Centage charges for supervising government projects treated as "pure services" under Entry 3, GST-exempt; refund limited by s.54

Centage charges received for project management/consultancy services to Govt departments and local authorities were examined for exemption under Entry 3 of N/N 12/2017-CT(R). As the supply involved only supervision, coordination and administrative management without any supply of goods or works contract, it qualified as "pure services"; being directly relatable to functions under Arts. 243G/243W read with the Eleventh/Twelfth Schedules, the centage charges were held exempt and not liable to GST. On refund of GST already paid, the AAR held that refund is governed by s.54 CGST Act and must be claimed within two years from the date of payment; it lacked jurisdiction to relax limitation, and declined to rule on factual eligibility beyond this.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether "centage charges" collected as consideration for Project Management Consultancy (PMC) / consultancy services rendered to State Government departments and local authorities, in relation to functions under Articles 243G/243W, are exempt from GST as "pure services" under Entry 3 of the relevant exemption notification.

(ii) Whether refund of GST already paid on such centage charges can be claimed for past periods from 2017-18 onwards, including whether any relaxation beyond the statutory two-year limitation can be granted by the Authority, and what aspects fall outside the Authority's jurisdiction while answering the refund question.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): GST applicability on centage charges for PMC / consultancy services

Legal framework (as discussed by the Authority): The Authority examined the exemption for "pure services (excluding works contract service or other composite supplies involving supply of any goods)" provided to Central/State Government, Union territory, local authority, or governmental authority, by way of an activity in relation to functions entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W, under Entry 3 of the exemption notification. The Authority also considered the statutory meaning of "local authority" and assessed the linkage to Eleventh and Twelfth Schedule functions as part of determining whether the services were "in relation to" Articles 243G/243W functions.

Interpretation and reasoning: The Authority found, on facts, that the applicant's PMC services consisted of supervision, coordination, and administrative management of projects, without executing any works contract and without supplying goods. On that basis, the services were held to be "pure services." The recipients were found to be State Government departments (including the departments identified in the record) and Panchayats (District and Grama Panchayats), and therefore within the classes of recipients contemplated by Entry 3 (Government and local authorities). The Authority further examined whether the nature of the projects (including environmental protection-related projects and other civil/electrical/infrastructure works undertaken for such bodies) was connected to the functions listed in the Eleventh and Twelfth Schedules, and concluded that they were directly connected with functions entrusted under Articles 243G/243W.

Conclusion: The Authority conclusively held that GST is not applicable on the centage charges collected for such pure PMC/consultancy services rendered to Government/local authorities in relation to functions under Articles 243G/243W, since the supplies are exempt under Entry 3 of the exemption notification, subject to satisfaction of the stated conditions.

Issue (ii): Refund of GST already paid on centage charges; limitation and jurisdiction

Legal framework (as discussed by the Authority): The Authority treated refund as governed by the statutory refund provision, including the requirement that a refund application be filed within two years from the relevant date, and noted that the "date of payment of tax" was the relevant date in the context considered. The Authority also referred to the requirement that refund be processed by the jurisdictional proper officer in accordance with the applicable refund procedure rules.

Interpretation and reasoning: The Authority determined that it has no jurisdiction to extend or relax the statutory two-year time limit for filing a refund claim, being a statutory authority bound by the refund provision. It further reasoned that while a refund claim may be filed, the actual eligibility for refund cannot be ruled upon in the advance ruling because relevant factual aspects necessary for granting refund (expressly including unjust enrichment) were not before it and must be examined by the proper officer case-by-case.

Conclusion: The Authority conclusively decided that refund of GST already paid may be claimed only within the two-year limitation prescribed under the GST law, and that it cannot grant any relaxation beyond that limitation. It also conclusively decided that determination of refund eligibility on merits (including issues such as unjust enrichment) is outside the scope of its ruling on the material available and must be decided by the jurisdictional officer.

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