Project Management Consultancy services provided to Andhra Pradesh Panchayat Raj Engineering Department for Andhra Pradesh Rural Road Project for Road Construction is Pure Service and exempt from GST: Says AAR

Facts of Case

In the present case the applicant provides Project Management Consultancy Services to APPRED (Andhra Pradesh Panchayati Raj & Engineering Department) for Andhra Pradesh Rural Road Project (APRRP) which is meant for connectivity of all unconnected habitats of 250+ population in the state of Andhra Pradesh.

APPRED has been set up by an act of Parliament and the main functions of the department are as follows:

• Implement schemes for rural development

• Improve the coverage and quality of infrastructure facilities in rural areas

• Make provision to provide clean drinking water

• Execute minor irrigation and poverty alleviation programs

The Scope of Project Management Consultancy under the terms of Contract comprises of following components, namely:

(i) Review & verification of the Project DPRs.

(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.

Question before AAR

Whether the ‘Project Management Consultancy’ services provided to Andhra Pradesh Panchayat Raj Engineering Department for Andhra Pradesh Rural Road Project (APRRP) for Road Construction can be termed as ‘Pure Services’ as referred in Sl. No. 3 - (Chapter 99) of Table mentioned in Notification No. 12/2017 - Central Tax (Rate) Dated 28/06/2017 and accordingly eligible for exemption from Central Goods and Service Tax?

Arguments by Applciant

The applicant in support of their plea, present the relevant portion of the Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017 for interpretation, which is as follows:

“In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts the intro-State supply of services of description as specified in column (3) of the Table below from so much of the central tax liveable thereon under sub-section (i) of section 9 of the said Act, as is in excess of the said tax calculated at the rate as specified in the corresponding entry in column (4) of the said Table, unless specified otherwise, subject to the relevant conditions as specified in the corresponding entry in column (5) of the said Table, namely:-

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 in relation to any function entrusted to a Municipality under article 243W of the Constitution.

Interpretation of ‘Pure Services’

1.1 The applicant submits that the services provided by them may be termed as ‘Pure Services’, as they fulfil the following conditions:

i) It excludes works contract service

ii) It excludes other composite supplies involving supply of any goods

iii) It is supply of services without involving any supply of goods

1.2 The word ‘Pure Services’ referred in notification has nowhere been defined in the Act, Rules or notification. The Notification also does not specifically name the services which are eligible for exemption and which are excluded. However, CBEC vide FAQs on Government Services, has clarified the scope of Pure Services as under:

Question 25: What is the scope of pure services’ mentioned in the exemption notification No. 12/2017-Central Tax (Rate), dated 28.06.2017?

Answer: In the context of the language used in the notification, supply of services without involving any supply of goods would be treated as supply of pure services. For example, supply of manpower for Cleanliness of roads, public places, architect services, Consulting engineer services, advisory services, and like services provided by business entities not involving any supply of goods would be treated as supply of pure services. On the other hand, let us take the example of a governmental authority awarding the work of maintenance of street lights in a Municipal area to an agency which involves apart from maintenance, replacement of defunct lights and other spares. In this case, the scope of the service involves maintenance work and supply of goods, which falls under the works contract services. The exemption is provided to services which involves only supply of services and not for works contract services.

Held by AAR

The Project Management Consultancy Services is a pure service hence exempt from GST.

taxreply.com © 2024. All Rights Reserved