UP AAR: GST Exemption Eligible for DPR & PMCS Services Under SUDA

In a recent ruling, the Lucknow Authority for Advance Ruling (AAR) has announced that the Detailed Project Report Service (DPR) and Project Management Consultancy services (PMCS) offered within the contracts of the State Urban Development Agency (SUDA) under Article 243G and 243W of the Indian Constitution, which are considered pure services, are exempted from Goods and Service Tax (GST).

In the context of the Pradhan Mantri Awas Yojana – Urban (PMAY-U), a prominent initiative of the Government of India, Rudrabhishek Enterprises Limited, the applicant, was selected as an agency for the “Preparation of Detailed Project Report” and offering “Project Management Consultancy Service.” Subsequently, an agreement was made between SUDA and the applicant.

Seeking clarity on whether the Project Development Service (Detailed Project Report Service and Project Management Consultancy services) offered by the applicant to the recipient under the Contract from SUDA for PMAY-U was exempt from GST or not, the applicant approached the AAR and sought an advance ruling.

During the proceedings, Pankaj Kumar Shukla, representing the applicant, argued that services provided by a subcontractor to the main contractor concerning DPR and PMCS would also be eligible for GST exemption. Further Shukla added that such services remained exempt as long as they were provided to SUDA under PMAY, irrespective of whether they were provided by the main contractor or a subcontractor.

The authority of Rajendra Kumar (Member (Central Tax)) and Harilal Prajapati (Member (State Tax)) observed that Notification No. 12/2017-CT (Rate) dated 28.06.2017, Clause 3, exempted certain services. These services are pure services provided to the Central Government, State Government, Union territory, local authority, or a Governmental authority.

The exemption applies to any activity related to the functions entrusted to a Panchayat under Article 243G of the Constitution or to a Municipality under Article 243W of the Constitution, as amended by notification no. 16/2021-central tax (rate) effective from 1.1.2022. This exemption does not include works contract services or other composite supplies that involve the supply of goods.

To qualify for the exemption mentioned above, the particular services needed to be provided to the Central Government, State Government, Union territory, local authority, or a Governmental authority. The notification did not impose a condition that these services must be provided directly to the aforementioned entities.

Considering the said observations, the GST AAR ruled that the applicant was liable for exemption if the particular services were provided to SUDA under a sub-contract with the main contractor.