KIIFB-Funded Project Management Services Attract 18% GST: Kerala AAR

In re Kerala Road Fund Board (GST AAR Kerala)

Summary: The Kerala Authority for Advance Ruling considered whether M/s. Kerala Road Fund Board (KRFB), acting as a Special Purpose Vehicle (SPV) for Kerala Infrastructure Investment Fund Board (KIIFB)-funded projects, was required to raise invoices in favour of the Administrative Department of the Government and whether centage charges received by it from KIIFB on behalf of the Government were liable to GST.

KRFB submitted that it was established as a body corporate by the Government of Kerala as a funding agency for providing financial assistance to transport facility projects and was subsequently selected as an SPV for implementing KIIFB-funded projects. Under the tripartite arrangement among KIIFB, the SPV and the Administrative Department, KRFB undertook activities including preparation of Detailed Project Reports, obtaining technical sanctions, tendering, competitive bidding, monitoring contractors, supervising execution and overall project management. Centage charges were paid by KIIFB to KRFB for meeting expenditure connected with project implementation.

KRFB claimed exemption under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, contending that its services were pure services supplied to the State Government in relation to functions entrusted to Panchayats under Article 243G or Municipalities under Article 243W of the Constitution. The Authority first held that the question concerning issuance of invoices, viewed independently, was prima facie outside Section 97(2), but treated it as ancillary to determination of the GST liability and recipient of the taxable supply. On the substantive tax issue, the Authority characterised KRFB’s activities as administrative and professional project management services falling within “supply of services” and appropriately classifiable under SAC 998339—Project management services for construction projects.