Consultancy services for building plans to State Government don't qualify for blanket GST exemption under notification 12/2017-CT(R)

AAR Gujarat held that consultancy services for preparing plans, estimates, and draft tender papers for building works provided to the State Government's R&B department do not qualify for blanket exemption under notification 12/2017-CT(R). While the services were deemed "pure services" provided to the State Government, they do not automatically fall under activities related to Panchayat or Municipality functions per Articles 243G and 243W. The applicant may claim exemption only if they can prove specific buildings relate to functions listed in Schedule XI and XII, determined case-by-case.

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Issues Involved:
1. Qualification of services under Article 243G or 243W of the Constitution of India.
2. Eligibility for exemption from CGST and SGST under Notification No. 12/2017-CT (R).

Summary:

Issue 1: Qualification of Services under Article 243G or 243W
The applicant, engaged in providing works contract and engineering consultancy services to governmental agencies, contended that their consultancy services for preparing plans and estimates for building work fall within the ambit of activities related to functions entrusted to Panchayats under Article 243G and Municipalities under Article 243W of the Constitution of India. The applicant argued that these services qualify as "pure services" provided to the State Government, meeting the conditions of entry no. 3 of Notification No. 12/2017-CT (R) dated 28.6.2017.

Upon examination, the Authority found that:
- The service provided to the R&B department of the Government of Gujarat is correct.
- Preparing and providing plans and estimates and DTP is considered "pure service" as it does not involve the supply of goods.

However, the Authority noted the lack of specific details regarding the buildings for which these services were provided. It was difficult to ascertain whether these buildings were related to functions entrusted to Panchayats or Municipalities as per Schedules XI and XII of the Constitution. The Authority emphasized that constructing buildings not directly related to the functions listed in these schedules does not qualify for the exemption under Sr. No. 3 of Notification No. 12/2017-CT (R).

Issue 2: Eligibility for Exemption from CGST and SGST
Given the negative ruling on the first issue, the second question regarding the eligibility for exemption from CGST and SGST under Notification No. 12/2017-CT (R) became infructuous. The Authority cited the Supreme Court ruling in the case of Dilip Kumar & Company, emphasizing that exemption notifications should be interpreted strictly, and the burden of proving applicability lies on the assessee.

Ruling:
1. The services of preparing and providing plans and estimates and DTP for building work provided by the applicant to the R&B department, Government of Gujarat, do not qualify as activities related to Panchayat or Municipality under Article 243G or Article 243W of the Constitution of India.
2. Since the first question is answered in the negative, the second question regarding exemption eligibility is rendered infructuous.

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