2021 (12) TMI 414 - AAAR - GST

Classification of services - pure services or not - Project Development Service (i.e. Detailed Project Report Service) and Project Management Consultancy services ('PMCS') provided by the applicant to the recipient under the Contract from State Urban Development Authority (herein after referred as SUDA ) and the Project Management Consultancy services ('PMC') under the Contract for PMAY - activity in relation to function entrusted to Panchayat or Municipality under Article 243G or Article 243W respectively, of the Constitution of India? - 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. HELD THAT - As per Sl. No. 3 of Notification No. 12 / 2017-CT (Rate) dated 28.06.2017 Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution are exempt from tax - the Authority for Advance Ruling has observed that SUDA is not covered in the definition of Central Government, State Government, Local Authority, Government Authority or Government Entity. As per the Registration Certificate issued to SUDA and as per the TDS Credit Received Summary provided by the Appellant, SUDA is deducting GST-TDS amount from each and every payment made by them, in term of section 51 of the Act - the Consultancy services rendered by the Appellant under the contract with SUDA, and for PMAY are in relation to functions entrusted to Municipalities / Panchayats under Article 243W / 243G of the Constitution of India. Whether such services provided by the Appellant would qualify as Pure services? - 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 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.

Summary

Issues Involved:
1. Whether the Project Development Service (Detailed Project Report Service) and Project Management Consultancy services provided by the appellant to the State Urban Development Authority (SUDA) 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 affirmative, whether such services qualify as Pure services as provided in serial number 3 of Notification No. 12/2017-Central Tax (Rate) dated 28 June 2017, and thus be eligible for exemption from CGST and UPGST.

Detailed Analysis:

Issue 1: Qualification of Services Under Article 243G or 243W
The core issue revolves around whether the services provided by the appellant to SUDA qualify as activities related to functions entrusted to Panchayats or Municipalities under Articles 243G and 243W of the Constitution of India. The appellant argued that their services are purely professional consultancy services without any supply of goods or materials, and thus should be considered under the purview of these constitutional articles.

Key Points:
- Notification No. 12/2017-CT (Rate): Pure services provided to the government or local authorities by way of any activity related to functions entrusted to Panchayats or Municipalities are exempt from tax.
- SUDA's Status: The Authority for Advance Ruling initially ruled that SUDA is not covered under the definition of Central Government, State Government, Local Authority, Government Authority, or Government Entity. However, the appellate authority observed that SUDA, established as a state-level nodal agency under the Department for Urban Employment and Poverty Alleviation by the Uttar Pradesh Government, aligns with the objectives of urban poverty alleviation and other functions listed under Articles 243G and 243W.
- Memorandum of Association: SUDA’s objectives include identifying urban poor, formulating schemes for their upliftment, and implementing these schemes, which align with functions like urban planning, poverty alleviation, and slum improvement.

Issue 2: Qualification as Pure Services
Given that the services are in relation to functions entrusted to Panchayats or Municipalities, the next issue is whether these services qualify as Pure Services under Notification No. 12/2017-Central Tax (Rate).

Key Points:
- Scope of Work: The appellant’s contract with SUDA involves detailed project report preparation and project management consultancy, which include activities like physical verification, data collection, architectural designs, and construction supervision, all of which are professional services without the involvement of goods.
- Exemption Criteria: According to the notification, Pure Services exclude works contract service or composite supplies involving supply of any goods. The appellate authority confirmed that the services provided by the appellant fall under this category, thus qualifying for exemption from CGST and UPGST.

Ruling:
The appellate authority concluded that the services rendered by the appellant to SUDA and for PMAY are indeed in relation to functions entrusted to Municipalities under Article 243W and to Panchayats under Article 243G of the Constitution of India. Furthermore, these services qualify as Pure Services, thereby making them eligible for exemption from the levy of CGST and UPGST.