2021 (3) TMI 705 - AAR - GST

Activity in relation to function entrusted to Panchayat or Municipality under Article 243G or Article 243W respectively, of the Constitution of India or not - Project Development Service (i.e. Detailed Project Report Service) and Project Management Consultancy services (PMCS) provided by the applicant to recipient under the Contract for SUDA - Project Management Consultancy services (PMC) under the contract for PMAY - pure services or not - exemption 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 - HELD THAT - The Consultancy services rendered by the applicant 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. Pure services or not - exemption 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 - 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.

Summary

Issues Involved:
1. Whether the Project Development Service (Detailed Project Report Service) and Project Management Consultancy services (PMCS) provided by the applicant to SUDA and PMAY qualify as activities related to functions entrusted to Panchayat or Municipality under Article 243G or Article 243W of the Constitution of India.
2. Whether such services qualify as "Pure services" (excluding works contract service or composite supplies involving supply of any goods) under Notification No. 12/2017-Central Tax (Rate) dated 28 June 2017, and are thus exempt from GST.

Issue-wise Detailed Analysis:

Issue 1: Qualification of Services under Article 243G and 243W of the Constitution of India

The applicant, M/s. Snow Fountain Consultants, sought an advance ruling on whether their 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 purpose and scope of work under these contracts. SUDA, established as a state-level nodal agency under the Uttar Pradesh Government, aims to uplift the urban poor through various schemes and plans. Similarly, PMAY aims to provide central assistance for urban housing projects. The functions listed under the 11th and 12th schedules of the Constitution, which pertain to Panchayats and Municipalities respectively, include urban planning, poverty alleviation, slum improvement, and other related activities.

The scope of work for the applicant under these contracts includes the preparation of Detailed Project Reports (DPR) and Project Management Consultancy (PMC) services. The DPR involves physical verification, data collection, architectural designs, and obtaining necessary approvals. The PMC services include coordinating, executing, and monitoring construction activities, ensuring quality control, and managing financial and technical aspects of the projects.

Based on these details, the ruling concluded that the services rendered by the applicant under contracts with SUDA and for PMAY are indeed related to functions entrusted to Municipalities under Article 243W and to Panchayats under Article 243G of the Constitution of India.

Issue 2: Qualification as "Pure Services" and GST Exemption

The second issue was whether the services provided by the applicant qualify as "Pure services" (excluding works contract service or composite supplies involving supply of any goods) under Notification No. 12/2017-Central Tax (Rate) dated 28 June 2017, and are thus exempt from GST.

Upon examining the sample contracts and the scope of work, it was determined that the services provided by the applicant did qualify as "Pure services." These services, as outlined in the contracts, did not involve any supply of goods and were purely service-oriented. Therefore, they fall under the exemption provided in serial number 3 of Notification No. 12/2017-Central Tax (Rate), as amended by Notification No. 2/2018-Central Tax (Rate) dated 25 January 2018.

Ruling:

1. On Question 1: The services rendered under the contract with 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.

2. On Question 2: Such services qualify as "Pure services" (excluding works contract service or other composite supplies involving supply of any goods) and are accordingly exempt from the payment of GST, as covered in Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate), dated 28 June 2017 (as amended).

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