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2021 (1) TMI 1196 - AAR - GSTClassification of services - Project Development Service (i.e. Detailed Project Report Service) and Project Management Consultancy services (PMCS) provided by the applicant to recipient under the Contract for SUDA and the Project Management Consultancy services (PMC) under the Contract for PMAY - would qualify as an activity in relation to function entrusted to Panchayat or Municipality under Article 243G or Article 243W respectively, of the Constitution of India? - Pure services or not - applicability of serial number 3 of Notification No. 12/2017-Central Tax (Rate) dated 28 June, 2017. HELD THAT - As per the work order produced by the applicant, it is clear that the Project Development Service (i.e. Detailed Project Report Service) and Project Management Consultancy services (PMCS) have been provided by the applicant to SUDA (State Urban Development Agency). SUDA has been established as a state level nodal agency, under the department for Urban Employment and Poverty Alleviation by Uttar Pradesh Government. This authority is registered under the 'Registration of Societies Act' since 20th November' 1990. As per the Memorandum of Association of State Urban Development Agency , its main objective shall be for betterment of urban population through comprehensive approach - SUDA is neither covered in the definition of Central Govt. nor State Govt. Moreover, SUDA is also not covered in Local Authority as the definition of local authority is very specific and means only those bodies which are mentioned as local authorities in clause (69) of section 2 of the CGST Act, 2017. The applicant has not submitted any relevant document to establish the coverage of services provided by them in particular functions entrusted to a municipality under the twelfth Schedule to Article 243W of the Constitution. The nature of services mentioned in the Work Order dated 16.01.2019 (attached by the applicant in the application of advance ruling on sample basis) i.e. preparation of DPR and Project Management Consultancy are not covered in the functions entrusted to a municipality under Article 243W of the Constitution.
Issues Involved:
1. Whether the Project Development Service (Detailed Project Report Service) and Project Management Consultancy services (PMCS) provided by the applicant to the recipient under the Contract for SUDA and PMAY qualify as an activity in relation to functions entrusted to Panchayat or Municipality under Article 243G or Article 243W of the Constitution of India. 2. If the answer to the first question is affirmative, whether such services qualify as "Pure services" and are eligible for exemption from CGST and UPGST under Notification No. 12/2017-Central Tax (Rate) and Notification No. 2/2018-Central Tax (Rate). Detailed Analysis: Issue 1: Qualification of Services under Article 243G or 243W The applicant sought clarification on whether the Project Development Service (Detailed Project Report Service) and Project Management Consultancy services (PMCS) provided to SUDA and PMAY fall under the functions entrusted to Panchayat or Municipality under Article 243G or Article 243W of the Constitution of India. Discussion and Findings: - The applicant is a registered assessee under GST and has entered into an agreement with SUDA for preparation of Detailed Project Reports (DPR) and providing Project Management Consultancy (PMC) services for projects under the Pradhan Mantri Awas Yojana - Urban (PMAY-U). - The Authority examined the relevant notifications, specifically Notification No. 12/2017-Central Tax (Rate) and Notification No. 2/2018-Central Tax (Rate), which provide exemptions for pure services and composite supplies involving a minor proportion of goods. - SUDA is established as a state-level nodal agency under the Department for Urban Employment and Poverty Alleviation by the Uttar Pradesh Government and is registered under the Registration of Societies Act since November 20, 1990. - The Authority determined that SUDA does not fall under the definitions of Central Government, State Government, Local Authority, Governmental Authority, or Government Entity as defined under the CGST Act, 2017. - The services provided by the applicant to SUDA do not qualify as activities related to functions entrusted to a Panchayat under Article 243G or a Municipality under Article 243W of the Constitution, as SUDA is engaged in urban development, which is not a function of Panchayats but rather of Municipalities. Ruling: - The Project Development Service (Detailed Project Report Service) and Project Management Consultancy services (PMCS) provided by the applicant to SUDA and PMAY do not qualify as activities in relation to functions entrusted to Panchayat or Municipality under Article 243G or Article 243W of the Constitution of India. Issue 2: Qualification as "Pure Services" and Eligibility for Exemption Given that the first question was answered in the negative, the second question regarding whether such services qualify as "Pure services" and are eligible for exemption from CGST and UPGST under the relevant notifications becomes inapplicable. Discussion and Findings: - Notification No. 12/2017-Central Tax (Rate) exempts pure services provided to the government or local authorities related to functions entrusted to Panchayats or Municipalities. - Notification No. 2/2018-Central Tax (Rate) provides exemptions for composite supplies where the value of goods does not exceed 25% of the total value. - Since the services provided by the applicant do not qualify under the functions entrusted to Panchayats or Municipalities, the question of exemption under these notifications does not arise. Ruling: - The question of whether such services qualify as "Pure services" and are eligible for exemption from CGST and UPGST is not applicable. Conclusion: The Authority for Advance Ruling, Uttar Pradesh, concluded that the Project Development Service and Project Management Consultancy services provided by the applicant to SUDA and PMAY do not qualify as activities related to functions entrusted to Panchayat or Municipality under Article 243G or Article 243W of the Constitution. Consequently, the services do not qualify for exemption under Notification No. 12/2017-Central Tax (Rate) and Notification No. 2/2018-Central Tax (Rate). This ruling is valid within the jurisdiction of the Authority for Advance Ruling, Uttar Pradesh, and subject to provisions under Section 103(2) of the CGST Act, 2017.
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