Services” exempt from GST under Articles 243G and 243W of the Constitution of India.
2. The Facts
Business Profile: M/s. Horizen was engaged in the digitization of Piped Water Supply Schemes (PWSS), monitoring Mega Schemes, enhancing the Jalmitra application, GIS mapping, and documentation for the Jal Jeevan Mission (JJM).
Transfer: The entire business, including operational assets and liabilities, was taken over by the applicant as a “going concern” to continue the PHED work orders without interruption.
Nature of Work: The work orders focused on digital mapping, mobile/web application development, field-level data validation of Functional Household Tap Connections (FHTC), and technical consultancy—without any supply of goods or works contract components.
3. Key Takeaways
Going Concern Exemption: The Authority held that because the transfer involved a live, operating business with all its essential features and no intent to wind up, it qualified as an exempt supply under Sl. No. 2 of Notification No. 12/2017-Central Tax (Rate).
Pure Service Classification: The work orders were categorized as “Pure Services” because:
There was no transfer of property in goods involved (not a works contract).
The recipient was the State Government (PHED Directorate).
The activities (water supply and sanitation) are specific functions entrusted to Panchayats and Municipalities under Articles 243G and 243W (specifically Entry 11 of the 11th Schedule and Entry 5 of the 12th Schedule).
Constitutional Nexus: The ruling underscored that drinking water supply is a constitutionally mandated responsibility of local bodies. Therefore, services like GIS mapping and data management that facilitate this water supply are inherently “in relation to” these constitutional functions.
Extension of Relief: While original rulings for the transferor don’t automatically bind the transferee, fresh analysis of the work orders confirmed that identical services remain exempt even after the change in the legal entity’s form.
AUTHORITY FOR ADVANCE RULING, WEST BENGAL
Horizen Edge Technologies (P.) Ltd., In re*
JAYDIP KUMAR CHAKRABARTI and SHAFEEQ S., Member
WBAAR 13 of 2025-26
Order No. 18/WBAAR/2025-26
Order No. 18/WBAAR/2025-26
SEPTEMBER 12, 2025
Rajkumar Banerjee, Adv. and Ms. Payel Agarwal, A/R for the Applicant.
PROCEEDINGS
1.1 At the outset, we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 (the CGST Act, for short) and the West Bengal Goods and Services Tax Act, 2017 (the WBGST Act, for short) have the same provisions in like matter except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the WBGST Act. Further to the earlier, henceforth for the purposes of these proceedings, the expression ‘GST Act’ would mean the CGST Act and the WBGST Act both.
1.2 The applicant is an entity newly incorporated to take over the business assets along with the provision of liabilities of M/s. Horizen (GSTIN 19BNSPM8492A1ZE) engaged inter alia in the business as a provider of Digitalisation and Monitoring of Mega Schemes; Enhancer of the Jalmitra application; Digitization of the Piped Water Supply schemes; Collection, Scanning and Digitization of printed distribution drawings along with development of a GIS tool; Relevant Data management, analysis and documentation and other technical consultancy services relating to water distribution networks for Directorate of Public Health Engineering across West Bengal. The said business taken over from M/s. Horizen shall run as a going concern by the applicant.
1.3 The applicant has made this application under sub-section (1) of section 97 of the GST Act and the rules made thereunder raising following questions vide serial number 14 of the application in FORM GST ARA-01:
| 1) | Whether based on facts of the instant case, transfer of assets and liabilities forming part of the business from M/s. Horizen amounts to “service by way of transfer of a going concern, as a whole or an independent part thereof” and is thus an exempt supply as classified under sl. no. 2 of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017 (as amended)? |
| 2) | In case where the answer to question No 1 is in negative, what shall be the classification and the rate of tax? |
| 3) | Upon the conveyance of the business to the applicant, a determination is required as to whether all supplies and/or invoices issued in furtherance of, or as an extension of, original work orders commenced under the name of the transferor, shall be deemed to possess the identical taxability as if such transactions had remained with M/s. Horizen or new tax treatment would apply due to the business transfer? |
1.4 The questions on which the advance ruling is sought for is found to be covered under clauses (a), (b) and (e) of sub-section (2) of section 97 of the GST Act.
1.5 The applicant states that the questions rose in the application neither have been decided by nor is pending before any authority under any provision of the GST Act.
1.6 The application is, therefore admitted.
Submission of the Applicant
2.1 The applicant, is an entity newly incorporated to take over the business assets along with the provision of liabilities of M/s. Horizen (GSTIN 19BNSPM8492A1ZE) engaged inter alia in the business as a provider of Digitalisation and Monitoring of Mega Schemes; Enhancer of the Jalmitra application; Digitization of the Piped Water Supply schemes; Collection, Scanning and Digitization of printed distribution drawings along with development of a GIS tool; Relevant Data management, analysis and documentation and other technical consultancy services relating to water distribution networks for Directorate of Public Health Engineering across West Bengal. The said business taken over from M/s. Horizen shall run as a going concern by the applicant.
The applicant submits that the Public Health Engineering Department (PHED) was created as an independent full-fledged department in 1987. Earlier Health & family Welfare Department of the State Government had a Public Health Engineering Wing. As per Rules of Business of the State Government, Public Health Engineering Department controls the Water Supply & Sanitation Budget of the State Government and undertakes programmes of implementation of water supply services mainly through Public Health Engineering Directorate under its administrative control. Therefore, main activities of PHED are now related to Rural Water Supply and Urban Water Supply in few limited areas of the State outside Kolkata Metropolitan Area (KMA), PHED also controls works of Hill Area Development so far as provision for water supply is concerned.
The main function of PHE Department within the jurisdiction of Rural Local Bodies is Supply of safe drinking water based on Ground Water/Surface Water/Sub – Surface Water/Based on other sources. Apart from rural water supply, PHE Department is also engaged in Urban Water Supply in few Municipalities, Mitigating Water Quality Related Issues, Monitoring & Surveillance of Water Quality (Chemical and Bacteriological), Creation of Sustainability Structures (Recharge of GW aquifer), Water Supply to Schools and Anganwadis, Creation of Spot Sources (Ordinary TW and Rig Bored TW), Research & Development Works in Water supply sector, Disaster management in flood, drought, earthquake etc.
As of now, PHED oversees a no. of 6,851 Piped Water Supply Schemes (hereinafter referred to as “PWSS”) in the State of West Bengal. These schemes encompass an extensive network of pipelines and other water supply assets throughout the state.
PHED has the largest Network of 219 water testing laboratories in the Country which are spread among all the districts of West Bengal. Every year more than 7 lakh samples are tested for Physical, Chemical (Arsenic, Fluoride Salinity etc. ) and Bacteriological imports and immediate action is taken for remedy of any water quality related issue.
The West Bengal Public Health Engineering Department is focused on delivering safe and reliable drinking water to rural households through a comprehensive network of piped water supply schemes.
This initiative is part of a larger national effort under the Jal Jeevan Mission (JJM), launched by the Central Government in 2019. The primary goal of JJM is to provide Functional Household Tap Connections (FHTCs) to every rural household by 2024, ensuring access to potable water in adequate quantity and quality.
2.2 Technological Integration
To effectively manage this extensive undertaking, the department has integrated advanced technologies into its operations.
PHED has implemented a digital asset management system to oversee the extensive number of existing PWSS. This system provides access to textual, locational, and pictorial information through satellite images, enabling efficient area identification and management for informed decision-making.
Applications, encompassing both mobile and web platforms, have been integrated into various projects to facilitate efficient data entry offering the advantage of offline access, addressing connectivity challenges in rural areas. Furthermore, it enables seamless data transfer to a web server for comprehensive visualization and reporting. These reports can be analyzed via a web-based desktop interface, utilizing pre-determined user matrices for enhanced clarity and insight.
The utilization of advanced GIS tools and analysis through WebGIS plays a pivotal role in the integration of technology for PHED data management. This mapping methodology serves the purpose of identifying the coverage of schemes, pinpointing areas that are yet to be covered, tracking the progress and achievements of various projects, and conducting comprehensive analyses pertaining to project monitoring across multiple dimensions.
Sensors have been installed at critical points within the water supply infrastructure, such as Water Treatment Plants, Booster Pumping Stations, and Overhead Reservoirs in some mega piped water supply schemes. These sensors continuously monitor key parameters like water levels, discharge rates, and quality metrics. The data collected is fed into a centralized Management Information System (MIS) and a Command and Control Centre, where it is analyzed for strategic planning and operational improvements. This technological approach not only ensures efficient water distribution but also helps in promptly addressing any issues that arise.
2.3 GIS Mapping
GIS (Geographic Information System) mapping is a crucial tool employed by the department. It provides a visual representation of the water supply network, including administrative boundaries, coverage areas of various Piped Water Supply Schemes (PWSS), and settlement areas. This mapping is regularly updated to reflect changes on the coverage areas and the ongoing implementation of FHTCs. It is very much useful for identifying areas that have yet to be covered by the water supply network and for planning future expansions. The department is also prioritizing “Har Ghar Jal” villages, where the task of geo-tagging assets like household tap connections and public institutions is being fast-tracked. Regular updates to the GIS maps help officials visualize the progress of each scheme, assess the distribution of tap connections, and estimate completion timelines.
2.4 Geo-Referenced Surveys
One of the primary service areas of the applicant involves conducting Geo-Referenced Surveys using mobile applications and/or instruments such as Total Station, Dumpy level, and DGPS. These instrumental surveys are carried out at locations including Water Treatment Units and Pump Houses to demarcate areas and create maps. The surveys, with or without applications, facilitate the collection of data and information on PWSS asset mapping (such as-Pump Houses, Overhead Reservoirs, Stand-alone treatment units etc.) and household surveys with locational and functional details of the tap connections. Surveys conducted with applications allow for seamless data integration into the digital Management Information System (MIS) through data synchronization. Conversely, in cases where applications are not used, locational information is manually captured and entered into the system. These surveys encompass not only point data collection but also the delineation of paths or alignments within the network system.
2.5 Data Management, Analysis and Documentation
All these operations and functions necessitate comprehensive reporting and documentation for future reference and maintenance. This is integrated with appropriate data analytical methods and representation modes that facilitate easy understanding.
The applicant submits that as on 31.03.2025, among the assets and liabilities lying in the books of account of the said proprietorship concern, only buildings (both residential and commercial) and investments are personal in nature. Rest all the assets and liabilities being in relation to business, would get transferred from M/s. Horizen to the applicant.
2.6 The applicant submits that since as per the facts of the instant case, all the business assets and liabilities are getting transferred and that the transferee shall run the business as a going concern, therefore, as per sl. no. 2 of the exemption Notification No. 12/2017 – Central Tax (Rate), dated 28.06.2017 (as amended), the same ought to have been exempt. The said sl. no. is reproduced as hereunder –
| Sl. No. | Chapter, Section, Heading, Group or Service Code (Tariff) | Description of Services | Rate (per cent.) | Condition |
| (1) | (2) | (3) | (4) | (5) |
| 2 | Chapter 99 | Services by way of transfer of a going concern, as a whole or an independent part thereof. | Nil | Nil |
Now given that the transferee upon the conveyance of the business from M/s. Horizen, would be supplying services and/or issuing invoices in furtherance of, or as an extension of, original work orders commenced under the name of the proprietorship concern, the same ought to be deemed to possess the identical taxability as if such transactions had remained with M/s. Horizen. Moreover, any work orders issued in the name of the transferee post transfer of business but being exactly identical to the ones decided by the Hon’ble Bench should also be treated in the same manner.
2.7 Under the above facts and circumstances, since all the business assets and liabilities are getting transferred and that the transferee shall run the business as a going concern, therefore, the said supply shall fall under Entry 2 of the exemption Notification No. 12/2017 – Central Tax (Rate), dated 28.06.2017 (as amended). However, if the said transfer is held to be non-satisfying the requirements for availing the benefit of the said Entry 2 of Exemption Notification no. 12/2017-Central Tax (Rate), dated 28.06.2017, the same shall be classifiable under SAC 999799 attracting GST @ 18%.
2.8 Further, the supplies and /or invoices to be issued in furtherance of, or as an extension of, original work orders commenced under the name of the proprietorship concern, shall also be deemed to possess the identical taxability as if such transactions had remained with M/s. Horizen, otherwise new tax treatment shall apply for each such activity due to the business transfer.
3 . Submission of the Revenue
3.1 The concerned officer from the revenue has not expressed any view on the merit of the issue raised by the applicant.
4 . Observations & Findings of the Authority
4.1 We have gone through the records of the issue as well as submissions made by the authorized representatives of the applicant during personal hearing.
4.2 As per the statement of facts furnished, the applicant is an entity newly incorporated to take over the business assets along with the provision of liabilities of M/s. Horizen having GSTIN 19BNSPM8492A1ZE (called transferor hereinafter). The transferor is engaged inter alia in the business as provider of digitalisation and monitoring of Mega Schemes; enhancer of the Jalmitra application. The applicant is engaged in digitization of the Piped Water Supply Schemes; collection, scanning and digitization of printed distribution drawings along with development of a GIS tool; relevant data management, analysis and documentation and other technical consultancy services relating to water distribution networks across West Bengal for Directorate of Public Health Engineering (PHE in short) of Government of West Bengal. The transferor shall be run as a going concern by the applicant.
Under this circumstance the applicant has raised the following questions:
| 1) | Whether based on facts of the instant case, transfer of assets and liabilities forming part of the business from M/s. Horizen amounts to “service by way of transfer of a going concern as a whole or an independent part thereof” and is thus an exempt supply as classified under sl. no. 2 of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017 (as amended)? |
| 2) | Whether based on facts of the instant case in case where the answer to question no. 1 is in negative, what shall be the classification and the rate of tax? |
| 3) | Upon the conveyance of the business to the applicant, a determination is required as to whether all supplies and/or invoices issued in furtherance of, or as an extension of, original work orders commenced under the name of the transferor, shall be deemed to possess the identical taxability as if such transactions had remained with M/s. Horizen or new tax treatment would apply due to the business transfer? |
4.3 The applicant submits that as on 31.03.2025, among the assets and liabilities lying in the books of account of the transferor, only buildings (both residential and commercial) and investments are personal in nature. The rest of all the assets and liabilities being in relation to business will get transferred from M/s. Horizen to the applicant.
The applicant believes since as per the facts of the instant case, all the business assets and liabilities are getting transferred and that the transferee shall run the business as a going concern, therefore, the transfer is exempted as per sl. no. 2 of the exemption Notification No. 12/2017 – Central Tax (Rate), dated 28.06.2017 (as amended).
According to the applicant, the transferee upon the conveyance of the business from M/s. Horizen, will be supplying services and/or issuing invoices in furtherance of, or as an extension of, original work orders commenced under the name of the proprietorship concern, the same ought to be deemed to possess the identical taxability as if such transactions had remained with M/s. Horizen. Moreover, any work order issued in the name of the transferee post transfer of business but being exactly identical to the ones decided by this authority in earlier occasion should also be treated in the same manner.
4.4 We will divide our discussion into two parts. The first part of the discussion will cover the first two questions raised by the applicant. The second part will deal with the third question placed before us.
As per the submission of the applicant’s representative, the applicant will take over the business assets along with the provision of liabilities of M/s. Horizen having GSTIN 19BNSPM8492A1ZE (called transferor hereinafter). The transferor shall be run as a going concern by the applicant.
So there are two issues involved here. First, there is a transfer of business in the form of take over. There will be transfer of assets (barring the personal assets of building) and liabilities of the business. Second, the transfer is one of a going concern. The transferor will be run as a going concern. It involves transfer of immovable property, goods, employees, goodwill and unexecuted orders. In fact, the applicant will carry out all the works that were earlier allotted to the transferor and are still pending with the PHE Directorate of Government of West Bengal.
The first issue before us is to decide whether the above noted transfer amounts to supply under the GST Act. To understand the scope of supply we are referring to relevant portions of Section 7 of the CGST Act, 2017.
Section 7. Scope of supply.- (1) For the purposes of this Act, the expression – “supply” includes-
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration.
Explanation.- For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;]
(b) import of services for a consideration whether or not in the course or furtherance of business;
(c) the activities specified in Schedule I, made or agreed to be made without a consideration; [****]
(d) [****].
(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II.
Since the concept of ‘Scope of Supply’ supra is an inclusive provision, it goes beyond the expression ‘all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business”. Even if the transfer of business is not done in the course or furtherance of business, still it will amount to supply. In fact, Section 7(1A) reinforces this proposition.
4.5 Section 7(1A) leads us to Schedule II appended to the CGST Act, 2017. This Schedule refers to ‘activities [or transactions] to be treated as supply of goods or supply of services”. Serial no. 4 of Schedule II relates to transfer of business assets.
Clause (c) of Entry no. 4 provides
‘where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless-
| (i) | the business is transferred as a going concern to another person;’ |
It is evident from the above provision that transfer of business as a going concern will not amount to supply of goods. Rather, it will be regarded as supply of service. Here we come to the concept of going concern.
The GST Act nowhere defines the term ‘going concern”. The only reference to going concern can be found in Notification No. 12/2017 – Central Tax (Rate), dated 28.06.2017, as amended. The relevant entry is reproduced hereinunder:
| Sl. No. | Chapter, Section, Heading, Group or Service Code (Tariff) | Description of Services | Rate (per cent.) | Condition |
| (1) | (2) | (3) | (4) | (5) |
| 2 | Chapter 99 | Services by way of transfer of a going concern, as a whole or an independent part thereof. | Nil | Nil |
Since the CGST Act does not define going concern, we will have to understand it in the context of common parlance and financial standards.
From a common parlance, going concern is a company which is assumed to continue its operations, such as trading and providing services, and will not be forced to liquidate its assets in the near future.
On the other hand, from financial point of view a going concern must exhibit the following features:
| • | Financial stability: The company is expected to meet its financial obligations as they become due. This includes paying debts on time and having sufficient resources. |
| • | Financial health: Companies typically show strong financial health, consistent revenue streams, and a capacity to handle financial challenges without major restructuring. |
| • | Long-term planning: There is an absence of any intention or need to liquidate or materially curtail the scale of operations in the near future. |
| • | Asset valuation: Financial statements are prepared under the assumption that assets will be used over their useful life, not sold off immediately at a lower liquidation value. |
| • | Operational integrity: The core products or services of the company are considered viable and have a reasonable market position. |
4.6 The applicant has furnished the financial statements of the transferor i.e. M/S Horizen for the financial year ending on 31.03.2025. From the financial statements it is noticed that the turnover of the transferor company has increased from Rs. 6.66 crore in F.Y. 2023-24 to Rs. 9.23 crore in 2024-25. The gross profit ratio for the same comparable periods stood at Rs. 2.60 crore and Rs. 3.72 crore respectively. The amount of sundry debtors has increased from Rs. 5.59 lakh in 2023-24 to Rs. 65.24 lakh in 2024-25. The written down value of assets as on 31.03.2025 are as under:
| Furniture & fixtures | Rs. 17,77,523.00 |
| Plant & machinery | Rs. 59,41,477.00 (this figure includes purchase of Rs. 15,58,025.00 during F.Y. 2024-25) |
All these figures indicate that the transferor company is a ‘going concern’. The financial health of the company suggests that there is no need to liquidate the entity in near future. Rather the transferee can continue the business as a going concern.
In our considered view, since the transferor company is a going concern by all financial standards, its transfer should come under serial no. 2 of the Notification No. 12/2017 – Central Tax (Rate), dated 28.06.2017, as amended.
4.7 Before going into the details of the next part of our observation, we should discuss some concepts which will act as reference in the latter part of the discussion.
Pure Service: This term has not been defined in the provisions of the GST Act. This term has reference in serial no. 3 of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017, as amended. Pure Services exclude works contract service or other composite supplies involving supply of goods. So supply of services which does not involve any supply of goods can be regarded as pure service.
Composite Supply: Section 2(30) of the GST Act defines Composite Supply as supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.
Article 243G: This Article of the Constitution of India reads as under:
Powers, authority and responsibilities of Panchayats — Subject to the provisions of this Constitution, the Legislature of a State may, by law, endow the Panchayats with such powers and authority as may be necessary to enable them to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Panchayats at the appropriate level, subject to such conditions as may be specified therein, with respect to —
| (a) | the preparation of plans for economic development and social justice; |
| (b) | the implementation of schemes for economic development and social justice as may be entrusted to them including those in relation to the matters listed in the Eleventh Schedule. |
The Eleventh Schedule as available in the Constitution of India downloaded from the official website of Legislative Department, Ministry of Law and Justice, Government of India (https://legislative.gov.in) contains the following entries in respect of Article 243G:
| 1. | Agriculture, including agricultural extension. |
| 2. | Land improvement, implementation of land reforms, land consolidation and soil conservation. |
| 3. | Minor irrigation, water management and watershed development. |
| 4. | Animal husbandry, dairying and poultry. |
| 5. | Fisheries. |
| 6. | Social forestry and farm forestry. |
| 7. | Minor forest produce. |
| 8. | Small scale industries, including food processing industries. |
| 9. | Khadi, village and cottage industries. |
| 10. | Rural housing. |
| 11. | Drinking water. |
| 12. | Fuel and fodder. |
| 13. | Roads, culverts, bridges, ferries, waterways and other means of communication. |
| 14. | Rural electrification, including distribution of electricity. |
| 15. | Non-conventional energy sources. |
| 16. | Poverty alleviation programme. |
| 17. | Education, including primary and secondary schools. |
| 18. | Technical training and vocational education. |
| 19. | Adult and non-formal education. |
| 20. | Libraries. |
| 21. | Cultural activities. |
| 22. | Markets and fairs. |
| 23. | Health and sanitation, including hospitals, primary health centres and dispensaries. |
| 24. | Family welfare. |
| 25. | Women and child development. |
| 26. | Social welfare, including welfare of the handicapped and mentally retarded. |
| 27. | Welfare of the weaker sections, and in particular, of the Scheduled Castes and the Scheduled Tribes. |
| 28. | Public distribution system. |
| 29. | Maintenance of community assets. |
Article 243W: This Article of the Constitution of India reads as under:
Powers, authority and responsibilities of Municipalities, etc. — Subject to the provisions of this Constitution, the Legislature of a State may, by law, endow —
| (a) | the Municipalities with such powers and authority as may be necessary to enable them to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Municipalities, subject to such conditions as may be specified therein, with respect to — |
| (i) | the preparation of plans for economic development and social justice; |
| (ii) | the performance of functions and the implementation of schemes as may be entrusted to them including those in relation to the matters listed in the Twelfth Schedule; |
| (b) | the Committees with such powers and authority as may be necessary to enable them to carry out the responsibilities conferred upon them including those in relation to the matters listed in the Twelfth Schedule. |
The Twelfth Schedule as available in the Constitution of India downloaded from the official website of Legislative Department, Ministry of Law and Justice, Government of India (https://legislative.gov.in) contains the following entries in respect of Article 243W:
| 1. | Urban planning including town planning. |
| 2. | Regulation of land-use and construction of buildings. |
| 3. | Planning for economic and social development. |
| 4. | Roads and bridges. |
| 5. | Water supply for domestic, industrial and commercial purposes. |
| 6. | Public health, sanitation conservancy and solid waste management. |
| 7. | Fire services. |
| 8. | Urban forestry, protection of the environment and promotion of ecological aspects. |
| 9. | Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded. |
| 10. | Slum improvement and upgradation. |
| 11. | Urban poverty alleviation. |
| 12. | Provision of urban amenities and facilities such as parks, gardens, playgrounds. |
| 13. | Promotion of cultural, educational and aesthetic aspects. |
| 14. | Burials and burial grounds; cremations, cremation grounds; and electric crematoriums. |
| 15. | Cattle pounds; prevention of cruelty to animals. |
| 16. | Vital statistics including registration of births and deaths. |
| 17. | Public amenities including street lighting, parking lots, bus stops and public conveniences. |
| 18. | Regulation of slaughter houses and tanneries. |
Jal Jeevan Mission (JJM): As per the narration provided in the official website of Department of Drinking Water & Sanitation, Ministry of Jalshakti, Government of India ‘Jal Jeevan Mission, is envisioned to provide safe and adequate drinking water through individual household tap connections by 2024 to all households in rural India. The programme will also implement source sustainability measures as mandatory elements, such as recharge and reuse through grey water management, water conservation, rain water harvesting. The Jal Jeevan Mission will be based on a community approach to water and will include extensive Information, Education and communication as a key component of the mission. The Jal Jeevan Mission will be based on a community approach to water and will include extensive Information, Education and communication as a key component of the mission. JJM looks to create a jan andolan for water, thereby making it everyone’s priority”.
Jal Mitra Programme: It is a part of Nal Jal Mitra Programme (NJMP) initiated by the Central Government. To ensure the long-term sustainability of the in-village water schemes under the Jal Jeevan Mission, it is imperative to have a sufficiently large pool of skilled human resources available at the local level. The aim of the Jal Mitra Programme is to provide skill-based trainings to local persons from villages, to equip them with a comprehensive set of skills & develop “Nal Jal Mitras”, so that they can function as scheme operators and are able to carry out minor repairs and maintenance, including preventive maintenance, of the piped water supply scheme(s) in their village.
4.8 The applicant has referred to Notification No. 12/2017 – Central Tax (Rate), dated 28.06.2017 as amended. The relevant portion of the notification is reproduced as under:
| Sl. No. | Chapter, Section, Heading, Group or Service Code (Tariff) | Description of Services | Rate (per cent.) | Condition |
| (1) | (2) | (3) | (4) | (5) |
| 3 | Chapter 99 | Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. | Nil | Nil |
It is evident from the above table that in order to qualify for Serial no. 3 of the Notification No. 12/2017 Central Tax (Rate), dated 28.06.2017 the following three conditions are to be fulfilled simultaneously.
| 1. | The service must be a pure service. It should not be works contract service or other composite supplies involving supply of any goods. |
| 2. | The service is to be provided to the Central or State Government or Union Territory or a local authority or a Governmental authority. |
| 3. | The service provided must be done by way of any activity in relation to any function entrusted to a Panchayat or Municipality under article 243G or 243W of the Constitution of India respectively. |
4.9 During the course of personal hearing the applicant’s representative submitted that as on date no work order in the name of the applicant has been given by the PHE Directorate of Government of West Bengal. The applicant will carry out the partial or complete works, as the case may be, allotted to M/S Horizen after the take – over is complete.
Earlier M/S Horizen being an applicant moved to this authority with certain questions vide ARN AD190824015843U Dated 24.08.2024 on the basis of work orders provided by the PHE Directorate of Government of West Bengal to M/S Horizen, the transferor in the instant application. The authority vide Order No. 15/WBAAR/2024-25 dated 11.12.2024 pronounced its ruling on such questions. There are certain other work orders issued by the same directorate in the name of M/S Horizen on which no ruling was sought from this authority.
According to the statement submitted by the applicant, earlier M/S Horizen has placed the work orders in relation to the following works which the applicant will carry on after take-over of the business as a going concern.
| A) | Upgradation and maintenance of Integrated Water Quality Management Information System by means of pre-assigned multifarious sample collection criteria in WebGIS view and uploading the water quality test results |
| B) | Digital structurisation of pipeline alignment and asset evaluation |
| C) | Scrutiny, analysis and identification of errors for Functional Household Tap Connection data collected through WB-JJM mobile application |
| D) | Design, development and maintenance of a monitoring system |
| E) | Updation of scheme level maps representing different features of Piped Water Supply Schemes(PWSS) |
| F) | Geo-tagging of assets of PWSS |
| G) | Restructuring and redesigning of map domain, upload and hosting of high quality maps |
| H) | Upkeep and management of WB-JJM applications and dashboards |
| I) | Updation of settlement layers for the entire statealong with hosting in WebGIS of PHE Directorate |
| J) | Design and development of an Integrated Monitoring System focusing on Chlorine consumption in Head Work or Tube Well sites of various PWSS |
| K) | Upgradation, maintenance and modification of the Command & Centre, Web application for real time monitoring |
This authority vide ruling dated 11.12.2024 pronounced that the above noted works qualified to be exempted supply of pure services vide Sl. no. 3 of the Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017 (as amended). In this case the applicant was M/S Horizen having GSTIN 19BNSPM8492A1ZE. The present applicant is a separate entity and separate taxable person having different GSTIN.
Here we must refer to the provisions of the CGST Act in respect of applicability of advance ruling. Section 103(1) of the CGST Act provides
| (1) | The advance ruling pronounced by the Authority or the Appellate Authority under this Chapter shall be binding only- |
| (a) | on the applicant who had sought it in respect of any matter referred to in sub-section (2) of section 97 for advance ruling; |
| (b) | on the concerned officer or the jurisdictional officer in respect of the applicant. |
| Again, Section 103(2) provides |
| (2) | The advance ruling referred to in sub-section (1) [and sub-section (1A)] shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed. |
It is clear from the statutory provisions that the questions on which this authority has already pronounced ruling is binding only on the concerned applicant and the concerned jurisdictional officer and none else.
On the other hand, the facts and circumstances supporting the earlier ruling have changed due to transfer of business of M/s. Horizen.
So the advance ruling dated 11.12.2024 is not applicable for the present applicant.
4.10 As we have already mentioned, there are certain works allotted to M/S Horizen by the PHE Directorate of Government of West Bengal in respect of which M/S Horizen has not sought any advance ruling. The applicant, as per the submissions made before us, will carry out the same work orders after take-over. The work orders placed before us serve only as samples for the purpose of this application for advance ruling. The works are as under:
| A) | Comprehensive proposal for digital transformation and monitoring of mega schemes under the PHE Directorate |
| B) | Enhancement of the Jalmitra application and upgradation and modification of the Android and Web module |
| C) | Digitisation of the tramsmission, distribution system and all assets of PWSS |
| D) | Collection, scanning and digitization of printed distribution drawings from divisions or sub-divisions of the PHE Directorate into Geo-referenced CAD files and uploading them in the PHED “Scheme Drawing & Litholog’ module |
| E) | Field level data validation of FHTC for error free database for different PWSS |
| F) | Organising orientation programme for ISAs and DPMU and Engineer officers on Functionality assessment along with evaluation of performance under support activities of JJM |
| G) | Design and development of mobile and web application for generation of Unique Tap Water Identity (UTWID) number for the beneficiaries |
| H) | Upkeep and hosting of WhatsApp bot platform to optimise data accessibility, enhanced service delivery and operational efficiency |
The PHE Directorate of Government of West Bengal has mainly focused on delivering safe and reliable drinking water to rural households of the state through a comprehensive network of piped water supply schemes. This is a part of the larger nationwide effort under the JJM launched by the Government of India in 2019. The primary goal of JJM is to be provide Functional Household Tap Connection (FHTC) to every rural household ensuring access to adequate quantity and quality of potable water. Under this scheme the PHE Directorate has provided nearly 96.89 lakhs of FHTC as of now. The data in relation to installation of FHTC, regularity and duration of water supply, installation of Piped Water Supply Schemes (PWSS) etc. are monitored on day-to-day basis. In order to effectively manage this extensive programme the PHE Directorate has integrated advanced technologies into its operations. For this purpose the directorate has implemented digital asset management system to oversee the progress of the work undertaken by it. The utilisation of GIS tools and analysis of Web GIS data plays a crucial role in respect of data management. The work orders referred to here in this paragraph are related to this aspect of functioning of the PHE Directorate and also for organising orientation programmes for stakeholders.
4.11 After the detailed study of the above work orders noted in Paragraph 4.10 we are of the considered view that these work orders per se do not represent any kind of works contract or composite supplies having any supply of goods involved in them. The services can be regarded as pure services. As such, these services can be regarded as Pure Service and qualifies for exemption under serial no. 3 of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017, as amended on the following grounds:
| (i) | Those are Pure Services. |
| (ii) | No works contract service or other composite supply involving supply of any goods is related to those works. |
| (iii) | Those pure services are provided to the Government of West Bengal represented by PHE Directorate. |
| (iv) | The specific activity of the services is in relation to function entrusted to a panchayat under Article 243G (vide serial no. 11 of the Eleventh Schedule) or to a municipality under Article 243W (vide serial no. 5 of the Twelfth Schedule). |
In view of the foregoing, we rule as under:
RULING
1) Whether based on facts of the instant case, transfer of assets and liabilities forming part of the business from M/s. Horizen amounts to “service by way of transfer of a going concern as a whole or an independent part thereof” and is thus an exempt supply as classified under sl. no. 2 of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017 (as amended)?
Answer: The answer is in the affirmative.
2) Whether based on facts of the instant case in case where the answer to question no. 1 is in negative, what shall be the classification and the rate of tax?
Answer: In view of the answer to Question 1, this question does not arise.
3) Upon the conveyance of the business to the applicant, a determination is required as to whether all supplies and/or invoices issued in furtherance of, or as an extension of, original work orders commenced under the name of the transferor, shall be deemed to possess the identical taxability as if such transactions had remained with M/s. Horizen or new tax treatment would apply due to the business transfer?
Answer: Answer to this question should be given in two parts.
For the work items mentioned in Paragraph 4.9 the ruling pronounced by this authority is not binding either on the applicant or on the jurisdictional officer.
For the work items mentioned in Paragraph 4.10, it is ruled that they qualify for exemption under serial no. 3 of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017, as amended if the work orders remain the same as per the sample work orders placed before us.