2022 (4) TMI 184 - AAR - GST

Classification of services - project management consultancy services - taxable under Service Accounting Code 9983 stating Other professional, technical and business services or otherwise - insertion vide N/N. 20/2019-C.T.(Rate), dated 30.09.2019 since the said amendment is clarification to the amendment made vide Notification No. 1/2018-CT.(Rate) dated 25 January 2018 reducing G5T rate for service of exploration, mining or drilling of petroleum crude or natural gas or both to 12% - HELD THAT - As a part of such project management consultancy services, the Applicant is required to manage the Projects right from the detail design to commissioning and is also required to review, monitor, manage and control all aspects of the execution of the Projects. Applicant will perform its activity using its independent and self-sufficient team, on behalf of VL, to complete the projects with quality, on time and within the approved cost. Thus, applicant has been appointed as a Project Management Consultant to manage and control all aspects of the execution of the Project by the Execution Partners. The applicant has been contracted to supply PMC services to suit the requirements of VL and from the oral and written submissions made by the applicant, it is found that there is no supply of goods involved in the subject case and therefore the impugned supply is a supply of services under the GST Laws. From a reading of the Circular No. 114/33/2019-GST and the relevant Explanatory Notes to service codes 998341 and 998343 of the Scheme of Classification of Services, it is clear that the impugned services are not covered by the said Explanatory Notes since the service code 998341 is restricted to Geological and geophysical consulting Services and the service code 998343 is restricted to Mineral exploration and evaluation Services and the impugned services being provided by the Applicant cannot be considered as being connected to either Geological and geophysical consulting services or Mineral exploration and evaluation services. In the subject case even though the impugned services consist of professional, technical and business services, the same are not covered under SAC 9983 (Sr. No. 21 (ia)). Therefore, the said professional, technical and business services supplied by the applicant are clearly covered under the residual Entry No. 21 (ii) of Notification 11/2017 - CTR dated 28.06.2017 as amended, attracting tax rate of 18% - the impugned services supplied by the applicant to VL are covered under Sr. No 21 (ii) of Notification No. 11/2017-CT(R) dated 28.06.2017 as amended and would be liable to tax at 18% GST.

Summary

Issues Involved:
1. Classification of Project Management Consultancy (PMC) services under GST.
2. Applicable GST rate for PMC services provided to Vedanta Limited (Division: Cairn Oil & Gas).

Detailed Analysis:

1. Classification of Project Management Consultancy (PMC) services under GST:

The applicant, M/s. Lloyds Register Consulting Energy Private Limited, sought an advance ruling on whether their PMC services provided to Vedanta Limited (Cairn Oil & Gas) fall under the Service Accounting Code (SAC) 9983, specifically under entry 21(ia) of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017 as amended by Notification No. 20/2019-C.T. (Rate) dated 30.09.2019, which pertains to "Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas or both."

The applicant contended that their services, which include project planning, monitoring, tracking, cost validation, variance analysis, and technical validation/assurance, should be classified under the aforementioned entry due to the broad scope of the term "relating to." They argued that the services provided are directly connected to the exploration, mining, or drilling activities and should therefore attract a GST rate of 12%.

However, the authority examined the scope of work and found that the services provided by the applicant encompass various professional, technical, and business services, such as project planning, monitoring, validation of contractor deliverables, and overall project management. It was determined that these services are not specifically covered under the explanatory notes for SAC 998341 (Geological and geophysical consulting services) or SAC 998343 (Mineral exploration and evaluation services) as per the Circular No. 114/33/2019-GST.

2. Applicable GST rate for PMC services provided to Vedanta Limited (Division: Cairn Oil & Gas):

The authority concluded that the services provided by the applicant do not fall under the specific entry 21(ia) of Notification No. 11/2017-C.T. (Rate) as amended, which would have attracted a GST rate of 12%. Instead, the services were classified under the residual entry 21(ii) of the same notification, which pertains to "Other professional, technical and business services other than (i) and (ia) above," attracting a GST rate of 18%.

Conclusion:

The project management consultancy services provided by the applicant to Vedanta Limited (Division: Cairn Oil & Gas) are classified under Sr. No. 21(ii) of Notification No. 11/2017-CT(R) dated 28.06.2017 as amended, and are liable to tax at 18% GST. The authority's decision was based on the comprehensive analysis of the scope of work and the relevant GST notifications and circulars, ensuring that the classification and applicable tax rate were accurately determined.