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TMI Blog2022 (2) TMI 1042X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Tax (rate) dated 28.06.2017. irrespective of the way of raising Invoice as stated in the Joint Venture Agreement. Whether the applicant is eligible for exemption under notification 12/2017central tax rate dated 28.06.2017 or otherwise? - HELD THAT:- It is seen that the following three conditions are to be fulfilled to be eligible for taking the benefit of the exemption from GST under the above notification:- (i) Pure services are to be provided. (ii) Such services provided should be by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution of India or in relation to any function entrusted to a Municipality under Article 243W of the Constitution of India; and (iii) Service recipient should either be Central Government or State Government or Union territory or Local authority or Governmental authority. In the present case, as regard the first condition to be discussed is as to what is meant by pure service? Since 'pure service' has not been defined under GST. the same can be construed in general terms as any supply, which is either deemed as services under Schedule II of CGST Act or which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions, a reference to the CGST Act would also mean a reference to the same provision under the RGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act RGST Act would be mentioned as being under the GST Act . The issue raised by M/s CONSULTING ENGINEERS GROUP LIMITED. B-11 G. 7th Floor. CEG Tower, Malviya Industrial Area. Jaipur, Rajasthan. 302017. (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (b) (e) given as under:- (b) applicability of a notification issued under the provisions of the Act. (e) determination of the liability to pay tax on any goods or services or both. Further, the applicant being a registered person (GSTIN is 08AAACC7519BIZ0 as per the declaration given by him in Form ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the applicant is admitted to pronounce advance ruling. A. SUBMISSION AND INTERPRETATION OF THE APPLICANT: Questions on which Advance Ruling is required 1. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... H LSG (Government of Rajasthan) is mainly responsible:- To give financial assistance to ULBs/Government Agencies/Non Government organization. To give subsidy, aid. assistance of any financial nature to ULBs/Govt. Agencies/Non Govt. Agencies. To arrange or provide consultancy services, technical, financial and other consultancy to Urban Local Bodies (hereinafter referred to as ULBs). To carry out survey for schemes and programme relating to Infrastructure Development. To receive amount as revenue from ULBs. To distribute on behalf of Govt, grant-in-aid and financial assistance to ULBs. lo arrange or raise funds from public, institutional investor. Banks or Financial Institutions. To plan and financial monitor all type of project related to development of Urban Areas in Rajasthan. To set up a Central Urban Data Center for collecting and updating of all information relating to urban development and urban Infrastructure for the urban areas of the state. To act as nodal agency for implementation of affordable housing policy/scheme 2009 and as amended from time to time by the Government of Rajasthan. To Plan, design, develop, con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rland B.V. The objective of the Contract Management Supervision Consultants (CMSC) i.e. the Applicant is to provide assistance to the Project Implementation Unit (PIU) for day to day contract management and construction supervision of the project towns of the respective package. The Applicant shall be responsible for effectively leading and taking initiative to manage, execute and implement the project by effective contract management and construction supervision. 7. As stated in the Joint Venture Contract Agreement, the Relationship between the Parties clause 2.1 to the Contract Agreement states the Relationship between the Joint Venture Members as under: Nothing contained herein shall be construed as establishing a relationship of master and servant or of principal and agent as between the Client and the Consultant. The Consultant, subject to this Contract has complete charge of the Experts and Sub-Consultants, if any performing the services and shall be fully responsible for the Services performed by them or on their behalf hereunder. 8. As per the Joint Venture Contract Agreement, the taxes and duties on any goods or services shall be paid as per the following cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cution and Monitoring of Construction plan and Preparation of monthly progress reports in agreed formats of each sub-project in suitable project monitoring software, including physical and Financial progress, hindrances, reports on variations, time -extensions, problems and issues etc. iii. Assist in preparing an overall Program Performance Monitoring System (PPMS) for the program and ensure that the Necessary independent inputs are in place when and where required iv. Regularly monitoring physical and financial progress against the milestones as per the contract so as to ensure completion on time. v. Monitoring and enforcing as detailed our in the contract QA QC manuals, the quality or inputs and processes and outputs during all activities of construction to ensure the highest quality of works confirming to the specifications A drawings. vi. Scrutinize the Contractor's detailed work program and guide the Contractor in preparation of work plan for each contract package vii. Examining the Contractor's claims, variations. additional compensations etc. and recommending appropriate actions decisions. viii. Providing advice and guidance to the PIU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and compiled reports from CAPP regarding socio economic survey census survey required for RP preparation and all other relevant surveys conducted by CAPP ii) Preparation of safeguard documents and updating them incorporation observations from PMCB in consultation with PH. iii) Support PMU PIU in implementation and monitoring and reporting of GESI activities iv) Implementation of GESI action plan activities regular monitoring and reporting of GESI updates along with Projects QPRs v) Prepare review and update the Initial Environmental Examination (IEE) in consultation with PMCB and PMU vi) Identify any further resettlement requirements and costs that may be required and provide all information required in relation to right-of-way access as well as the relocation of existing utilities vii) Monitoring and Validation of baseline surveys environmental management plans and programs, initial environmental impact examinations (IEE) Social Safeguard compliances as may be required viii) Review and supervision of Implementation of ADB compliant resettlement plans if any based on the approved resettlement framework ix) Support in establishing grievance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m. b) The management and allocation of any shared costs, for clarity any other costs related directly Io the employment of experts and their relocation to the project office shall he responsibility of each member (such as but not limited to accommodation, per-diem, flights/trains/transportation) in accordance to the reimbursable cost budget c) Preparation and submission of ail invoices to the Client, which will be submitted in the name of the Joint Venture and d) Receipt and verification of Invoices from the other members for their entitlement under this Agreement and making timely payments of such sums to them. 11. Thus, the Applicant raise Invoice for its Project Management Consultancy Services to the Leading Member DHV, who further raise Invoice for complete amount to RUDSICO. The payment when received by the Lead member, is further disbursed to the Applicant and other members of the Joint Venture. 12. The Applicant further states that its client, RUDSICO is of the view that the Project Management Consultancy services provided by them are exempt from CGST and Rajasthan GST as per of Notification No. 12/2017-Central fax (Rate) dated 28/06/2017. 13. Given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (Per cent.) Condition 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 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 243 W of the Constitution. Nil Nil From the abovementioned notification, it can be stated that the services are exempted from the CGST and SGST Tax if the following conditions are satisfied cumulatively:- They are rendering Pure services; To the Central Government, State Government or Union territory or local authority or a Governmental authority; and Such services should be in relation to any function entrusted to a Panchayat under article 243G of the Constitution or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the execution of such contract. 1.4 In the Contract between the Applicant and RUDSICO, there is no component of transfer of property in goods as evident from the contract agreement and is purely a service contract. As per the scope of work mentioned above in Point no. 8 of Exhibit-II, the Applicant is mainly engaged in providing Project Management Consultancy services to the RUDSICO through its professionals and Experts in various fields. 1.5 The scope of work of the Applicant mainly surrounds to services in relation to:- (i) Review verification of the Project DP Rs. (ii) Project Management (execution) and Monitoring, and (iii) Construction Supervision and Contract Management, including QAC (iv) Ensuring that the ESMPs are properly prepared and implemented. 1.6 In addition, the Taxes Duties clause (Clause 43.1 Clause 43.2) of the Joint Venture Agreement, as stated in Point 7 of the Exhibit-II, also states that the GST on Consultancy services is exempt. II. RUDSICO qualifies to be a Governmental Authority 2.1 Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Limited (RUDSICO) is a Public incorporated company and is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chedule (Article 243W of the Constitution list out the Matters for economic development. The relevant extract of the schedule has been stated hereunder: 1. Urban planning including town planning. ......................... ............................ 5. Water supply for domestic, industrial and commercial purposes. ................ ............... 3.3 RUDSICO, a Govt, of Rajasthan undertaking, is the State Level Nodal Agency (SLNA) for Govt, of India financed projects like AMRUT, smart city, UIDSSMT. UIG, Eleven City-Sewerage and the state Govt, financed projects like ROB-RUB, Seven Cities Sewerage and Affordable Housing. The main objectives of RUDSICO includes:- To carry out survey for schemes and programme relating to Infrastructure Development. To plan and financial monitor all type of project related to development of Urban Areas in Rajasthan. To Plan, design, develop, construct, maintain, and manage the finance and to make or arrange all the works/Jobs/Services including incidental and ancillary for infrastructure development, housing, public utility services and all other works related to the construction. 3.4 As stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than one entity where one member has the authority to conduct all business for or on behalf of any and all the members of the JV and where the members of the JV are jointly and severally liable to the client for the performance of the contract . 4.5 Thus, the Applicant is providing 'Project Management Consultancy' service to RUDSICO only and just for the purpose of financial administration, the Applicant and other Member of the JV is raising Invoice to the Leading Member, which in-turn is raising invoice to RUDSICO of complete amount and later on disburse the payments to the JV Members. Concluding the above, the Project Management and Consultancy service, being a 'Pure Service', provided by the Applicant to RUDSICO, being a 'Local Authority' would be eligible for exemption under Entry 3 of the notification no. 12/2017- Central Tax (Rate) dated 28.06.2017 as such activity qualify to be in relation to functions entrusted to Committee under Article 243W of the Constitution, irrespective of the fact that invoice is raised to the Leading Member and not to RUDSICO directly. PRAYER IN ADVANCE RULING Given the facts and circumstances, the Appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought by the applicant, relevant facts the applicant's interpretation of law. 1. At the outset, we would like to state that the provisions of both the CGST Act and tine RGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the RGST Act. 2. The applicant has contended that The 'Project Management Consultancy services' provided by the Applicant has no component of supply of goods and is eligible to be a 'Pure Service'. Considering the definitions of Governmental Authority and the facts of RUDSICO, RUDSICO qualifies to be a 'Governmental Authority', with more than 90 percent of state government equity. The services provided by the Applicant to RUDSICO is Project Management Consultancy Services is in relation to Rajasthan Sector Towns Development Sector Project (RSTDSP) for rehabilitation and expansion of water supply network, rehabilitation and expansion of sewerage network, modernization and construction of new water supply and wastewater treatment plants which is listed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (ii) Such services provided should be by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution of India or in relation to any function entrusted to a Municipality under Article 243W of the Constitution of India; and (iii) Service recipient should either be Central Government or State Government or Union territory or Local authority or Governmental authority. So, the first condition to be discussed is as to what is meant by pure service? Since 'pure service' has not been defined under GST. the same can be construed in general terms as any supply, which is either deemed as services under Schedule II of CGST Act or which are not covered under the definition of goods shall be categorized as pure services. However, as per the notification, works contract services or other composite supplies involving supply of any goods are not covered in Serial No. 3. In other words, if a person provides only service to any person without involvement of supply of goods, then the same would be termed as supply of pure service. Ongoing through the contract agreement submitted by the applicant with regard to services provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UDSICO) qualifies as Governmental authority . The definition of Governmental Authority as per the definition given under Notification no. 11/2017-Central tax (rate) and Notification no. 12/2017 Central tax (rate) dated 28th June 2017 is as under: - Governmental Authority means an authority or a board or any other body, - (i) set up by an Act of Parliament or a State Legislature; or (ii) established by any Government, with 90 per cent, or more participation by way of equity or control, to carry out any function entrusted to a Municipality under Article 243W of the Constitution or to a Panchayat under Article 243G of the Constitution. In the instance case, as per the master data submitted by the applicant, we find that the total authorized capital is ₹ 50 crores and the paid up capital is ₹ 48.67 crore. We further find that total paid up capital, wherein, only ₹ 41 crore holding with Government of Rajasthan through H.E. governor of Rajasthan, which is less than 90%, as per the definition given under Notification no. 11/2017-Central tax (rate) and Notification no. 12/2017- Central tax (rate) dated 28th June 2017 as stated above, the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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