2019 (5) TMI 961 - AAR - GST

Rate of GST - Centage charges / Consultancy charges - Construction Agency / Project Management Consultant / Special Purpose vehicle for preparation of DPR, tendering of work, executing agreement with contractor, supervision of construction, recording measurements in M-Book, preparation of bill etc. - HELD THAT - The applicant being a corporation established by the State Government and incorporated under the Companies Act, 1956 with full control of the State Government to carry out functions entrusted by the State Government satisfies the definition of Government Entity and accordingly, the out sourced services of soil investigation and structural design works for DPR preparation received by the applicant in respect of the projects listed Sl.No. 1 to 4 will be covered by the exemption under Sl.No. 3 of the above notification. The Centage Charges / Consultancy Charges received by the applicant in respect of the works at SI Nos. (1) to (4) above being in relation to pure services provided to the State Government by way of activity in relation to function entrusted to a Panchayat / Municipality under 243G / 243W of the Constitution is exempted from goods and services tax as per Sl. No. 3 .of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 - The out sourced services of soil investigation and structural design works for DPR preparation received by the applicant in respect of the projects listed at Sl. No. 1 to 4 will be covered by the exemption under Sl. No. 3 of the above notification as pure services provided to a Government Entity by way of any activity in relation to a function entrusted to a Panchayat / Municipality under 243G / 243W of the Constitution. The services supplied / received by the applicant are taxable at the rate of 18%.

Summary

Issues:
1. Determination of GST rate applicable for centage charges/consultancy charges.

Analysis:
The judgment involves a request for an advance ruling on the GST rate applicable for centage charges/consultancy charges in the context of construction projects undertaken by the applicant. The applicant, a corporation established by the State Government, is engaged in various construction projects, including educational and government infrastructure works. The key consideration is whether the services provided by the applicant fall under the exemption criteria specified in Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

The ruling clarifies that the services rendered by the applicant, falling under the Service Classification Code 998339 for project management services for construction projects, qualify as pure services provided to a Government Entity by way of activities related to functions entrusted to a Panchayat/Municipality under the Constitution. The exemption under Sl. No. 3 of the notification applies to services provided to the Central Government, State Government, or local authorities. The applicant's services for projects promoting educational aspects and welfare of scheduled castes and tribes are covered under this exemption.

However, the ruling specifies that services provided for a project not related to functions entrusted to a Panchayat/Municipality under the Constitution, such as the construction of a Sub-Registrar Office, do not qualify for the exemption. Therefore, the GST rate for services related to such projects is determined to be 18%.

In conclusion, the ruling determines that centage charges/consultancy charges received by the applicant for specific projects are exempted from GST under Notification No. 12/2017-Central Tax (Rate) due to their nature as pure services provided to a Government Entity for activities related to functions entrusted to Panchayats/Municipalities under the Constitution. Services for projects falling outside this scope are taxable at the rate of 18%.