Consultancy services to government entities exempt from GST; Private individual services taxable at 18%.

The Authority for Advance Rulings confirmed that pure consultancy services provided by a private limited company to Municipalities, Corporations, and Government Departments are exempt from GST under specific conditions. However, consultancy services provided to private individuals are taxable at a rate of 18%. Input tax credit on the purchase of capital goods and certain services can be claimed proportionately to the extent of taxable supplies made by the applicant.

---

---

Issues Involved:
1. Whether pure consultancy services provided to Municipalities and Corporations are exempt from GST.
2. Whether pure consultancy services provided to private individuals are taxable, and if so, the applicable rate of tax.
3. Whether input tax paid on the purchase of capital goods and certain services can be claimed to the extent of taxable supply of services.

Issue-Wise Detailed Analysis:

1. Exemption of Pure Consultancy Services to Municipalities and Corporations:
The applicant, a private limited company, provides pure consultancy services like project management, construction supervision, quality control, and the preparation of detailed project reports (DPRs) primarily to Municipalities, Corporations, and Government Departments. The applicant sought a ruling on whether these services are exempt from GST under serial number 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

The notification exempts "pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government, Union territory, local authority, or Governmental authority by way of any activity in relation to any function entrusted to a Municipality under Article 243W of the Constitution."

The applicant argued that their services fall under this exemption as they are pure services provided to local authorities (BBMP) and Government Departments, relating to functions listed in the Twelfth Schedule of the Constitution. The Authority for Advance Rulings (AAR) confirmed that BBMP and Sindhanur Municipality are local authorities, and the services provided by the applicant are related to functions entrusted to Municipalities under Article 243W, such as public health, sanitation, urban amenities, and environmental protection. Thus, these services are exempt from GST, subject to the condition that no goods are involved in the service provision.

2. Taxability of Pure Consultancy Services to Private Individuals:
The applicant also provides consultancy services to private individuals. The AAR ruled that these services are taxable under entry No. 21 of the heading 9983 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, which pertains to "Other professional, technical and business services." The applicable tax rate is 9% under CGST and 9% under SGST, totaling 18%.

3. Claim of Input Tax Credit on Capital Goods and Services:
The applicant inquired whether they could claim input tax credit (ITC) on the purchase of capital goods and certain services to the extent of taxable supply of services. According to subsection 2 of section 17 of the CGST Act 2017, when goods or services are used partly for taxable supplies and partly for exempt supplies, the ITC must be restricted to the extent attributable to taxable supplies. Therefore, the applicant can claim ITC proportionately to their taxable supplies.

Ruling:
1. Pure consultancy services (without supply of goods) provided to Municipalities, Corporations, and State Government Departments are exempt from GST as per serial number 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.
2. Pure consultancy services provided to private individuals are taxable at 9% under CGST and 9% under SGST as per entry No. 21 of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.
3. Input tax paid on the purchase of capital goods and certain services shall be restricted to the extent attributable to taxable supplies as per subsection 2 of section 17 of the CGST Act 2017.

---