In re Steel Industrials Kerala Ltd. (GST AAR Kerala)
The Authority for Advance Ruling, Kerala examined the applicability of GST on “centage charges” collected for Project Management Consultancy (PMC) or consultancy services provided by a public sector undertaking to Government departments and local authorities, and the eligibility to claim refund of GST already paid from 2017-18 onwards. The applicant is a Government of Kerala undertaking engaged, among other activities, in providing PMC services such as supervision, coordination, and administrative management of civil, electrical, and infrastructure projects for State Government departments, District Panchayats, and Grama Panchayats. For these PMC services, the applicant collected centage charges as a percentage-based consultancy or administrative fee.
During an audit by the Comptroller and Auditor General, it was observed that GST had been charged on such centage charges, which was considered an avoidable expenditure on the ground that the services were “pure services.” Following audit observations, Government departments and local bodies informed the applicant that GST would not be paid on future centage charges and sought recovery or refund of GST already remitted.
The applicant contended that the PMC services were rendered to Government departments and local authorities in relation to functions entrusted to Panchayats and Municipalities under Articles 243G and 243W of the Constitution. It was submitted that the services involved only consultancy and project management without supply of goods or execution of works contracts, and therefore constituted pure services. The applicant argued that such services are exempt under Entry 3 of Notification No. 12/2017-Central Tax (Rate), which exempts pure services provided to the Central Government, State Government, Union Territory, or local authority in relation to functions entrusted under Articles 243G or 243W. On this basis, the applicant claimed that GST paid earlier was not legally payable and sought refund without being restricted by the two-year limitation under Section 54 of the CGST Act.
