2024 (6) TMI 119 - AAR - GST

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 ... Classification of services - activity in relation to Panchayat or Municipality under Article 243G or Article 243W respectively, of the Constitution of India or not - services of preparing and providing plans and estimate and preparing and providing DTP [Draft Tender Plan] for the building work provided by the assessee to the R&B department - pure services or not - eligibility for exemption under serial number 3 of N/N. 12/2017-CT (R). dtd 28.6.2017. Whether the consultancy services provided by way of preparing and providing plans and estimates and DTP [draft tender paper] for building works-to R&B department of the Government of Gujarat in terms of the scope of the tender issued by them are in relation to the functions entrusted to Municipalities under article 243W and to Panchayat under Article 243G of the Constitution of India and is therefore exempt in terms of Sr. No. 3 of notification No. 12/2017-CT (R.) dated 28.6.2017, as amended? - HELD THAT:- The claim of the service having been provided to State Government appears to be correct. Preparing and providing plans and estimates and DTP [draft tender plan], is a pure service or not - HELD THAT:- Since, the applicant is engaged in preparing and providing plans and estimates and DTP [draft tender plan], it is found that the second claim of the applicant of the service having been rendered being a ‘pure service’ appears to be correct. Activity is in relation to function entrusted to a Municipality and a Panchayat, i.e. Articles 243G and W of the Constitution or not - HELD THAT:- The applicant who is engaged in preparing and providing plans and estimates and DTP [draft tender plan], is not eligible for a blanket exemption in terms of Sr. No. 3 of notification No. 12/2017-CT (R) dated 28.6.2017, as amended, in respect of all the buildings constructed for the State Government. However, it goes without saying that in case the applicant is in a position to prove that the building constructed is in relation to any of the functions entrusted to a Panchayat or Municipality, in terms of Schedule XI and XII, they would be eligible for the exemption under Sr. No. 3 of notification No. 12/2017-CT (R) dated 28.6.2017, as amended. This as is already mentioned would van’ and depend on the facts of each case - the blanket exemption sought by the applicant in respect of all the buildings constructed for the State government under the aforementioned notification, is not legally tenable. Providing services of preparing and providing plans and estimate and preparing and providing DTP [Draft Tender Plan] for the building work by the applicant to the R&B department, Government of Gujarat under the contract would not qualify as an activity in relation to Panchayat or Municipality under Article 243G or Article 243W respectively, of the Constitution of India. 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 243WThe 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 SGSTGiven 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.