No GST Exemption for Supply of Machinery to Municipality; Exemptions Restricted to ‘Pure Services’ or ‘Low-Goods’ Composite Supplies
ISSUE
Whether the supply of fresh waste processing machinery to a Local Authority (Anand Nagarpalika Corporation) is exempt from GST under Notification No. 12/2017-Central Tax (Rate), or if it constitutes a taxable supply.
FACTS
The Transaction: The Applicant won a bid for the supply of fresh waste processing machinery to the Anand Nagarpalika Corporation.
The Invoice: After installing the machinery, the Applicant raised invoices charging GST.
The Dispute: The Nagarpalika (Municipality) requested the Applicant to seek an Advance Ruling to confirm if GST was actually applicable on supplies made to a local authority, presumably hoping for an exemption available to government functions.
HELD
Analysis of Notification 12/2017: The Authority (AAR) analyzed the specific entries for exemptions provided to supplies made to Government/Local Authorities:
Sl. No. 3: Exempts “Pure Services” (excluding works contract service or other composite supplies involving any goods).
Sl. No. 3A: Exempts “Composite Supply of goods and services” where the value of supply of goods constitutes not more than 25% of the total value.
Nature of Supply: The instant transaction was primarily a supply of goods (machinery). Even if installation was involved, the dominant nature was goods, and the value of goods far exceeded the 25% threshold required for Entry 3A.
Conclusion: Since the transaction was neither a “pure service” nor a “composite supply with <25% goods,” it did not qualify for exemption.
Verdict: The supply is taxable at the applicable rate of 18%. [In Favour of Revenue]
KEY TAKEAWAYS
Govt Supply ≠ Automatic Exemption: Many vendors (and government officers) mistakenly believe that any work done for a Municipality (Article 243W functions) is exempt. This is incorrect.
The “25% Goods” Rule: For works contracts (like maintenance, repairs, or construction) provided to the government, exemption applies only if the material component is minor (less than 25%). If you supply a machine, a computer, or build a structure where materials are significant, it is fully taxable.
Pure Goods are Taxable: The direct supply of goods (vehicles, machinery, furniture) to the government is always taxable, just like a supply to a private entity.
AUTHORITY FOR ADVANCE RULING, GUJARAT
Vishalsinh Mahendrasinh Atodariya , In re
SUSHMA VORA and VISHAL MALANI, Member
No.- GUJ/GAAR/R/2025/52
(In Application No. Advance Ruling/SGST & CGST/2025/AR/10)
(In Application No. Advance Ruling/SGST & CGST/2025/AR/10)
NOVEMBER 24, 2025
Sushil Kumar Kabra, CA and Rakeshkumar M. Shah, Adv. for the Applicant.
proceedings
1. M/s Vishalsinh Mahendrasinh Atodariya, 211, Brahman Faliyu, Post Tarsadi, Taluka Mangrol, Surat, Gujarat-394120 [for short – ‘applicant’] is registered under GST and their GSTIN is 24AJYPA8981B2ZX.
2. The applicant has stated that they are a registered tax payer providing ‘Door to Door Garbage collection’ in various localities. They had won a bid for supply of ‘Fresh Waste Processing Machinery’ to the Anand Nagarpalika. After the allotment of tender, the machinery was installed by the applicant as per the instruction and terms of the tender. After completion of installation of machinery, invoices charging GST on the supplied machinery was presented to the Anand Nagarpalika. As the applicant was of the opinion that GST needs to be charged on the supply of machinery to the Nagarpalika, they accordingly charged GST while raising invoices. However, the Nagarpalika requested the applicant by way of a letter, to approach the Authority for Advance Ruling for the applicability of GST on the supply made to the local authority.
3. As per the applicant, majority of the machinery supplied and installed at the premises designated by the Nagarpalika fall under HSN 8479. Further, Sr. Nos. 3 and 3A of Notification No. 12/2017-CT(R), dtd. 28.06.2017 exempts pure services or composite supply of goods and services in which the value of goods does not constitute more than 25%, provided to the Central government, State Government or UT or any local authority, by way of an activity in relation to any function entrusted to a Municipality under Article 243W of the Constitution. However, in their case, it is a supply of goods in the form of machinery for Fresh Waste processing. Therefore, as per their view, GST would be leviable on the machinery supplied by them to the Municipality.
4. The applicant has sought a ruling on the following questions: –
| (i) | Whether supply of goods to Anand Municipality Corporation (Local Authority of Anand City) attracts GST or it is exempt? |
| (ii) | If GST is applicable on the supply of goods to Anand Municipality Corporation, then what will be the rate of GST applicable on the following items? |
| Sr. No. | Particulars | HSN Code |
| 1 | WASTE HOPPER MACHINE 30 TPH | 84798200 |
| 2 | WASTE FEEDING CONVEYOR SYSTEMS 30 TPH | 84282019 |
| 3 | FULLY AUTOMATED WASTE SEGREGATION SCREEN 200 TPD 100 MM | 84798999 |
| 4 | MANUAL SORTING PLATFORM FOR WASTE SORTING | 84798999 |
| 5 | WASTE DISPOSAL CONVEYOR SYSTEM 30 TPH + 100 MM | 84798999 |
| 6 | WASTE SHREDDAR MACHINE 100 TPD | 84742090 |
| 7 | WASTE BALING MACHINE 50 TPD | 84629190 |
| 8 | WASTE FEEDING CONVEYOR SYSTEM 30TPH | 84282019 |
| 9 | FULLY AUTOMATED WASTE SEGREGATION SCREEN 200 TPD 35 MM/16MM | 8479899 |
| 10 | SUSPENDED MAGNETIC SEPERATOR | 84798999 |
| 11 | WASTE DISPOSAL CONVEYOR SYSTEMS 30 TPH 35MM/16MM | 84282019 |
| 12 | MATERIAL RECOVERY FACILITY MRF | 84798999 |
| 13 | EDDY SEPERATOR MACHINE | 84798999 |
| 14 | AIR DENSITY SEPERATOR | 84798999 |
| 15 | ORGANIC WASTE COMPOSTER (35TPD) | 8479 |
5-6. Personal hearing was granted on 24.09.2025 wherein Shri Sushil Kumar Kabra, CA appeared on behalf of the applicant and reiterated the facts & grounds as stated in the application. During the course of hearing, the applicant was specifically asked to submit the HSNs of the machinery procured by them and supplied to the Nagarpalika. Vide letter dtd. 26.09.2025, the applicant submitted the HSNs of the machine supplied by them to the Nagarpalika vide Invoice No. ANND/SAN/MSW/01 dtd. 08.01.2024, ANND/SAN/MSW/02 dtd. 08.02.2024 and ANND/SAN/MSW/03 dtd. 19.02.2024, as under :-
| Sr. No. | Particulars | HSN Code |
| 1 | WASTE HOPPER MACHINE 30 TPH | 84798200 |
| 2 | WASTE FEEDING CONVEYOR SYSTEMS 30 TPH | 84282019 |
| 3 | FULLY AUTOMATED WASTE SEGREGATION SCREEN 200 TPD 100 MM | 84798999 |
| 4 | MANUAL SORTING PLATFORM FOR WASTE SORTING | 84798999 |
| 5 | WASTE DISPOSAL CONVEYOR SYSTEM 30 TPH + 100 MM | 84282019 |
| 6 | WASTE SHREDDER MACHINE 100 TPD | 84742090 |
| 7 | WASTE BALING MACHINE 50 TPD | 84626100 |
| 8 | WASTE FEEDING CONVEYOR SYSTEM 30TPH | 84282019 |
| 9 | FULLY AUTOMATED WASTE SEGREGATION SCREEN 200 TPD 35 MM/16MM | 8479899 |
| 10 | SUSPENDED MAGNETIC SEPERATOR | 84798999 |
| 11 | WASTE DISPOSAL CONVEYOR SYSTEMS 30 TPH 35MM/16MM | 84282019 |
| 12 | MATERIAL RECOVERY FACILITY MRF | 84798999 |
| 13 | EDDY SEPERATOR MACHINE | 84798999 |
| 14 | AIR DENSITY SEPERATOR | 84798999 |
| 15 | ORGANIC WASTE COMPOSTER (35TPD) | 8479 |
They have also submitted a copy of the ‘Third Party Inspection Report’ issued by TUV Rheinland India Pvt Ltd. confirming the installation of machinery, as mentioned in the Tender document as well as the Tender document issued by the Anand Nagarpalika, for selection of Agency for Providing machineries required for processing of Daily Municipal Solid Waste (MSW) for Anand City.
Discussion and findings
7. At the outset, we would like to state that the provisions of both the CGST Act and the GGST Act are the same, except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the GGST Act.
8. We have considered the submissions made by the applicant in their application for advance ruling as well as the submissions made both oral and written during the course of personal hearing. We have also considered the issue involved, the relevant facts & the applicant’s submission/interpretation of law in respect of question on which the advance ruling is sought.
9. We find that the applicant has been awarded a contract for installation of Fresh Waste processing Plant by the Anand Nagarpalika vide letter F.No:- AM/SAN/168/1 dtd. 29.09.2022 against the Tender Id No. 529402 dtd. 02.06.2022. The applicant has also submitted the copies of Tax Invoice No. ANND/SAN/MSW/01 dtd. 08.01.2024, ANND/SAN/MSW/02 dtd. 08.02.2024 and ANND/SAN/MSW/03 dtd. 19.02.2024, under which the machineries mentioned in their Question have been supplied.
10. As per the applicant, the ruling has been sought on the request of Anand Nagarpalika, as the Nagar Palika was of the opinion that the supply made to them would be exempt in terms of Sr. Nos. 3 and 3A of Notification No. 12/2017-CT(R) dtd. 28.06.2017, as amended. The relevant entries of Notification No. 12/2017- CT(R) are reproduced below: –
| SI.No. | Chapter, Section, Heading, Group or Service Code (Tariff) | Description of Services | Rate (per cent.) | Condition |
| 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 [****] 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 |
| 3A | Chapter 99 | Composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent. of the value of the said composite supply provided to the Central Government, State Government or Union territory or local 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 |
11. We find that as per SI. No.3 of the Notification, if the services provided are ‘Pure Services’ i.e. where there is only a supply of service with no corresponding supply of goods, and if it is provided to the Central Government, State Government or Union territory or local 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 243 W of the Constitution, then the same is exempted. While SI. No. 3A of the Notification gives exemption if there is Composite supply of goods and services, in which the value of supply of goods constitutes not more than 25 per cent of the value of the said composite supply and is provided to the Central Government, State Government or Union territory or local 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 243 W of the Constitution.
12. We find that as per the letter F.No:-AM/SAN/168/1 dtd. 29.09.2022 issued by the Nagarpalika, the contract is for the supply of machinery for “Fresh Waste Processing” and the three Tax invoices namely ANND/SAN/MSW/01 dtd. 08.01.2024, ANND/SAN/MSW/02 dtd. 08.02.2024 and ANND/SAN/MSW/03 dtd. 19.02.2024 are also to this effect. Exemption from payment of GST under SI. No. 3 of Notification No. 12/2017-CT(R), dtd. 28.06.2017 is only available for pure services and under SI. Nos. 3A for composite supply of goods and services, in which the value of supply of goods constitutes not more than 25 per cent of the value of the said composite supply. Since, in the instant case, there is only a supply of goods, both the entries i.e. SI. No. 3 or 3A will not be applicable and consequently, no exemption is available for the supply of goods by the appellant to the Nagarpalika.
13. Having held so, we now move on to the next question of the applicant i.e. the GST rate applicable on the goods i.e. machinery, supplied by the applicant to the Nagarpalika vide Invoice No. ANND/SAN/MSW/01 dtd. 08.01.2024, ANND/SAN/MSW/02 dtd. 08.02.2024 and ANND/SAN/MSW/03 dtd. 19.02.2024. We find that Chapter 84 of the Tariff covers Machinery and mechanical appliances. Therefore, the machinery covered by the three invoices, supra, fall under Chapter 84 more particularly under HSN 8479, 8428, 8462 and 8474. The GST rate for all these HSNs is 18%.
14. In view of the foregoing, we rule as under: –
RULING
Q.1 Whether supply of goods to Anand Municipality Corporation (Local Authority of Anand City) attracts GST or it is exempt?
A 1: – Supply of goods to Anand Municipality Corporation (Local Authority of Anand City) attracts GST.
Q.2 If GST is applicable on the supply of goods to Anand Municipality Corporation, then what will be the rate of GST applicable on the following items?
| Sr. No. | Particulars | HSN Code |
| 1 | WASTE HOPPER MACHINE 30 TPH | 84798200 |
| 2 | WASTE FEEDING CONVEYOR SYSTEMS 30 TPH | 84282019 |
| 3 | FULLY AUTOMATED WASTE SEGREGATION SCREEN 200 TPD 100 MM | 84798999 |
| 4 | MANUAL SORTING PLATFORM FOR WASTE SORTING | 84798999 |
| 5 | WASTE DISPOSAL CONVEYOR SYSTEM 30 TPH + 100 MM | 84798999 |
| 6 | WASTE SHREDDAR MACHINE 100 TPD | 84742090 |
| 7 | WASTE BALING MACHINE 50 TPD | 84629190 |
| 8 | WASTE FEEDING CONVEYOR SYSTEM 30TPH | 84282019 |
| 9 | FULLY AUTOMATED WASTE SEGREGATION SCREEN 200 TPD 35 MM/16MM | 8479899 |
| 10 | SUSPENDED MAGNETIC SEPERATOR | 84798999 |
| 11 | WASTE DISPOSAL CONVEYOR SYSTEMS 30 TPH 35MM/16MM | 84282019 |
| 12 | MATERIAL RECOVERY FACILITY MRF | 84798999 |
| 13 | EDDY SEPERATOR MACHINE | 84798999 |
| 14 | AIR DENSITY SEPERATOR | 84798999 |
| 15 | ORGANIC WASTE COMPOSTER (35TPD) | 8479 |
A 2: – Applicable rate of GST is 18%.