2022 (2) TMI 240 - AAR - GST

Architectural services to Municipal Corporation qualify for GST exemption under Notification 12/2017 as pure services

In Re: M/s. Sir J.J. College of Architecture Consultancy Cell

AAR Maharashtra held that architectural services provided by applicant to Municipal Corporation of Greater Mumbai qualify for GST exemption under ... Exemption from GST - pure services or not - Comprehensive architectural services provided by the Applicant to Municipal Corporation of Greater Mumbai - Notification No. 12/2017 - Central Tax (Rate) dated 28th June 2017 as amended by Notification No. 16/2021 - Central Tax (Rate) New Delhi, 18th November, 2021 - services includes architectural design, structural design, MEP design, HVAC services design, preparation of drawings etc for repairs/ restoration, reconstruction for development of recreation ground cum textile museum at United India Mills 2 & 3 at Kola chowky - HELD THAT:- For any supply to be covered under Sr. No. 3 of the amended Notification, the supply should be in respect of only Pure Services, secondly such Pure Services must be provided to the Central Government, State Government or Union territory or local authority and finally such services should be provided by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. In the instant case, pure services are supplied by the applicant to MCGM. This is because the applicant during the course of the personal hearing, stated that no goods are supplied by them at all, under the impugned agreement. Thus, the first part of the conditions mentioned at Sr. No. 3 of the aforesaid amended Notification is satisfied in the subject case - the second condition to be satisfied for availing exemption under the above referred Notification is that such pure services, as are being rendered in the subject case, should be supplied to the Central Government, State Government or Union territory or local authority. The applicant is supplying pure services to MCGM which is a local authority under the GST Laws. Thus, the second condition mentioned at Sr. No. 3 of the aforesaid Notification is also satisfied in the subject case. From a reading of the Section 63 of the Brihan Mumbai Municipal Corporation Act, 1888, it is crystal clear that the impugned activities, even though at the discretion of MCGM, are entrusted to MCGM by the State Government and such activities can be considered to be in the nature of functions or schemes entrusted to the municipality by the State Government. Thus, the impugned activities are entrusted to the MCGM by the State Government and therefore the same are covered under clause (a) (ii) of Article 243W of the Constitution - Section 63A states that Where any duty has been imposed on, or any function has been assigned to the Corporation under this Act or any other law for the time being in force, or the Corporation has been entrusted with the implementation of a scheme, the Corporation may, either discharge such duties or perform such functions or implement such scheme by itself or cause them to be discharged, performed or implemented by any agency. In the subject case MCGM is performing the impugned activities through an agency, viz. the applicant Sir JJ College of Architecture Mumbai, which is affiliated to the University of Mumbai - the MCGM cannot perform any activity which it is not empowered to do so by the Mumbai Municipal Corporation Act 1888, an Act which has been promulgated by the State Government. Thus all activities, obligatory or voluntary, which are required to be performed by MCGM under the Mumbai Municipal Corporation Act 1888 will be considered as activities performed by MCGM as entrusted to it, by the State Government under the Mumbai Municipal Corporation Act 1888 - thus, the third condition of Sr. No. 3 of the Notification, viz. “such pure services should be provided by way of any activity in relation to any function entrusted to a Municipality under article 243W of the Constitution” is also satisfied in the subject case. Thus, the applicant is entitled for exemption under Sr. No. 3 of Notification No. 12/2017 - CTR dated 28.06.2017 as amended. Issues Involved:1. Applicability of GST exemption on comprehensive architectural services provided by the applicant to the Municipal Corporation of Greater Mumbai (MCGM).Issue-Wise Detailed Analysis:1. Applicability of GST exemption on comprehensive architectural services:Facts and Contentions:- The applicant, Sir JJ College of Architecture Consultancy Cell, provides comprehensive architectural services to government bodies, including MCGM, for projects such as the development of a recreation ground cum textile museum.- The services include architectural design, structural design, MEP design, HVAC design, preparation of drawings, and other related activities.- The applicant contends that these services qualify as 'pure services' and are exempt under Sr. No. 3 of Notification No. 12/2017 - Central Tax (Rate) dated 28th June 2017.Applicant’s Interpretation of Law:- The applicant argues that their services qualify as 'supply' under Section 7 of the CGST Act, 2017, and are exempt as 'pure services' provided to a local authority (MCGM) under Sr. No. 3 of the exemption notification.- The services are in relation to functions entrusted to municipalities under Article 243W of the Constitution, which includes the development of public amenities such as museums and recreation grounds.- The applicant relies on the Brihan Mumbai Municipal Corporation Act, 1888, which entrusts MCGM with functions like maintaining museums and recreation grounds, aligning with the twelfth schedule of Article 243W.Officer’s Submission:- The State Tax Officer agrees that the services are 'pure services' and that MCGM is a local authority.- However, the officer contends that the specific activity (development of a recreation ground cum textile museum) is not explicitly mentioned in the twelfth schedule of Article 243W, thus not qualifying for the GST exemption.Discussion and Findings:- The Authority for Advance Ruling (AAR) examined the documents and submissions, confirming that the services provided by the applicant are 'pure services' as no goods are involved.- MCGM is recognized as a local authority under the GST laws.- The AAR reviewed Article 243W and the twelfth schedule, noting that the functions listed are illustrative and not exhaustive. The Brihan Mumbai Municipal Corporation Act, 1888, empowers MCGM to maintain museums and recreation grounds, aligning with the functions under Article 243W.- Section 63 of the Brihan Mumbai Municipal Corporation Act, 1888, supports that the impugned activities are within the discretionary functions of MCGM, thus qualifying under the functions entrusted to municipalities.Conclusion:- The AAR concluded that the comprehensive architectural services provided by the applicant to MCGM are exempt from GST under Sr. No. 3 of Notification No. 12/2017 - Central Tax (Rate) dated 28th June 2017.- The exemption applies as the services are 'pure services' provided to a local authority in relation to functions entrusted to municipalities under Article 243W of the Constitution.Order:- The comprehensive architectural services provided by the applicant to MCGM for the development of a recreation ground cum textile museum are exempt from GST as per Sr. No. 3 of Notification No. 12/2017 - Central Tax (Rate) dated 28th June 2017.