In re Manpar Icon Technologies (GST AAR Uttar Pradesh)
Q(i) .Whether the Project Development Service (ie. Detailed Project Report Service) and project management consultancy services (PMCS) provided by the applicant to reciepient under the contract from State Urban Development Authority (SUDA) and project management consultancy services (PMCS) under the contract of Prandhan Mantri Awas Yojna (PMAY) woould qualify as an activity in relation to function entrusted to Panchayat or Munshipality under article 243G or article 243W respectively , of the constitution of India?
Ruling on Question 1. We hold that the Services rendered by the applicant to the State Urban Development Agency, Uttar Pradesh (SUDA), and for PMAY, under contract with main contractor, are in relation to functions entrusted to Municipalities under Article 243W and to Panchayats under Article 243G of the Constitution of India.
Q(ii) .If answer to first question is in affirmative then whether such services provided by the applicant would qualify as pure services (Excluding works contract service or composite supply involving supply of any goods) as provided in serial no. 3 of Notification No. 12/2017- Central Tax (Rate) dated 28 June, 2017,, as amended (S.N. 3A) by Notification No. 2/2018-Central Tax (Rate) dated 25 January, 2018 issued under Central Goods and Service Tax Act, 2017 (CGST) and Corresponding Notification No. KA.N.I.-2-843/XI-9 (47)/17-UP-Act-1-2017-order-(10)-2017 Lucknow dated june 30 2017, issued under Uttar Pradesh Goods and Services Tax Act, 2017(UPGST Act) where the project cost includes the cost of service rendered along with reimbursement of cost of procurement of goods for rendering such service, and, thus, be eligible for exemption from levy of CGST and UPGST respectively.
Ruling on Question 2. Such services would qualify as Pure Service (excluding works contract service or other composite supplies involving supply of any goods)” and accordingly exempt from the payment of GST duly covered in Sl. No 3 of Notification No. 12/2017- Central Tax (Rate) dated 28 June, 2017, (as amended from time to time) issued under Central Goods and Services Tax Act, 2017 (CGST/Act), and corresponding notifications issued under Uttar Pradesh Goods and Services Tax Act, 2017 (UPGST Act), subject to the fulfillment of condition prescribed for Input Tax Credit under the CGST Act, 2017 and subsequent Rules, made there under.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, UTTAR PRADESH
Sub:- GST ACT, 2017 – Advance Ruling U/s 98 – liability to tax under GST Act in respect to application dated 02.06.2020 from M/s Manpar Icon Technologies, 7/23, Sector-7, Gomti Nagar Extension, Amar Saheed Path, Lucknow, Uttar Pradesh- 226 002 – Order- Reg.
**********
1) M/s Manpar Icon Technologies, 7/23, Sector-7, Gomti Nagar Extension, Amar Saheed Path, Lucknow, Uttar Pradesh- 226 002 (here in after called the applicant) is a registered assessee under GST having GSTN: 09ABGFM6137K1ZV.
2) The Applicant has informed that State Urban Development Authority (SUDA in short), Lucknow has entered into an agreement with M/s Creative Consortium, and M/s Rudrabhishek Enterprises Limited (herein after referred as main contractors) for “Preparation of Detailed Project Report” and providing “Project Management Consultancy Service” under Pradhan Mantri Awas Yojna (PMAY in short). The above two parties made an agreement and awarded, back to back, same work to the applicant.
3) Accordingly, the Applicant has submitted application for Advance Ruling dated 02.06.2020 enclosing duly filled Form ARA-01(the application form for Advance Ruling) along with certain annexure and attachments and sought Advance Ruling as follows : –
i. Whether the Project Development Service (i.e. Detailed Project Report Service) and Project Management Consultancy services (‘PMCS’) provided by the applicant to the recipient under the Contract from State Urban Development Authority (herein after referred as “SUDA”) and the Project Management Consultancy services (‘PMC’) under the Contract for PMAY would qualify as an activity in relation to function entrusted to Panchayat or Municipality under Article 243G or Article 243W respectively, of the Constitution of India?
ii. If answer to first question is in affirmative then, whether such services provided by the applicant would qualify as Pure services (excluding works contract service or composite supplies involving supply of any goods) as provided in serial number 3 of Notification No. 12/2017- Central Tax (Rate) dated 28 June, 2017, as amended (S. No. 3A) by Notification No. 2/2018- Central Tax (Rate) dated 25 January, 2018 issued under Central Goods and Services Tax Act, 2017 (‘CGST’) and corresponding Notifications No. — KA.N.I.-2-843/X1- 9 (47) / 17-UP. Act-1 – 2017 Order – (10) – 2017 Lucknow, dated June 30, 2017 issued under Uttar Pradesh Goods and Service Tax Act, 2017 (‘UPGST Act’), where the Project cost includes the cost of service rendered along with reimbursement of cost of procurement of goods for rendering such service, and, thus, be eligible for exemption from levy of CGST and UPGST, respectively.
4). The applicant further submitted that based on the Notification No. 12/2017 and 02/2018 issued under Central Tax (Rate), GST is exempt in case of DPR and PMCs. They also submitted copy of Order No. 22 dated 25.01.2019, in the case of M/S Rudhrabhishek Enterprises Ltd, Noida, Uttar Pradesh wherein full exemption was granted by the Authority for Advance Ruling Uttar Pradesh.
5). As per the declaration given by the applicant in Form ARA-01, the issue raised by the applicant is neither pending in any proceedings nor decided in any proceedings in the applicant’s case under any of the provisions of the ACT.
6). The application for advance ruling was forwarded to the Jurisdictional GST Officer (Assistant Commissioner, CGST 8s CEX, Division-I, Lucknow) to offer his comments/views/verification report on the matter. The Divisional officer, in his report has submitted that:-
a. Going through the Scope of work under preparation of DPR and scope of work under PMC, this office is of the considered view that the Project Development Services provided by the applicant to its recipient qualifies as an activity in relation to function entrusted to Panchayat or Municipality.
b. As regard to the second question the answer to the question is yes if it is ascertained that the cost of Composite Supply of Goods and Services in which the value of supply of goods constitutes not more than 25 percent of the value of the said composite supply provided to any Government.
c. As per records available no proceeding in the applicant’s case on the question raised in the application under any provisions of the CGST Act, is pending for decision.
7). The applicant was granted a personal hearing in the matter. In compliance, Sh. Narendra Kumar, Chartered Accountant, Authorized representative, appeared on 26.06.2020 for hearing on behalf of the applicant. During the personal hearing he reiterated the submissions already made vide application dated 2nd June 2020, submitted a write submission that:-
i. SUDA Lucknow has entered into an agreement with the main contractors for “Preparation of Detailed Project Report” and providing “Project Management Consultancy Service” under PMAY in various districts of Uttar Pradesh.
ii. The main contractors made an agreement and awarded, back to back, same work to the applicant.
iii. The applicant is not involved in any other activities other than aforesaid agreement for preparation of DPR and providing Project Management Consultancy (PMC) Service.
Further, vide letter dated 07.07.2020, he filed another written submission wherein it was submitted that in terms of Circular no. 138/07/2011-Service Tax, it is clarified that the services provided by the sub-contractor/consultants and other service providers are classifiable as per Section 65 A of the Finance Act, 1994 under respective sub clause (105) of Section 65 of the Finance Act and chargeable to Service Tax accordingly. If the same concept of classification going to apply in GST regime then service provided by sub-contractor regarding DPR and PMS to main contractor shall be exempted because same activities of main contractor to SUDA is exempted under GST regime. The applicant also relied upon the order issued by the Rajasthan Authority for Advance Ruling in the case of Sevak Ram Sahu (M/s SRS Enterprises) in support of his application.
DISCUSSION AND FINDING
8). At the outset, we would like to make it clear that the provisions of both the CGST Act and the UPGST 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 UPGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / UPGST Act would be mentioned as being under the `CGST Act’.
9). We have gone through the submissions made by the applicant and have examined the explanation submitted by them. At the outset, we find that the issue raised in the application is squarely covered under Section 97(2)(b) of the CGST Act 2017 being a matter related to applicability of a notification issued under the provisions of this Act. We therefore, admit the application for consideration on merits.
10). We have gone through the submissions made by the applicant and examined the detailed explanation submitted by them. We observe that the questions before us to decide is whether:-
i. the Project Development Service and Project Management Consultancy services (‘PMCS’) provided by the main contractors to `SUDA’ and the Project Management Consultancy Services for `PMAY’ would qualify as an activity in relation to functions entrusted to Panchayat or Municipality under Article 243G or Article 243W respectively, of the Constitution of India, and if so, whether such services provided by the main contractors would qualify as Pure services accordingly exempt from the payment of GST duly covered in Sl. No 3 of Notification No. 12/2017-Central Tax (Rate), dated 28th June, 2017 (as amended from time to time).
ii. Whether the said service provided by the sub-contractor to the main contractor would also be exempt from payment of GST in terms of Notification No. 12/2017-Central Tax (Rate).
11). Now coming to the first question i.e. whether the Project Development Service (i.e. Detailed Project Report Service) and Project Management Consultancy services (‘PMCS’) provided under the Contract for SUDA and the Project Management Consultancy services (‘PMC’) under the contract for PMAY would qualify as an activity in relation to function entrusted to Panchayat or Municipality under Article 243G or Article 243W respectively, of the Constitution of India or not. To proceed further, we need to examine the purpose and scope of work for which the main contractors have gone into contract with SUDA and PMAY.
12). SUDA has been established as a state level nodal agency, under the department for Urban Employment and Poverty Alleviation by Uttar Pradesh Government. This agency is registered under the ‘Registration of Societies Act’ since 20th November’ 1990. As per the “Memorandum of Association of State Urban Development Agency”, it’s main objectives shall be-
(a) To identify the urban poor in the state.
(b) To draw up plans and formulate schemes for the upliftment of the urban poor in the state.
(c) To implement schemes for the benefit of the urban poor either directly or through other agencies engaged in this direction, whether private, public or cooperative.
(d) To review the progress of the execution of these activities as well as effectiveness of the benefits directed towards the urban poor.
(e) To set up or establish any specific service such as training facilities, infrastructural etc. in furtherance of the economic interest of the urban poor.
13). Further, as per website of Pradhan Mantri Awas Yojana-Housing for All (Urban), Ministry of Housing and Urban Affairs, the PMAY is a Scheme to provide central assistance to Urban Local Bodies (ULBs) and other implementing agencies through States/UTs for Rehabilitation of existing slum dwellers using their land as a resource through private, participation, and affordable Housing in Partnership. Furthermore, the matters listed in the 11th and 12th schedule to the constitution (details 243G and 243W, respectively), as functions pertaining to Panchayats/Municipality, are inter alia: (a) Safe water for drinking, (b) Maintenance of community assets, (c) Family welfare, (d) Markets and Fairs, (e) Poverty Alleviation Programmes, (f) Regulation of land use and construction of land buildings, (g) Urban planning including the town planning, (h) Planning for economic and social development, (i) Urban poverty alleviation, (j) Slum improvement and up-gradation.
14). Now, we come to examine the scope of work under different contracts, as provided by the applicant—
A. Scope of work under Preparation of DPR:-
