German company's storm water drain consulting services to Chennai Corporation exempt from GST under notification 12/2017-Central Tax

AAR Tamil Nadu ruled that consulting services provided by a German company for storm water drain management in Chennai qualify for GST exemption. The applicant provided pure services involving technical expertise, financial planning, and training to Greater Chennai Corporation without supplying goods. The services related to urban planning activities under Article 243W of the Constitution, supplied to a local authority. The AAR held that these pure services fall under exemption notification 12/2017-Central Tax (Rate) as they constitute consulting services for urban infrastructure development provided to a municipal corporation.

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Issues Involved:
1. Applicability of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 to the services provided.
2. Definition and scope of "Pure Services" under GST.
3. Classification of Greater Chennai Corporation (GCC) as a "Local Authority".
4. Determination of whether the services provided relate to functions entrusted to a Municipality under Article 243W of the Constitution.

Issue-wise Detailed Analysis:

1. Applicability of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017:
The applicant sought a ruling on whether their consulting services for the implementation of Integrated Storm Water Drain for M1 & M2 Components of Kovalam Basin, provided to the Superintending Engineer, Storm Water Drain Department, Greater Chennai Corporation, are exempt from GST under S.No.3 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The notification exempts "Pure Services" provided to the Central Government, State Government, Union Territory, Local Authority, or Governmental Authority by way of any activity in relation to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution.

2. Definition and Scope of "Pure Services" under GST:
"Pure Services" are not explicitly defined under GST, but generally refer to services provided without the involvement of goods. The applicant’s services include planning, preparation of detailed design and tender documents, assisting in contractor selection, supervising construction activities, and ensuring sustainability of project investments. These activities involve knowledge and efficiency enhancement without the procurement of goods, thus qualifying as "Pure Services".

3. Classification of Greater Chennai Corporation (GCC) as a "Local Authority":
The Greater Chennai Corporation (GCC) is established under The Chennai City Municipal Corporation Act 1919 and qualifies as a "Local Authority" as per Section 2(69) of the CGST Act 2017. Section 2(69)(b) includes "Municipality" as defined in clause (e) of Article 243P of the Constitution. Article 243Q further clarifies that a Municipal Corporation for a larger urban area is considered a Municipality. Therefore, GCC is recognized as a Local Authority under the GST Act.

4. Determination of Whether the Services Provided Relate to Functions Entrusted to a Municipality under Article 243W of the Constitution:
The applicant’s services are related to the construction and maintenance of storm water drains, which is part of the "Urban Infrastructure Development" of Chennai. The project is undertaken as part of the "Sustainable Urban Infrastructure Development" program, supported by a KfW loan. The activities fall under "Urban Planning including Town Planning" as per Entry No. 1 of the Twelfth Schedule under Article 243W of the Constitution. Thus, the services are in relation to functions entrusted to a Municipality under Article 243W.

Conclusion:
The Authority for Advance Ruling concluded that the services provided by the applicant are "Pure Services" supplied to a "Local Authority" (GCC) and are related to "Urban Planning", a function under Article 243W. Therefore, these services are exempt from GST under S.No.3 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

Ruling:
The Pure Services provided by the applicant for Programme Management and Accompanying Measures for the implementation of Integrated Storm Water Drain for M1 & M2 Components of Kovalam Basin, supplied to the Superintending Engineer, Storm Water Drain Department, Greater Chennai Corporation, are exempt from payment of GST under S.No.3 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and SGST Notification No. II(2)/CTR/532(d-15)/2017 dated 29.06.2017.

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