Geotechnical investigation and architectural design services attract 18% GST under Heading 9983, exemption available for Panchayat/Municipality functions only

The Kerala AAR ruled that geotechnical investigation, foundation recommendation preparation, architectural design, detailed project report preparation, and project management services for civil works are classifiable under Heading 9983 and liable to 18% GST. Services provided to Rebuild Kerala and State Public Works Department qualified for exemption under entry 3 of Notification 12/2017 as they constitute activities related to functions entrusted to Panchayats/Municipalities under Articles 243G/243W. However, services to HLL Infratech Services Ltd, being a PSU rather than government entity, were not eligible for the same exemption.

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Issues Involved:
1. Classification of geotechnical investigation and preparation of foundation recommendation (soil report preparation) for civil works or infrastructure construction works.
2. Classification of preparation of detailed project report (DPR) related to civil works/infrastructure construction works.
3. Classification of architectural and engineering design for civil works/infrastructure works.
4. Classification of project management services for civil works or infrastructure construction works.
5. Eligibility for GST exemption for services provided to Rebuild Kerala, Kerala State Public Works Department, and HLL Infratech Services Ltd.

Issue-wise Detailed Analysis:

1. Classification of Geotechnical Investigation and Preparation of Foundation Recommendation (Soil Report Preparation) for Civil Works or Infrastructure Construction Works:
The applicant sought to determine whether these services fall under "pure service" or "works contract services." The Authority examined the Scheme of Classification of Services under Notification No. 11/2017 CT (Rate) and found that the services provided by the applicant do not involve any transfer of goods. Therefore, these services are classified under Heading 9983 - Other professional, technical, and business services, specifically under Service Code 998332 for engineering services. These services are liable to GST at the rate of 18% [9% CGST + 9% SGST].

2. Classification of Preparation of Detailed Project Report (DPR) Related to Civil Works/Infrastructure Construction Works:
Similarly, the applicant questioned whether the preparation of DPR falls under "pure service" or "works contract services." The Authority concluded that the preparation of DPR, which involves only the provision of designs, plans, and studies without any transfer of goods, falls under Heading 9983. Specifically, it is classified under Service Code 998332 for engineering services and is subject to GST at the rate of 18%.

3. Classification of Architectural and Engineering Design for Civil Works/Infrastructure Works:
The applicant sought clarity on whether these services are "pure services" or "works contract services." The Authority determined that architectural and engineering design services, which involve the creation of designs, plans, and studies without the transfer of goods, are classified under Heading 9983. These services fall under Service Code 998322 for architectural services and Service Code 998332 for engineering services, both subject to GST at the rate of 18%.

4. Classification of Project Management Services for Civil Works or Infrastructure Construction Works:
The applicant asked whether project management services fall under "pure service" or "works contract services." The Authority ruled that project management services, which involve assuming overall responsibility for the successful completion of a construction project without transferring any goods, are classified under Heading 9983. Specifically, these services fall under Service Code 998339 for project management services for construction projects, subject to GST at the rate of 18%.

5. Eligibility for GST Exemption for Services Provided to Rebuild Kerala, Kerala State Public Works Department, and HLL Infratech Services Ltd:
The Authority examined whether the services provided to these entities are eligible for GST exemption under SI. No. 3 of Notification No. 12/2017 Central Tax (Rate). It was found that:
- Services provided to Rebuild Kerala and the Kerala State Public Works Department are eligible for exemption as they are pure services provided to the State Government in relation to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution.
- Services provided to HLL Infratech Services Ltd are not eligible for exemption as this entity is a public sector undertaking and not considered Central Government, State Government, or local authority.

Ruling:
The services rendered by the applicant, including geotechnical investigation, preparation of DPR, architectural and engineering design, and project management services, are classified under Heading 9983 - Other professional, technical, and business services, and are subject to GST at the rate of 18%. Services provided to Rebuild Kerala and the Kerala State Public Works Department are exempted under SI. No. 3 of Notification No. 12/2017 Central Tax (Rate), while services provided to HLL Infratech Services Ltd are not eligible for this exemption.

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