Devendra K Patel {AUTHORITY FOR ADVANCE RULINGS, GUJARAT}

Devendra K Patel {AUTHORITY FOR ADVANCE RULINGS, GUJARAT} :

Date of Order : 30-05-2024

In this case decided by the Authority for Advance Rulings (AAR) in Gujarat, the issue revolved around whether consultancy services provided to the State Government’s Roads and Buildings Department qualify for exemption from GST under the category of “pure service” related to functions under Articles 243G or 243W of the Constitution.

Background: The applicant, Devendra K Patel, sought an advance ruling to determine if their consultancy services—specifically preparing plans, estimates, and tender documents for building works provided to the State Government—qualify for exemption from GST. They claimed that these services should be exempted as they relate to functions entrusted to Panchayats or Municipalities under the Constitution.

Ruling and Interpretation: The AAR, after considering the provisions of Notification No. 12/2017-CT(R) dated 28-6-2017 and constitutional provisions related to Panchayats and Municipalities (Articles 243G and 243W), concluded as follows:

1. No Blanket Exemption: The AAR ruled that merely providing consultancy services to the State Government’s Roads and Buildings Department does not automatically qualify as an activity related to functions entrusted to Panchayats or Municipalities. Therefore, a blanket exemption from GST under the aforementioned notification was not applicable.
2. Case-by-Case Basis: The exemption from GST could only be considered if the applicant demonstrates that the building constructed with the help of their consultancy services is directly related to specific functions of a Panchayat or Municipality. This determination needs to be made on a case-to-case basis.
3. Decision Outcome: Consequently, the AAR ruled that the consultancy services provided by the applicant to the State Government’s Roads and Buildings Department for preparing plans, estimates, and tender documents do not qualify for GST exemption under the provisions cited. They emphasized that the exemption under GST law is contingent upon a direct connection with functions entrusted to Panchayats or Municipalities as defined in the Constitution.

Conclusion: This ruling clarifies that while GST exemptions exist for services related to Panchayats or Municipalities, they are not broadly applicable to all consultancy services provided to State Government departments. Each case must be evaluated to determine if the services directly pertain to functions under Articles 243G or 243W of the Constitution to qualify for GST exemption.