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of <h1>Reimbursements for consultancy services to government entity exempt from GST under Notification 12/2017-CT(R).</h1> <h3>In Re: M/s. Maha Mumbai Metro (M3) Operation Corporation Limited</h3> In Re: M/s. Maha Mumbai Metro (M3) Operation Corporation Limited - 2022 (57) G.S.T.L. 159 (A. A. R. - GST - Mah.) Issues Involved:1. Applicability of GST on reimbursement of expenses such as salaries, rent, training, staff welfare expenses.2. Determination of GST rate if applicable.Detailed Analysis:Issue 1: Applicability of GST on Reimbursement of ExpensesApplicant's Submissions:The applicant, M/s. MAHA MUMBAI METRO (M3) OPERATION CORPORATION LIMITED, is a wholly-owned subsidiary of the Mumbai Metropolitan Region Development Authority (MMRDA). The applicant is engaged in providing local land transport services, including metro operations. They incur various expenses like salaries, rent, training, and staff welfare, which are reimbursed by MMRDA at cost without generating any additional revenue.The applicant argued that these reimbursements should not be subject to GST, citing definitions and interpretations from various legal dictionaries and past judicial decisions. They referenced the concept of 'pure agent' and the Supreme Court's interpretation of 'reimbursement' in Tata Iron and Steel Co. Ltd. v. Union of India, which denotes restoration of something paid in excess.The applicant also cited previous rulings, such as the case of M/s. HABUFA MEUBELEN B.V., where reimbursements were not considered liable to GST as no consideration for services was charged. They further argued that their activities fall under exemptions provided in Notification 12/2017-Central Tax (Rate), which exempts services provided by a governmental entity in relation to functions entrusted to a municipality under Article 243W of the Constitution.Authority's Observations and Findings:The Authority noted that the applicant is engaged in providing consultancy services related to transport studies, which are considered pure services. These services are provided to MMRDA, a government entity, and fall under the functions entrusted to a municipality under Article 243W of the Constitution.The Authority observed that the amounts received by the applicant from MMRDA, although termed as reimbursements, are essentially considerations for the consultancy services rendered. Therefore, these amounts are subject to GST.Conclusion:The Authority concluded that the reimbursements received by the applicant from MMRDA are indeed considerations for the consultancy services provided. However, since these services are pure services provided to a government entity in relation to functions entrusted to a municipality, they are exempt from GST under Notification No. 12/2017-CT(R) dated 28.06.2017.Issue 2: Determination of GST Rate if ApplicableConclusion:Since the answer to the first question was in the negative (i.e., the reimbursements are not subject to GST), the second question regarding the GST rate was not addressed.Order:Question 1: Whether GST is applicable on reimbursement of expenses such as salaries, rent, training, staff welfare expensesRs.- Answer: Answered in the negative.Question 2: If above answer is affirmative, at what rate GST should be chargedRs.- Answer: Not answered due to the negative response to Question 1.
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