Consultancy charges received by Government Entity in relation to specified construction services are exempt

Categories: Advance Ruling
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Facts:

M/s. Kerala State Construction Corporation Ltd. (“the Applicant”) is engaged as Construction Agency/Program Management Consultant/ Special Purpose vehicle for the work of construction of model residential school, building for pre-examination training, pre-metric hostel for Boys, sub-registrar office for registration department.

issue Involved:

Whether GST would be applicable on consultancy charges?

Observation and Findings:

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 is covered by Sl. No. 3 of Notification no. 12/2017 dated June 28, 2017 (“Exemption Notification”).

Further, in respect of Project Management services for construction projects activities undertaken by Applicant is pure services falling under the SAC 998339. However, the services provided by way of construction of sub-registrar office doesn’t fall under ‘services in relation to any activity falling under article 243G/ 243W of the constitution’ and hence, doesn’t come under the purview of the exemption notification.

In respect of building works undertaken by Applicant, soil investigation and structural design works for DPR preparation are entrusted to outside consultants. These services provided by the applicant is exempt vide Sl. No. 3 of Exemption Notification, being pure services provided to Government Entity by way of any activity in relation to any function entrusted to a panchayat/ Municipality under Article 243G/ 243W of the constitution.

Held:

The Hon’ble AAR, Kerala vide Advance Ruling No. KER/46/2019 dated April 12, 2019 held that, except for the services provided by way of construction of sub-registrar office, which is taxable at the rate of 18%, all other services fall under Sl. No. 3 of the Exemption Notification including the outsourced services of soil investigation and structural design services.

Citation: [TS-326-AAR-2019-NT]