2018 (8) TMI 283 - AAR - GST

Court: PDMC & PMC Services for AMRUT & PMAY Qualify as Pure Services

In Re : Egis India Consulting Engineers P. Ltd.

The Court held that Project Development and Management Consultancy (PDMC) services under AMRUT and Project Management Consultancy (PMC) services under ... Whether the Project Development and Management Consultancy services (PDMC) provided by Applicant to recipient under the Contract for AMRUT; and the Project Management Consultancy services (PMC) under the Contract for PMAY would qualify as an activity in relation to function entrusted to Panchayat or Municipality under Article 243G or Article 243W respectively, of the Constitution of India? - Held that:- Similarly, as per website of Pradhan Mantri Awas Yojana-Housing for All (Urban), Ministry of Housing and Urban Affairs, the PMAY is a Scheme to provide central assistance to Urban Local Bodies (ULBs) and other implementing agencies through States/UTs for Rehabilitation of existing slum dwellers using their land as a resource through private participation, and Affordable Housing in Partnership - the various objectives of both the above Schemes are covered in more than one clauses of the Eleventh and Twelfth Schedule referred in Article 243G and 243W of the Constitution, including Housing, drinking water, sanitation, Park, etc. - the Consultancy services rendered by the applicant under the Agreement with Urban Administration & Development, Government of Madhya Pradesh, Bhopal for implementation of AMRUT and PMAY are in relation to functions entrusted to Municipalities under Article 243-W and to Panchayats under Article 243-G of the Constitution of India. Would such services provided by the Applicant qualify as “Pure services (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[Notification No. FA -3-42/201711/v (53) dated 30 June 2017, as amended by Notification No. 2/2018- Central Tax (Rate) dated 25 January, 2018 issued under CGST Act, 2017 and corresponding notifications issued under MPGST 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 MPGST, respectively - Held that:- These items are not naturally bundled into the service being provided by the applicant Further, as per the contracts, such items have to be disposed off by the applicant after completion of contract as directed by the principal, and the cost of such items would be over and above the contract price. Therefore, such purchases of equipments, furnitures, etc. would neither make the said contract of consultancy as a works contract, nor a composite contract, and therefore, due to purchase of Equipments, Furnitures, etc. by the applicant, and getting reimbursement of their costs from the employer will not affect eligibility of the applicant for NIL rate of tax in Sr. No. 3 of Notification No. 12/2017-Central Tax (Rate), dated 28th June, 2017 and corresponding notification issued under MPGST Act, 2017 in respect of Consultancy services rendered under the contract in question. Ruling:- The PDMC provided by Applicant to recipient under the Contract for AMRUT; and the PMC under the Contract for PMAY would qualify as an activity in relation to function entrusted to Panchayat or Municipality under Article 243G or Article 243W respectively, of the Constitution of India. Such services provided by the Applicant would qualify as “Pure services (excluding works contract service or other composite supplies involving supply of any goods)” as provided in serial number 3of Notification No. 12/2017- Central Tax (Rate) dated 28 June, 2017 as amended by Notification No. 2/2018-Central Tax (Rate) dated 25 January, 2018 issued under CGST Act, 2017 and corresponding notifications issued under MPGST Act in respect of 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 MPGST, respectively. Issues Involved:1. Qualification of Project Development and Management Consultancy services (PDMC) under AMRUT and Project Management Consultancy services (PMC) under PMAY as activities related to functions entrusted to Panchayats or Municipalities under Article 243G or Article 243W of the Constitution of India.2. Eligibility of such services as 'Pure services' for exemption from CGST and MPGST under Notification No. 12/2017-Central Tax (Rate) and corresponding notifications.Detailed Analysis:Issue 1: Qualification of PDMC and PMC Services under Constitutional ArticlesThe core question is whether the PDMC services for AMRUT and PMC services for PMAY qualify as activities related to functions entrusted to Panchayats or Municipalities under Article 243G or Article 243W of the Constitution of India.- AMRUT Scheme: The Atal Mission for Rejuvenation and Urban Transformation (AMRUT) aims to provide basic civic amenities like water supply, sewerage, urban transport, and parks to improve the quality of life, especially for the poor and disadvantaged. The mission’s objectives include ensuring every household has access to a tap with assured water supply and a sewerage connection, increasing the amenity value of cities by developing greenery and well-maintained open spaces, and reducing pollution by promoting public transport and non-motorized transport facilities.- PMAY Scheme: The Pradhan Mantri Awas Yojana-Housing for All (Urban) aims to provide central assistance to Urban Local Bodies (ULBs) and other implementing agencies for the rehabilitation of existing slum dwellers using their land as a resource through private participation and affordable housing in partnership.The judgment found that the objectives of both AMRUT and PMAY schemes align with several clauses of the Eleventh and Twelfth Schedules referred to in Article 243G and 243W of the Constitution, including housing, drinking water, sanitation, and parks.Conclusion for Issue 1: The Consultancy services rendered by the applicant under the agreements for AMRUT and PMAY are in relation to functions entrusted to Municipalities under Article 243-W and to Panchayats under Article 243-G of the Constitution of India.Issue 2: Eligibility as 'Pure Services' for Tax ExemptionThe second question is whether such services qualify as 'Pure services' (excluding works contract service or other composite supplies involving the supply of any goods) under Serial Number 3 of Notification No. 12/2017-Central Tax (Rate) and corresponding notifications, thus being eligible for exemption from CGST and MPGST.- Nature of Contract: The contract awarded to the applicant for PDMC under AMRUT and PMC under PMAY is identified as a Pure Service Contract. It is not covered under the exclusion clause for 'works contract service' or 'composite supplies involving supply of any goods.'- Reimbursement of Goods: The contract includes the purchase of office equipment, furniture, etc., which are reimbursed by the employer. These items are not naturally bundled into the service provided and are to be disposed of as per the principal's instructions after use.Conclusion for Issue 2: The purchase and reimbursement of equipment and furniture do not alter the classification of the contract as a Pure Service. Therefore, the services qualify for exemption from CGST and MPGST under Serial Number 3 of Notification No. 12/2017-Central Tax (Rate) and corresponding notifications.Ruling:1. The PDMC services for AMRUT and PMC services for PMAY qualify as activities related to functions entrusted to Panchayats or Municipalities under Article 243G or Article 243W of the Constitution of India.2. Such services qualify as 'Pure services' and are eligible for exemption from CGST and MPGST. However, the disposal of tangible goods at the end of the contract will be subject to GST depending on the circumstances and manner of disposal.