In re Consulting Engineers Groups (GST AAAR Rajasthan)
It was held that holding of equity control of RUDSICO by JDA and Rajasthan Housing Board cannot be treated as holding of equity control by Government; therefore, RUDSOCO is not Government Authority. Appellant is not eligible for exemption under entry No. 3 of notification no. 12/2017 Central Tax (Rate) dated 28.06.2017 for supply provided as Project Management Service.
Read AAR Order:- Consulting Engineers Group Limited (GST AAR Rajasthan)
FULL TEXT OF THE ORDER OF APPELLATE AUTHORITY FOR ADVANCE RULING, RAJASTHAN
At the outset, we would like to make it clear that the provisions of both the Central GST Act, 2017 and the Rajasthan GST Act, 2017 are same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central GST Act, 2017 would also mean a reference to the same provisions under Rajasthan GST Act, 2017.
2. The present appeal has been filed under Section 100 of the Central GST Act, 2017 (hereinafter also referred to as ‘the CGST Act’) read with Section 100 of the Rajasthan GST Act, 2017(hereinafter also referred to as ‘the RGST Act’) by M/s Consulting Engineers Groups, B-llG,7th Floor, CEG Tower, Malviya Industrial Area, Jaipur (hereinafter also referred to as ‘the appellant’) against the Advance Ruling No.RAJ/AAR/2021-22/11 dated 06.09.2021
3. Appellant 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-11(G), Industrial Area, Malviya Nagar, Jaipur-302017 vide GSTIN 08AAACC7519B1Z0, having its Principal place of Business at 7th Floor, B-11(G), Industrial Area, Malviya Nagar, Jaipur-302017. A contract under Rajasthan Secondary Towns Development Sector Project (RSTDSP), (herein after called “project”) has been awarded by Rajasthan Urban Drinking Water Sewerage & Infrastructure Corporation Limited (hereinafter referred to as RUDSICO) to 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., Haskoning DHV Nederland B.V. and Consulting Engineers group Ltd. Rajasthan Secondary Towns Development Sector Project (RSTDSP) 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. This will support the municipalities O&M responsibility and improve the quality of 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. The Applicant has agreed to provide Project Management Consultancy Services to RUDSICO for Rajasthan Secondary Towns 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. Haskoning DHV is the Lead Member in the Joint Venture and is authorized with the responsibility of all the Financial Administration work of the contract. Thus, the Applicant raise Invoice for its Project Management Consultancy Services to the Lead Member Haskoning DHV, who further raise Invoice for consolidated amount to RUDSICO. The payment when received by the Lead member, is further disbursed to the appellant and other members of the Joint Venture. The appellant 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 Entry no. 3 of Notification No. 12/2017 Central Tax (Rate) dated 28/06/2017.
4. Appellant has filed an application before the Rajasthan Authority of Advance Ruling to determine the eligibility of 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 Entry No. 3 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 appellant to the Lead Member and not to the Service receiver i.e. RUDSICO.
Question on which the Advance Ruling was sought, is as under:-
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 Lead Member, who further raise invoice to RUDSICO of consolidated 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.
5. Authority for Advance Ruling, Rajasthan issued Advance Ruling holding that:-
a) Ongoing through the Contract Agreement submitted by the Applicant with regard to the Services provided to the RUDSICO, it is seen that the services provided are of only Consultancy services. The Applicant has also declared that PMC services provided by them have no component of supply of goods. Since there is no involvement of supply of goods in the services, the services would be termed as ‘Pure Services’.
b) In view of the objective of the Project mentioned in the Contract, we conclude that the supply of Consultancy Services by the Applicant are in relation to function of Town Planning and Water Supply, hence, it is in relation to function entrusted to a Municipality under Article 243W of the Constitution.
c) The third condition, whether recipient of Service, i.e., RUDSICO qualifies as ‘Governmental Authority’. In the instant case, as per the master data, the total authorized capital is Rs. 50 crore and the paid up capital is Rs. 48.67 crore. The paid up capital ofonly Rs. 41 crore is held by the Government of Rajasthan through H.E. Governor of Rajasthan, which is less than 90%, as per the definition given under Notification no. 11/2017-Central Tax (rate) and Notification no. 12/2017- Central Tax (rate) dated 28.06.2017, hence, the recipient of the service is not a Governmental Authority.
Therefore, they are not eligible for exemption under Notification No. 12/2017 Central Tax (Rate) dated 28/06/2017
6. Aggrieved by the Ruling, the Appellant has preferred the present appeal before this forum on following ground.
6.1 In RUDSICO, more than 90% shareholding or equity Control is held by the Government of Rajasthan.
6.1.1 The definition of “Governmental Authority” as per the definitions given under Notification no. 11/2017-Central tax (rate) and Notification No. 12/2017 Central Tax (Rate) dated 28/06/2017:-
“Governmental Authority” means an authority or a board or any other body, –
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government,
with 90 per cent, or more participation by way of equity or control, to carry out any function entrusted to a Municipality under Article 243W of the Constitution or to a Panchayat under Article 243G of the Constitution.
6.1.2 Appellant submitted that the Government of Rajasthan holds more than 90% of the Equity Control in RUDSICO, through:
