In re IIM Raipur Foundation For Entrepreneurship Development (GST AAR Chhattisgarh)
The Authority for Advance Ruling (AAR), Chhattisgarh, in IIM Raipur Foundation for Entrepreneurship Development, examined the GST implications of a ₹10.70 crore government-funded incubation project implemented under the Chhattisgarh Grameen Aajeevika Samvardhan Samiti (CGSRLM-Bihan). The applicant, a registered entity engaged in entrepreneurship development and incubation activities, had entered into a consultancy services agreement with CGSRLM-Bihan for establishing and operating incubation centres to support rural enterprises. The project was funded under the DAY-NRLM framework of the Ministry of Rural Development, Government of India, and aimed to promote entrepreneurship, financial inclusion, capacity building and sustainable livelihoods. The applicant sought advance rulings on whether the consideration received under the project was taxable, whether exemptions were available for training and incubation services, and how various components of the project funding should be treated under GST.
The project involved providing incubation support, mentoring, enterprise handholding, business development assistance, market linkage facilitation, financial linkage support, training and capacity-building services to rural entrepreneurs. The agreement covered a period of 36 months and prescribed a total lump-sum consideration of ₹10.70 crore. The allocation comprised ₹3.57 crore towards incubation costs and capacity building, including ₹2.67 crore for operational expenses and ₹90 lakh for training; ₹6.33 crore towards challenge funds comprising soft loans and grants; ₹50 lakh towards equity investments in partnerships; and ₹30 lakh towards selection and event expenses. The applicant argued that the programme was primarily intended to achieve government welfare objectives, rather than commercial profit, and that several components represented financial support directly benefiting rural enterprises. The AAR examined the contractual arrangements, nature of activities and applicable statutory provisions to determine whether these receipts constituted consideration for taxable supplies.
On the principal question of GST applicability, the applicant contended that its activities were undertaken in furtherance of government programmes relating to rural development, poverty alleviation and livelihood promotion. It relied upon the exemption for pure services provided to specified government bodies in relation to functions entrusted to Panchayats under Article 243G of the Constitution. The AAR, however, observed that the services were supplied under a consultancy agreement with CGSRLM-Bihan, a government-supported entity, rather than directly to the Central Government, State Government or Union Territory administration. It held that the conditions prescribed under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate) were not fulfilled merely because the project advanced public welfare objectives or received government funding. Accordingly, the authority concluded that the consultancy services supplied under the incubation project were taxable at 18% GST, comprising 9% CGST and 9% SGST.
The applicant also sought exemption for training and capacity-building services under Entry No. 72 of Notification No. 12/2017-Central Tax (Rate), which concerns specified training programmes provided to the Central Government, State Government or Union Territory administration where the entire expenditure is borne by the government. The AAR held that the exemption could not be extended to the applicant’s services because the recipient, CGSRLM-Bihan, was a government entity or society rather than the Government itself. It similarly rejected the claim that incubation support, enterprise mentoring, business development assistance, financial linkage support, market linkage support and related programme implementation services qualified for exemption as pure services under Entry No. 3. The authority emphasised that government funding and the social objectives of a project do not automatically confer GST exemption when the specific conditions prescribed in the relevant notification are not satisfied.
Regarding expenditure on dedicated project personnel, including salaries, remuneration and related human-resource costs, the applicant argued that these payments represented reimbursements of actual expenditure and should not attract GST independently. The AAR noted that the applicant had not furnished sufficient details to establish conclusively whether the amounts constituted reimbursements under a pure-agent arrangement. It nevertheless clarified that salaries and direct personnel costs relating to employees working under the applicant’s employment relationship would fall within Schedule III of the CGST Act, which excludes services by an employee to an employer in the course of employment from the scope of supply. However, where such costs formed part of the overall consideration charged by the applicant for providing consultancy or project implementation services, they could be included in the taxable value under Section 15(1) of the CGST Act. The ruling therefore distinguished between the non-taxable employer-employee relationship and the taxable consideration received by the applicant under its consultancy contract.
The AAR further considered the treatment of challenge fund grants, soft loans, equity investments and other enterprise-support funds administered under the incubation programme. It examined the contractual provisions and found that the applicant was functioning as a consultant and nodal service provider responsible for implementing and facilitating the project. The authority observed that the project activities were covered by a composite contractual arrangement involving taxable services. It therefore held that the amounts received towards challenge fund grants, soft loans and other enterprise-support funds would form part of the taxable value of services supplied under the project. However, it also referred to Rule 33 of the CGST Rules, which permits exclusion of qualifying pure-agent expenditure from taxable value where the prescribed conditions are satisfied. Such exclusion would require proper documentation, separate invoicing and evidence that the applicant had no ownership or beneficial interest in the amounts disbursed.
Finally, the authority examined the applicant’s claim for exemption under Entry No. 48 of Notification No. 12/2017-Central Tax (Rate), relating to services provided by specified technology business incubators and recognised bio-incubators. The applicant submitted that recognition by the National Science and Technology Entrepreneurship Development Board (NSTEDB), Department of Science and Technology, Government of India, would entitle it to the prescribed exemption. The AAR found that no documentary evidence establishing such recognition was available on the date of the ruling. It therefore held that the applicant’s services under the CGSRLM incubation project did not presently qualify for the exemption. Nevertheless, the authority clarified that the benefit of the exemption could become available from the effective date of valid recognition, subject to compliance with the conditions of the notification. Consequently, the ruling confirmed 18% GST on the taxable consultancy and incubation services, denied the claimed government-training exemption, addressed the treatment of personnel costs and project funds, and recognised the possibility of prospective exemption upon obtaining the required technology business incubator recognition.
Cases Discussed
The ruling refers to the following judicial decision:
IC Tactoday of Kerala (ICTAK), (2025) 37 Centax 95 (AAR Kerala) — Relied upon by the Chhattisgarh AAR in examining whether services supplied to a government entity or society qualify for the exemption under Notification No. 12/2017-Central Tax (Rate).
The following verified references are useful for the statutory issues discussed:
