2020 (1) TMI 1428 - AAR - GST

Consultancy Services Exempt from CGST & UPGST under Constitutional Provisions

The consultancy services provided by M/s. Hi Tech Builder under contracts with the State Urban Development Agency and for the Pradhan Mantri Awas Yojna ... Activity in relation to function entrusted to Panchayat or Municipality under Article 243G or Article 243W respectively, of the Constitution of India or not - Project Development Service (i.e. Detailed Project Report Service) and Project Management Consultancy services (PMCS) provided by the applicant to recipient under the Contract for SUDA - Project Management Consultancy services (PMC) under the contract for PMAY - pure services or not - exemption as provided in serial number 3 of Notification No. 12/2017- Central Tax (Rate) dated 28 June, 2017, as amended (S. No. 3A) by Notification No. 2/2018- Central Tax (Rate) dated 25 January, 2018 - HELD THAT:- The Consultancy services rendered by the applicant under the contract with State Urban Development Agency, Uttar Pradesh (SUDA), and for PMAY are in relation to functions entrusted to Municipalities under Article 243W and to Panchayats under Article 243G of the Constitution of India. Pure services or not - exemption as provided in serial number 3 of Notification No. 12/2017- Central Tax (Rate) dated 28 June, 2017, as amended (S. No. 3A) by Notification No. 2/2018- Central Tax (Rate) dated 25 January, 2018 - HELD THAT:- The services mentioned in the contract would qualify as Pure Service (excluding works contract service or other composite supplies involving supply of any goods)” as provided in serial number 3 of Notification No. 12/2017- Central Tax (Rate) dated 28 June, 2017, as amended (S. No. 3A) by Notification No. 2/2018- Central Tax (Rate) dated 25 January, 2018 issued under Central Goods and Services Tax Act, 2017 (CGST) and corresponding Notifications No.- KA.N.I.-2-843/X1- 9 (47) / 17-UP. Act-1 - 2017 - Order - (10) – 2017 Lucknow, dated June 30, 2017 issued under Uttar Pradesh Goods and Service Tax Act, 2017 (UPGST Act), where the Project cost includes the cost of service rendered along with reimbursement of cost of procurement of goods for rendering such service, and, thus, be eligible for exemption from levy of CGST and UPGST, respectively. Issues Involved:1. Whether the Project Development Service (Detailed Project Report Service) and Project Management Consultancy services (PMCS) provided by the applicant qualify as activities related to functions entrusted to Panchayats or Municipalities under Article 243G or Article 243W of the Constitution of India.2. Whether such services qualify as 'Pure services' and are eligible for exemption from CGST and UPGST under Notification No. 12/2017-Central Tax (Rate) and corresponding notifications.Issue-wise Detailed Analysis:Issue 1: Qualification of Services under Article 243G and Article 243WThe applicant, M/s. Hi Tech Builder, sought clarification on whether their services under contracts with State Urban Development Agency (SUDA) and Pradhan Mantri Awas Yojna (PMAY) qualify as activities related to functions entrusted to Panchayats or Municipalities under Article 243G and Article 243W of the Constitution of India.The applicant provides consultancy services related to infrastructure, environment, social survey, housing, project management, and construction management. The services include preparation of Detailed Project Reports (DPR) and Project Management Consultancy (PMC) for PMAY (Urban) projects.SUDA, established as a state-level nodal agency under the Uttar Pradesh Government, aims to uplift the urban poor through various schemes, including PMAY, which provides central assistance to Urban Local Bodies (ULBs) for rehabilitating slum dwellers and developing affordable housing.The scope of work under the DPR includes physical verification, data collection, infrastructure details, stakeholder consultations, architectural designs, and obtaining necessary approvals. The PMC's role involves coordinating construction activities, ensuring quality, administering agreements, and providing progress reports.The Authority examined the functions listed in the 11th and 12th schedules of the Constitution, which include urban planning, poverty alleviation, slum improvement, and other related activities. It concluded that the services provided by the applicant are indeed related to functions entrusted to Municipalities under Article 243W and Panchayats under Article 243G.Issue 2: Qualification as Pure Services and Eligibility for Tax ExemptionHaving established that the services fall under the functions of Panchayats and Municipalities, the next question was whether these services qualify as 'Pure services' and are eligible for exemption from CGST and UPGST under Notification No. 12/2017-Central Tax (Rate) and its amendments.The Authority examined the contract details and scope of work for DPR and PMC. It found that the services provided by the applicant do not involve any works contract service or composite supplies involving goods. Thus, they qualify as 'Pure services.'Notification No. 12/2017-Central Tax (Rate) exempts pure services provided to the Central Government, State Government, Union Territory, local authority, or a Government entity from GST. The services rendered by the applicant, being pure services, are eligible for this exemption.Ruling:1. The consultancy services provided by the applicant under contracts with SUDA and for PMAY are related to functions entrusted to Municipalities under Article 243W and Panchayats under Article 243G of the Constitution of India.2. The services qualify as 'Pure services' and are exempt from CGST and UPGST under Notification No. 12/2017-Central Tax (Rate) and corresponding notifications issued under the Uttar Pradesh Goods and Services Tax Act, 2017.This ruling is valid subject to the provisions under Section 103(2) of the CGST Act, 2017 until declared void under Section 104(1) of the Act.