GMVN Ltd's construction activities for government qualify as supply of services under section 7 but exempt from GST under government grant notification

The AAR, Uttarakhand ruled that GMVN Ltd.'s construction/repair/renovation activities for government entities constitute supply of services under section 7 of CGST Act, 2017, as the work scope is predetermined and payment received as grants qualifies as consideration. The activities fall under works contract services involving civil construction. The AAR held that GST exemption under Notification No. 12/2017-CT (Rate) dated 28.06.2017 applies since consideration was received in grant form from government entities for specific predetermined purposes, making the supplies exempt from GST.

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Issues Involved:
1. Determination of whether the activities undertaken for implementing various projects by GMVN Ltd. for the government, for which consideration is received in the form of grants, amount to supply under GST laws and are chargeable to GST.
2. Classification of the supply as either supply of goods or supply of services.
3. Determination of whether the supply is exempt under GST laws.
4. Applicability of exemption under Notification No. 12/2017-CT (Rate) for services provided to the government for consideration received in the form of grants.

Issue-Wise Detailed Analysis:

1. Determination of Supply:
The applicant, GMVN Ltd., sought an advance ruling on whether their activities funded by government grants amount to a supply under GST laws. The term "supply" is defined under Section 7 of the CGST Act, 2017, which includes all forms of supply of goods or services for a consideration in the course or furtherance of business. The authority confirmed that the activities undertaken by GMVN Ltd. for the government, for which consideration is received in the form of grants, do indeed amount to a supply as per Section 7 of the CGST Act, 2017. This is because the grants received are considered "consideration" under Section 2(31) of the CGST Act, 2017, as they are payments made for the execution of specific works.

2. Classification of Supply:
The next issue was to determine whether the supply is classified as goods or services. The authority referred to the definitions under the CGST Act, 2017, particularly the definition of "works contract" under Section 2(119), which includes construction, repair, maintenance, and other similar activities involving immovable property. The projects undertaken by GMVN Ltd., such as the construction of 'Shaheed Dwar' and creating barrier-free environments for PWDs, involve civil construction work and thus fall under the definition of works contract service. Therefore, these activities are classified as the supply of services.

3. Exemption under GST Laws:
The authority examined whether the supply is exempt under GST laws. Notification No. 32/2017-CT(Rate) dated 13.10.2017 amended Notification No. 12/2017-CT(Rate) dated 28.06.2017, which exempts the supply of services by a government entity to the government, local authority, or specified persons against consideration received in the form of grants. The authority confirmed that the exemption is available if the consideration is in the form of grants and used for the intended purpose. In this case, the grants received by GMVN Ltd. for the specific projects qualify for the exemption.

4. Applicability of Exemption under Notification No. 12/2017-CT (Rate):
The authority reiterated that the exemption under Notification No. 12/2017-CT (Rate) is applicable only if the consideration is in the form of grants. The documents provided by the applicant, such as the letters from the Government of Uttarakhand and the Ministry of Social Justice and Empowerment, confirm that the grants are for specific purposes, thereby qualifying for the exemption.

Ruling:
1. Services/activities undertaken for the government, for which the consideration is in the form of grants, are exempt from GST.
2. The works of "construction of 'Shaheed Dwar' at Banjarawala, Dehradun" and "construction of 'Creation of barrier-free environment for PWDs' and 'tourist rest houses in various districts of Uttarakhand State'" are classified as the supply of services.
3. Exemption from GST is available for the specified works.
4. The exemption under SI. No. 9C of Notification No. 12/2017-CT (Rate) is available only if the consideration is in the form of grants.

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