GST Exemption Dispute on Dredging Services Left Open by Goa Appellate Authority

M/s. Vaibhavi Dredging, a registered GST taxpayer holding GSTIN 30AASFV7395M1Z9, is engaged in providing dredging, desilting, and related support services.

The company asked for clarification on the following question:

“Applicability of Exemption under S1. No. 3 (for Pure Services) or 3A (for composite supply where supply of goods does not constitute more than 25% of the value) of the Exemption Notification”

The company argued that the work was a “pure service” provided to a government department and related to public functions such as inland waterways, flood control, environmental protection, fisheries, and water management.

The company stated that the work involved only the use of its own machinery and manpower and did not include transfer of materials to the government. It also claimed that even if some goods were involved, their value was less than 25% of the contract value, making the work eligible for exemption under Entry 3A of the notification.

However, the earlier ruling by the Goa Authority for Advance Ruling had denied the exemption. The authority held that the applicant failed to prove that dredging and desilting were functions specifically devolved to local bodies under the Goa law as required under Articles 243G and 243W of the Constitution. It also observed that dredging activity could involve goods and preparatory works and therefore may not qualify as a pure service.

The company challenged this order before the appellate authority, contending that the exemption notification refers to the constitutional functions listed in the Eleventh and Twelfth Schedules in a broad manner and not only to those functions specifically devolved by the state legislation. The appellant also relied upon CBIC circulars, earlier advance rulings from other states and certificates issued by the captain of the Ports Department in support of its claim.

During the hearing, the company further submitted that the captain of the ports department performs public and civic functions similar to local authorities.

At the same time, the appellate authority observed that the jurisdictional tax department had already initiated separate GST proceedings on the same issue. A show cause notice was issued, and subsequently, an adjudication order was passed under Section 73 confirming the GST demand against the company.

Considering that parallel statutory proceedings were already underway, the appellate authority decided not to examine the merits of the case. It also observed that giving findings in the appeal could prejudice the company’s rights in future appellate proceedings against the tax demand order.

Accordingly, the Goa Appellate Authority disposed of the appeal without giving any opinion on whether the dredging and desilting services are eligible for GST exemption. All issues have been left open to be decided in future legal proceedings.