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Project management consultancy services for petroleum projects taxable at 18% GST under residual professional services entry AAR Maharashtra ruled that project management consultancy services for petroleum projects are taxable at 18% GST under the residual entry of professional, ...
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Project management consultancy services for petroleum projects taxable at 18% GST under residual professional services entry
AAR Maharashtra ruled that project management consultancy services for petroleum projects are taxable at 18% GST under the residual entry of professional, technical and business services. The applicant managed projects from design to commissioning without supplying goods. The services did not qualify for the reduced 12% rate under geological/geophysical consulting or mineral exploration categories, as they were general project management services not specifically connected to exploration activities, falling under the standard 18% tax rate.
Issues Involved: 1. Classification of Project Management Consultancy (PMC) services under GST. 2. Applicable GST rate for PMC services provided to Vedanta Limited (Division: Cairn Oil & Gas).
Detailed Analysis:
1. Classification of Project Management Consultancy (PMC) services under GST:
The applicant, M/s. Lloyds Register Consulting Energy Private Limited, sought an advance ruling on whether their PMC services provided to Vedanta Limited (Cairn Oil & Gas) fall under the Service Accounting Code (SAC) 9983, specifically under entry 21(ia) of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 as amended by Notification No. 20/2019-C.T. (Rate) dated 30.09.2019, which pertains to "Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both."
The applicant contended that their services, which include project planning, monitoring, tracking, cost validation, variance analysis, and technical validation/assurance, should be classified under the aforementioned entry due to the broad scope of the term "relating to." They argued that the services provided are directly connected to the exploration, mining, or drilling activities and should therefore attract a GST rate of 12%.
However, the authority examined the scope of work and found that the services provided by the applicant encompass various professional, technical, and business services, such as project planning, monitoring, validation of contractor deliverables, and overall project management. It was determined that these services are not specifically covered under the explanatory notes for SAC 998341 (Geological and geophysical consulting services) or SAC 998343 (Mineral exploration and evaluation services) as per the Circular No. 114/33/2019-GST.
2. Applicable GST rate for PMC services provided to Vedanta Limited (Division: Cairn Oil & Gas):
The authority concluded that the services provided by the applicant do not fall under the specific entry 21(ia) of Notification No. 11/2017-C.T. (Rate) as amended, which would have attracted a GST rate of 12%. Instead, the services were classified under the residual entry 21(ii) of the same notification, which pertains to "Other professional, technical and business services other than (i) and (ia) above," attracting a GST rate of 18%.
Conclusion:
The project management consultancy services provided by the applicant to Vedanta Limited (Division: Cairn Oil & Gas) are classified under Sr. No. 21(ii) of Notification No. 11/2017-CT(R) dated 28.06.2017 as amended, and are liable to tax at 18% GST. The authority's decision was based on the comprehensive analysis of the scope of work and the relevant GST notifications and circulars, ensuring that the classification and applicable tax rate were accurately determined.
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