Technical Consultancy for Project Development and Management Support Services to MJP are taxable under GST at the rate of 18%

[CA Bimal Jain]

The AAR Maharashtra, in the case of IN RE: M/S. THE NISARGA CONSULTANCY [2024 (10) TMI 1213 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA] ruled that no tax will be leviable on work allotted by Maharashtra Jeevan Pradhikar (“MJP”) as per of Jal Jeevan Mission (“JJM”) which is a mission of Government of India performed & invoiced before January 01, 2022 as per Serial No. 3 of Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017 (“Exemption Notification”). Further, 18% GST is payable under Sr. No. 21 Heading 9983, (ii) of the Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017 where work allotted by MJP as per of JJM if work is performed and invoiced after January 01, 2022 but which is allotted before January 01, 2022.

Facts:

M/s. The Nisarga Consultancy (“the Applicant”) was a partnership firm engaged in the business of providing technical consultancy to various Governments, Semi-Government, Government Corporations & Quasi-Government Institutions. The Applicant was also involved in the activity of designing, planning, and supervising the implementation of such schemes which provides a regular supply of water and proper sewage facilities and used water disposal in the villages, towns and cities by the Government under Article 243G and W in the Constitution of India.

The Government of Maharashtra enacted the Maharashtra Jeevan Authority Act, 1976 (“MJA Act”) known as Maharashtra Jeevan Pradhikaranj (‘MJP’) by which all water schemes were implemented on water by supply, drainage, sanitation and storm. The said authority was wholly controlled by the Government and received funds from consolidated funds as per budget allocations from respective Government for execution of any new water supply/sanitation scheme. Due to lack of manpower, the activity was outsourced to outside agencies by respective government.

The said activities were exempt from tax. Even under the Finance Act, 1994 the activities were exempt. The Notification No. 16/20121 (Rate) dated November 18, 2021 omitted words “or a Governmental authority or a Government Entity” from Sr. 3 &4 of Exemption Notification.

By virtue of amendment dated January 01, 2022, the activity of the Applicant was no longer exempt but was chargeable to full rate of tax i.e. 18%. However, there was no uniformity to understand the legal position of tax exigibility on Applicant’s activity, for some of the Zilla Parishad’s, some State Government add GST payable @18% to the invoice payable in respect of pure service activity performed by tax persons identically situated, to that performed, by the Applicant.

Hence, aggrieved by the circumstances, the Applicant filled the present application of Advance Ruling in order to clarify the rate of tax applicable to the activity performed by the Applicant i.e. pure services in the nature of project management consultancy provided to Central/State Governments/Local Authority/ Government Authority/Entity” before January 01, 2022 and after January 01, 2022.

Issue:

Whether the technical consultancy for project development and management support services to MJP taxable under GST?

Held:

The AAR, Maharashtra in the case of IN RE: M/S. THE NISARGA CONSULTANCY [2024 (10) TMI 1213 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA]  held as under:

• Observed that, the Applicant had provided 'Technical Consultancy for Project Development and Management support services' for water supply scheme at various locations implemented by MJP for supply of water, which are function stated in articles 243G & 243W. Further, clause 2(zf) of notification defines 'Governmental Authority' as an authority or a board or any other body, which is set up by an Act of Parliament or a State Legislature; or (ii) established by any Government, with 90% or more participation by way of equity or control, to carry out any function entrusted to a Municipality under article 243W of Constitution or to a Panchayat under article 243G of Constitution. As MJP is set up by an Act of Legislature of Maharashtra State, it is 'Governmental Authority'. Therefore, 'Technical Consultancy for Project Development and Management support services', provided by applicant to MJP for its Water supply schemes where time of supply is on or before December 31, 2021, are covered by exemption entry at Sl. No. 3 of Exemption Notification.
• Noted that, work was allotted before January 1, 2022, but, performed and invoiced after this date, then in aforesaid case, applicable GST rate is 18 % according to Entry No. 21, Heading 9983(ii) of Notification No. 11/2017-Central Tax (Rate). Therefore, services supplied by the Applicant is in nature of 'Technical Consultancy for Project Development and Management support services', hence, classifiable under SAC code 9983 and are taxable at rate of 18%, wherever exemption is not applicable.
• Relied on, Hon'ble Supreme Court has in case of COMMISSIONER OF CENTRAL EXCISE, NEW DELHI VERSUS HARI CHAND SHRI GOPAL [2005 (10) TMI 89 - SUPREME COURT] where it was held that a person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the Statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption.
• Opined that, Exemption Notification was amended by Notification No. 16/2021-Central Tax (Rate) dated November 18, 2021 which omitted words 'or a government authority or a Government Entity'. Hence, services rendered by the Applicant are received by MJP which is a Government Entity. Thus, this service is taxable as any normal service and taxable as per type of service rendered.
• Held that, MJP agreed to pay Applicant in consideration for performance of services, such amounts as may become payable under provisions of agreement at times and in manner prescribed in Consultancy Agreement. Section 2(93) of the CGST Act defines 'recipient' of supply of goods or services or both, as any person who is liable to pay consideration. Therefore, MJA is service receiver within meaning of section 2(93) of the CGST Act in respect of amounts received as grants by MJP which are paid to Applicant on services provide before and after January 1, 2022.

Our Comments:

Notification No. 12/2017-Central Tax (Rate) dated June 28, 2017 provides list of exempt supply of services under CGST Act.

SI. No.	Chapter, Section, Heading, Group or Service Code (Tariff)	Description of Services	Rate (per cent.)	Condition
(1)	(2)	(3)	(4)	(5)
3	Chapter 99	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 79[****] 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.	Nil	Nil

79. Omitted Vide Notification 16/2017-Central Tax (Rate) dated November 18, 2021 w.e.f. January 01, 2022 before it was read as “or a Governmental authority [or a Government Entity]”.

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