In re Consulting Engineers Group Limited (GST AAR Rajasthan)
Q. Whether the ‘Project Management Consultancy’ services provided to Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation (RUDSICO) under Rajasthan Secondary Towns Development Sector Project, where Invoice is raised by the Applicant to the Leading Member, who further raise invoice to RUDSICO of complete amount, can be termed as ‘Pure Services’ as referred in SI. 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 and State Goods & Service
Answer: No.
Read AAAR Order:- Consulting Engineers Groups (GST AAAR Rajasthan)
FULL TEXT OF THE ORDER OF AUTHORITY OF ADVANCE RULING, RAJASTHAN
Note: Under Section 100 of the CGST/RGST Act, 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/RGST Act, 2017, within a period of 30 days from the date of service of this order.
At the outset, we would like to make it clear that the provisions of both the CGST Act and the RGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the RGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act RGST Act would be mentioned as being under the “GST Act”.
The issue raised by M/s CONSULTING ENGINEERS GROUP LIMITED. B-11 G. 7th Floor. CEG Tower, Malviya Industrial Area. Jaipur, Rajasthan. 302017. (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (b) & (e) given as under:-
(b) applicability of a notification issued under the provisions of the Act.
(e) determination of the liability to pay tax on any goods or services or both.
Further, the applicant being a registered person (GSTIN is 08AAACC7519BIZ0 as per the declaration given by him in Form ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the applicant is admitted to pronounce advance ruling.
A. SUBMISSION AND INTERPRETATION OF THE APPLICANT:
Questions on which Advance Ruling is required
1. Whether the ‘Project Management Consultancy’ services provided to Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation (RUDSICO) under Rajasthan Secondary Towns Development Sector Project, where Invoice is raised by the Applicant to the Leading Member, who further raise invoice to RUDSICO of complete amount, can be termed as ‘Pure Services’ as referred in SI. 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 and State Goods & Service Tax.
At the outset, we would like to make it clear that the provisions of both Central Goods & Service Tax Act, 2017 and Rajasthan Goods & Service Tax Act, 2017 (referred to as CGST Act & RGST Act) are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the corresponding similar provisions under RGST Act.
Exhibit- II
Relevant facts of the case having a bearing on the question raised
1. Consulting Engineers Group Limited (hereinafter referred to as ‘CEG’ or the ‘Applicant ‘) is a Company registered under the Companies Act, 1956 and registered with Registrar of Companies as “Consulting Engineering Group Limited” vide CIN: U74140RJ1991PLC006329 with its Registered Office at 7th Floor, B-ll(G), Industrial Area, Malviya Nagai-, Jaipur- 302017 vide GSTIN 08AAACC7519B1Z0, having its Principle place of Business at 7th Floor, B-ll(G), Industrial Area, Malviya Nagar. Jaipur- 302017.
2. Rajasthan Urban Drinking Water Sewerage & Infrastructure Corporation Limited (hereinafter referred to as RUDSICO) is a Government Company registered under Companies Act, 1956, incorporated in Dec., 2004. RUDSICO, a Govt, of Rajasthan undertaking, is the State Level Nodal Agency (SLNA) for Govt, of India financed projects like AMRUT, smart city, UIDSSMT. UIG, Eleven City Sewerage and the state Govt, financed projects like ROB-RUB, Seven Cities Sewerage and Affordable Housing. Earlier it was known by the name of Rajasthan Urban Infrastructure Finance and Development Corporation Limited (RUIFDCO) but after 19th November 2015 its name got changed to RUDSICO.
3. RUDSICO. being a Government Undertaking and headed by the Honorable Minister UDH & LSG (Government of Rajasthan) is mainly responsible:-
> To give financial assistance to ULBs/Government Agencies/Non Government organization.
> To give subsidy, aid. assistance of any financial nature to ULBs/Govt. Agencies/Non Govt. Agencies.
> To arrange or provide consultancy services, technical, financial and other consultancy to Urban Local Bodies (hereinafter referred to as ULBs).
> To carry out survey for schemes and programme relating to Infrastructure Development.
> To receive amount as revenue from ULBs.
> To distribute on behalf of Govt, grant-in-aid and financial assistance to ULBs.
> lo arrange or raise funds from public, institutional investor. Banks or Financial Institutions.
> To plan and financial monitor all type of project related to development of Urban Areas in Rajasthan.
> To set up a Central Urban Data Center for collecting and updating of all information relating to urban development and urban Infrastructure for the urban areas of the state.
> To act as nodal agency for implementation of affordable housing policy/scheme 2009 and as amended from time to time by the Government of Rajasthan.
> To Plan, design, develop, construct, maintain, and manage the finance and to make or arrange all the works/Jobs/Services including incidental and ancillary for infrastructure development, housing, public utility services and all other works related to the construction.
4. A contract under Rajasthan Secondary Towns Development Sector Project (RSTDSP). (herein after called “project”) has been awarded by RUDSICO – EAP( Eristwhile RUDIP) herein after client and on the other hand a Joint venture consisting of the following entities, each member of which will be jointly and severally liable to the client (i.e. RUDSICO) for all the consultant’s obligation under this contract namely Haskoning DHV consulting PVT ltd in joint venture with Haskoning DHV Nederland B. V. and consulting Engineers group Ltd.
5. Rajasthan Secondary Towns Development Sector Project (RSTDSP), (herein after called “project”), with an estimated cost of $700 million (ADB financing of $500million). ADB financing will support the on-going efforts of Government of Rajasthan (GOR) towards improving the water and wastewater services in 42 secondary towns, each with population in the range of 50,000 to 1.10,000 with some exceptions for district headquarters (2) and heritage towns (10) which are smaller.
The project will invest in the rehabilitation and expansion of water supply network for reduction of non-revenue water under (NRW).24×7 water supply, rehabilitation and expansion of sewerage network, modernization and new construction of water supply and wastewater treatment plants and wastewater pumping stations, faecal sludge management and decentralized wastewater management systems in the projected towns.
The project will include O&M embedded construction contracts combining design, construction and O&M for water supply and wastewater contracts for a period of 10 years. 1 his will support the municipalities O&M responsibility and improve the quality oi service delivery by providing continuity in system operation as well as O&M. Special contract conditions for monitoring NRW reduction will be developed and incorporated in the bidding documents to provide incentives for NRW reduction.
6. The Applicant has agreed to provide Project Management Consultancy Services to RUDSICO for Rajasthan Secondary downs Development Sector Project in Joint Venture with Haskoning DHV Consulting Pvt. Ltd. And Haskoning DHV Nederland B.V.
The objective of the Contract Management & Supervision Consultants (CMSC) i.e. the Applicant is to provide assistance to the Project Implementation Unit (PIU) for day to day contract management and construction supervision of the project towns of the respective package. The Applicant shall be responsible for effectively leading and taking initiative to manage, execute and implement the project by effective contract management and construction supervision.
7. As stated in the Joint Venture Contract Agreement, the Relationship between the Parties clause 2.1 to the Contract Agreement states the Relationship between the Joint Venture Members as under:
“Nothing contained herein shall be construed as establishing a relationship of master and servant or of principal and agent as between the Client and the Consultant. The Consultant, subject to this Contract has complete charge of the Experts and Sub-Consultants, if any performing the services and shall be fully responsible for the Services performed by them or on their behalf hereunder. “
8. As per the Joint Venture Contract Agreement, the taxes and duties on any goods or services shall be paid as per the following clause 43.1 and 43.2:
“Taxes and Duties
The Client shall either pay or reimburse any indirect taxes, duties, fees, levies and other impositions imposed, under the applicable law in the Client’s country (as on date project Services are GST exempted), on the Consultancy contract in respect of:-
(a) Any payment whatsoever made to the Consultant in connection with the carrying out of the services.
(b) Any equipment, materials and supplies brought into the Client’s country by the Consultant or Sub-Consultants for the purpose of carrying out the Services and which, after having been brought into such territories will be withdrawn by them.
(c) Any equipment imported for the purpose of carrying out the Services and paid for out of funds provided by Client and which is treated as property of the Client and
(d) Any property brought into the Client’s country by the Consultant, any Sub-Consultants or the Experts (other than national or permanent residents of the Client’s country), or the eligible dependents of such experts far their personal use and which will subsequently be withdrawn by them upon their respective departure from the Client’s country, provided that:-
> If the Consultant, Sub-Consultants and experts shall fallow the usual custom procedures of the Client’s country in importing property into the Client’s country and
> If the Consultant, Sub-consultants or Experts do not withdraw but dispose of any property in the Client’s country upon which Custom duties and taxes have been Exempted, the Consultant, Sub-consultants or Experts, as the case may be. (a) shall bear such custom duties and taxes in conformity with the regulations of the Client’s country, or (b) shall reimburse them to the client if they were paid by the Client at the time the property in question was brought into the Client’s country. “
9. RUDISCO has requested the Applicant to provide certain Consulting services as defined in the Contract as under:
Detailed scope of services, Tasks (Components)
Without limiting the scope, the CMSC has to work in close liaison with the PIU and will be responsible for the following tasks:
Contract Management:–
i. Assisting the PIU’s in the overall administration of the Contract and resolution of various Contractual issues
ii. Preparing, execution and Monitoring of Construction plan and Preparation of monthly progress reports in agreed formats of each sub-project in suitable project monitoring software, including physical and Financial progress, hindrances, reports on variations, time -extensions, problems and issues etc.
iii. Assist in preparing an overall Program Performance Monitoring System (PPMS) for the program and ensure that the Necessary independent inputs are in place when and where required
iv. Regularly monitoring physical and financial progress against the milestones as per the contract so as to ensure completion on time.
v. Monitoring and enforcing as detailed our in the contract QA & QC manuals, the quality or inputs and processes and outputs during all activities of construction to ensure the highest quality of works confirming to the specifications A drawings.
vi. Scrutinize the Contractor’s detailed work program and guide the Contractor in preparation of work plan for each contract package
vii. Examining the Contractor’s claims, variations. additional compensations etc. and recommending appropriate actions decisions.
viii. Providing advice and guidance to the PIU on ADB’s procedures and guidelines for project implementation and management in general.
Provide inputs towards enabling the advance preparations od subprojects and assist PMU and PIUs in identifying and preparing subprojects as per the subproject selection criteria and assist PMU in (a) appraising subprojects, (b) preparing subproject appraisals reports and (e) forming bid packages.
Construction Supervision:
i) Undertaking necessary surveys investigations as necessary in consultation with PMCBC/PMU (such as CBR, SBC, soil reaction, sulphates, structural investigation etc). Costs of these shall be met from the provisional sum under this contract based on actual costs.
ii) Prepare Construction supervision manual, maintenance manual etc. and submit to PMU/PIU for approval and subsequent adoption updation during the implementation period.
iii) Interpretation of the technical specifications for each contract package
iv) Supervise and monitor construction work of each contract package
v) Verification of survey and design drawings vis-a-vis ground situation and make necessary corrections if required with approval of PMU/PIU
vi) Issue Good for Construction drawings including all revisions and detailed drawings required during execution of the contract
vii) Assist PMU & PIU in operationing the PPMS and in monitoring the physical progress of each subproject to ensure the effective and timely delivery of the program outputs.
viii) Ensure safely of the works including project personnel and general public and avoid disruptions
ix) Establish quality assurance system including verification of source of material and certification
x) Carry out necessary quality control activities and certify that the quality of works confirms to the specifications and drawings
xi) Assist third party Inspections if necessary as decided by client
xii) Review A- finalise the “as built ” drawings submitted by Contractor
xiii) Inspect the work at appropriate intervals during defective liability period
xiv) Assist the PIU in other tasks as assigned hr the EAAA
Socials. Gender, Environmental. Archaeological. Occupational Health and Safety-Issues:
Collection of relevant inputs required for preparation of IEE and Rp documents from PMU/PIU and other sources,-
i) .Collection of raw data and compiled reports from CAPP regarding socio economic survey census survey required for RP preparation and all other relevant surveys conducted by CAPP
ii) Preparation of safeguard documents and updating them incorporation observations from PMCB in consultation with PH.
iii) Support PMU & PIU in implementation and monitoring and reporting of GESI activities
iv) Implementation of GESI action plan activities regular monitoring and reporting of GESI updates along with Projects QPRs
v) Prepare review and update the Initial Environmental Examination (IEE) in consultation with PMCB and PMU
vi) Identify any further resettlement requirements and costs that may be required and provide all information required in relation to right-of-way access as well as the relocation of existing utilities
vii) Monitoring and Validation of baseline surveys environmental management plans and programs, initial environmental impact examinations (IEE) Social Safeguard compliances as may be required
viii) Review and supervision of Implementation of ADB compliant resettlement plans if any based on the approved resettlement framework
ix) Support in establishing grievance redress mechanism acceptable to ADB norms under the project
x) Obtain all necessary permissions and complying with statutory requirements as required for all construction stages such as permissions form Railways. National Highways. Department of Archaeology. Department of Forests and National Parks
xi) Monitor the Implementation of EMP during construction and pre/post construction phases
xii) In compliance with the EMP. develop a strategy to overcome the difficulties of construction/traffic management in narrow streets and also prepare detailed plans for detour of traffic during excavation form pipe laying. Purpose for coordination among all stakeholders such as traffic police, rods department, user committees etc for smooth construction execution
xiii) Lead designs for surveys and investigations required for the protection of archaeological sites heritage areas and prepare Archaeological Impact Assessment or other agreed upon document to be approved by the department of Archaeology for the Archaeologically sensitive areas
xiv) Ensure that nil bidding documents contain specific measures for working and excavating in Archaeologically sensitive areas
xv) As part of the EMP, prepare a project focused Occupational Health and Safety plan (OHS) to be adopted by PIU on project work sites
xvi) As part of the EMP, prepare a project focused Community Occupational Health and Safety plan (OHS) to be adopted by PIU on project work sites
xvii) Provide awareness training on OHS, environmental impacts and mitigation measures to PIU and Contractors including Contractor’s workers
10. As per Schedule 3 to the Joint Venture Agreement, which lays down the financial Administration of the Contract, stales that:
Schedule A: FINANCIAL ADMINISTRATION
The leading member under the guidance of Steering Committee shall he responsible for the Financial Administration of the Joint Venture in accordance with the Financial Management Policy. The leading Member charges the other Members with a zero % management on all staff inputs supplied.
The Financial Administration of the Joint Venture shall include:
a) receipt and verification of invoices from the creditors (hut not of subcontractors engaged by the other Member individually as opposed to subcontractors engaged by the all members of Joint Venture) and arranging payments Io them.
b) The management and allocation of any shared costs, for clarity any other costs related directly Io the employment of experts and their relocation to the project office shall he responsibility of each member (such as but not limited to accommodation, per-diem, flights/trains/transportation) in accordance to the reimbursable cost budget
c) Preparation and submission of ail invoices to the Client, which will be submitted in the name of the Joint Venture and
d) Receipt and verification of Invoices from the other members for their entitlement under this Agreement and making timely payments of such sums to them.
11. Thus, the Applicant raise Invoice for its Project Management Consultancy Services to the Leading Member DHV, who further raise Invoice for complete amount to RUDSICO. The payment when received by the Lead member, is further disbursed to the Applicant and other members of the Joint Venture.
12. The Applicant further states that its client, RUDSICO is of the view that the Project Management Consultancy services provided by them are exempt from CGST and Rajasthan GST as per of Notification No. 12/2017 Central fax (Rate) dated 28/06/2017.
13. Given the above background, the present application is being preferred before the Hon’ble Authority of Advance Ruling to determine whether the Project Management Consultancy services provided to Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation for Rajasthan Secondary Towns Development Sector Project can be termed as ‘Pure Services’ as referred in SI. 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 and Rajasthan Goods and Service Tax, irrespective of the invoice being raised by the Applicant to the Leading Member and not to the Service receiver i.e. RUDSICO.
Exhibit- III
I. Whether the ‘Project Management Consultancy’ services provided to Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation (RUDSICO) under Rajasthan Secondary Towns Development Sector Project, where Invoice is raised by the Applicant to the Leading Member, who further raise invoice to RUDSICO of complete amount, can be termed as ‘Pure Services’ as referred in SI. 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 and State Goods & Service Tax.
The relevant portion of the Notification No. 12/2017 -Central Tax (Rate) dated 28/06/2017 has been reproduced 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 intra-State supply of services of description as specified in column (3) of the Table below from so much of the central tax leviable thereon under sub-section (1) 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:-
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