2021 (3) TMI 708 - AAR - GST

Classification of services - services provided by main contractors - pure services or not - Project Development Service and Project Management Consultancy services (PMCS) provided by the main contractors to SUDA - Project Management Consultancy Services for PMAY - activity in relation to functions entrusted to Panchayat or Municipality under Article 243G or Article 243W respectively - service provided by the sub-contractor to the main contractor - exemption as per Sl. No 3 of Notification No. 12/2017-Central Tax (Rate), dated 28th June, 2017 (as amended from time to time). Project Development Service and Project Management Consultancy services (PMCS) provided by the main contractors to SUDA - Project Management Consultancy Services for PMAY - activity in relation to functions entrusted to Panchayat or Municipality under Article 243G or Article 243W respectively, of the Constitution of India or not - HELD THAT - SUDA has been established as a state level nodal agency, under the department for Urban Employment and Poverty Alleviation by Uttar Pradesh Government. This agency is registered under the Registration of Societies Act since 20th November 1990 - Further, as per website of Pradhan Mantri Awas Yojana-Housing for All (Urban), Ministry of Housing and Urban Affairs, the PMAY is a Scheme to provide central assistance to Urban Local Bodies (ULBs) and other implementing agencies through States/UTs for Rehabilitation of existing slum dwellers using their land as a resource through private, participation, and affordable Housing in Partnership. Thus, the Consultancy services rendered under the contract with State Urban Development Agency, Uttar Pradesh (SUDA), and for PMAY are in relation to functions entrusted to Municipalities under Article 243W and to Panchayats under Article 243G of the Constitution of India. Whether such services provided would qualify as Pure services (excluding works contract service or other composite supplies involving supply of any goods) as provided in serial number 3 of Notification No. 12/2017- Central Tax (Rate) dated 28 June, 2017, as amended? - HELD THAT - The services mentioned in the contract would qualify as Pure Service (excluding works contract service or other composite supplies involving supply of any goods) as provided in serial number 3 of Notification No. 12/2017- Central Tax (Rate) dated 28 June, 2017, as amended (S. No. 3A) by Notification No. 2/2018- Central Tax (Rate) dated 25 January, 2018 issued under Central Goods and Services Tax Act, 2017 (CGST) and corresponding Notifications No. - KA.N.I.-2-843/X1- 9 (47) / 17 -UP. Act-1 2017 - Order - (10) - 2017 Lucknow, dated June 30, 2017 issued under Uttar Pradesh Goods and Service Tax Act, 2017 (UPGST Act), where the Project cost includes the cost of service rendered along with reimbursement of cost of procurement of goods for rendering such service, and, thus, be eligible for exemption from levy of CGST and UPGST, respectively. Whether the services provided by the applicant would be exempted or not, in terms of Notification No. 12/2017 -Central Tax (Rate) dated 28th June 2017, as amended? - HELD THAT - The main contractors have entered into an agreement with SUDA for providing Preparation of Detailed Project Report and providing Project Management Consultancy Service under Pradhan Mantri Awas Yojna, the service which was further sublet to the applicant by the main contractors - From perusal of entry no. 03 of the Notification No. 12/2017, it is observed that service should be pure service, supplied to specific class of recipient and should be in relation to any function entrusted to panchayat or municipality under article 243G or 243W of the constitution - thus, the service of providing Preparation of Detailed Project Report (DPR) and providing Project Management Consultancy Service (PMC) under Pradhan Mantri Awas Yojna, by the applicant, in terms of contract entered between main-contractor and SUDA and sub letting of same contract by the main contractor to the applicant, is exempt from GST.

Summary

Issues Involved:
1. Qualification of Project Development Service and Project Management Consultancy Services as activities related to functions entrusted to Panchayat or Municipality under Article 243G or Article 243W of the Constitution of India.
2. Eligibility of such services for exemption from GST as "Pure services" under Notification No. 12/2017-Central Tax (Rate) dated 28 June 2017.
3. Applicability of GST exemption to services provided by the sub-contractor to the main contractor.

Issue-wise Detailed Analysis:

1. Qualification of Services under Articles 243G and 243W:
The applicant, a registered assessee under GST, sought an advance ruling on whether the Project Development Service (Detailed Project Report Service) and Project Management Consultancy Services (PMCS) provided under contracts with the State Urban Development Authority (SUDA) and for the Pradhan Mantri Awas Yojna (PMAY) qualify as activities related to functions entrusted to Panchayat or Municipality under Article 243G or Article 243W of the Constitution of India. The ruling examined the scope of work under these contracts, identifying that SUDA's objectives include identifying urban poor, formulating and implementing schemes for their upliftment, and reviewing the progress of these activities. The PMAY scheme provides central assistance to Urban Local Bodies (ULBs) for slum rehabilitation and affordable housing. These activities align with functions listed in the 11th and 12th schedules of the Constitution, such as urban planning, poverty alleviation, and slum improvement.

2. Eligibility for Exemption as "Pure Services":
The ruling further addressed whether these services qualify as "Pure services" (excluding works contract service or composite supplies involving supply of any goods) under serial number 3 of Notification No. 12/2017-Central Tax (Rate) dated 28 June 2017, as amended. The ruling examined the sample contracts and determined that the services provided by the applicant, including detailed project reports and project management consultancy, fall under the definition of "Pure services" as they do not involve the supply of goods. Therefore, these services are eligible for exemption from GST under the specified notification, provided the project cost includes the cost of service rendered along with reimbursement of the cost of procurement of goods for rendering such service.

3. Applicability of GST Exemption to Sub-contractor Services:
The ruling also considered whether the services provided by the applicant, as a sub-contractor to the main contractor, would be exempt from GST. The main contractors had awarded the same work to the applicant that they had contracted with SUDA. The ruling noted that the services provided by the applicant are in relation to functions entrusted to Municipalities under Article 243W and to Panchayats under Article 243G of the Constitution of India. As such, these services are exempt from GST under entry no. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28 June 2017. The ruling referenced similar decisions by other authorities, reinforcing that the exemption applies to pure services provided by sub-contractors under such government schemes.

Ruling:
1. The services rendered by the applicant to SUDA and for PMAY under contract with the main contractor are in relation to functions entrusted to Municipalities under Article 243W and to Panchayats under Article 243G of the Constitution of India.
2. Such services qualify as "Pure services" (excluding works contract service or other composite supplies involving supply of any goods) and are exempt from GST under Notification No. 12/2017-Central Tax (Rate), dated 28 June 2017, as amended, subject to the fulfillment of conditions prescribed for Input Tax Credit under the CGST Act, 2017 and subsequent Rules.

This ruling is valid within the jurisdiction of the Authority for Advance Ruling Uttar Pradesh and subject to the provisions under Section 103(2) of the CGST Act, 2017 until declared void under Section 104(1) of the Act.