RUDSICO NOT A GOVERMENTAL AUTHORITY; PMC SERVICES NOT ELIGIBLE FOR GST EXEMPTION UNDER NOTIFICATION 12/2017
RAJASTHAN APPELLATE AUTHORITY FOR ADVANCE RULING
GOODS AND SERVICES TAX
Before the Bench of
1. Satish Kumar Agrawal, Member (Central Tax)
2. Ravi Jain, Member (State Tax )
Case Title :-M/S Consulting Engineers Groups (GST AAAR RAJASTHAN)
Appeal No. RAJ/AAAR/APP/03/2021-22Advance Ruling No. RAJ/AAR 2021-22/11 dated 06.09.20Date of Judgement Order- 13th December 2021 |
BRIEF OF FACT
The appellant, engaged in providing Project Management Consultancy (PMC) services for the Rajasthan Secondary Towns Development Sector Project, approached the AAAR to clarify the applicability of GST on their services. The main issue was whether their PMC services, rendered to Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation (RUDSICO) through a Joint Venture lead member, qualified as ‘Pure Services’ and whether RUDSICO qualified as a ‘Governmental Authority’ under Notification No. 12/2017-Central Tax (Rate) for exemption purposes. The AAAR upheld the AAR’s ruling, confirming that the PMC services are indeed ‘Pure Services’ involving only consultancy without any supply of goods. However, it was also held that RUDSICO does not meet the definition of a ‘Governmental Authority’ since it is not owned or controlled 90% or more by the government. Consequently, the services, despite being pure consultancy related to municipal functions under Article 243W of the Constitution, do not qualify for GST exemption under the said notification.
GROUNDS OF APPEAL
Para No. 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-Centra/ tax (rate) and Notification no. 12/2017- Central tax (rate) dated 28th June 2017:
“Governmental Authority” means an authority or a board or any other body, –
- set up by an Act of Parliament or a State Legislature; or
- 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
6.1.3. Appellant further submitted that Rajasthan Housing Board (RHB) and Jaipur Development Authority are also Government entities having more than 90% holding of Government of Rajasthan, as under:
Rajasthan Housing Board (RHB)
The Rajasthan Housing Board was established on 24th Feb, 1970 by promulgation of an RHB Act No. 4, of 1970 (received the assent ofThe Governor on the 18th day of April, 1970) by the Government of Rajasthan as an autonomous body to provide for measures to be taken to deal with & satisfy the need of Housing accommodation inState of Rajasthan. The Board consist of a chairman, appointed by The State Government and of six non official members, nominated by The Government and official Members-Principa/ Secretary to Government (UDH), Secretary to Government (Finance), Chief Town Planner, Rajasthan and the Housing Commissioner of the Board.
Jaipur Development Authority (JDA)
Jaipur Development Authority is a body constituted under Jaipur Development Authority Act 1982 (Act. 25) as a statutory vehicle to implement the urban development of Jaipur as envisaged by the Department of Urban Development and Housing, Government of Rajasthan. JDA is charged and empowered to create basic infrastructure to meet the needs of the ever-increasing population and also for the required expansion of the city ensuring sustainable and orderly growth supported with effective monitoring and regulation through innovative and citizen participatory approach.
Hence, both the entities are created by an Act of Parliament/ State Legislature by the Government of Rajasthan and qualify to be a Government Authority as per the Definition.
6.2. RUDSICO is entrusted with the developmental projects of the state of Rajasthan
6.2.1 RUDSICO is a Govt. of Rajasthan undertaking, is the State Level Noda/ Agency (SLNA) for Govt. of India financed projects likeAMRUT, smart city, UIDSSMT, UIG, Eleven City Sewerage and the stateGovt. financed projects like ROB-RUB, Seven Cities Sewerage andAffordable 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.
6.2.2 RUDSICO, being a Government authority and headed by the Honurab/e Minister IJDH & 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.
- To arrange or raise funds from public, institutional investor, Banks or Financial Institutions.
- To plan and financial monitor al/ type of project related to development of Urban Areas in Rajasthan.
- To set up a Central Urban Data Center for collecting and updating of al/ 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 al/ the works/Jobs/Services including incidental and ancillary for infrastructure development, housing, public utility services and a// other works related to the construction.
6.2.3 Appellant submitted that RUDSICO is a State Level Nodal Agency, entrusted with the development objectives of the state of Rajasthan and is held by the Government of Rajasthan.
- Al/ the Official Authorized Documents as well as its official website, mentions RUDSICO as ‘a Government of Rajasthan Undertaking’.
- The introductory para on the official website of RUDSICO reads as under:
Rajasthan Urban Drinking Water Sewerage and Infrastructure Corporation Limited (erstwhile Rajasthan Urban Infrastructure Finance and Development Corporation Limited) is a Government Company registered under The Companies Act, 1956 incorporated in Dec. 2004 and got its name changed from RUIFDCO to RUDSICO on 19th November, 2015.
In compliance of Cabinet order 160/2014 dated 12th Dec. 2014 Rajasthan Avas Vikas Infrastructure Limited (RAVIL) was merged into RUDSICO vide MCA order dated 29th January, 2016 and accordingly notification no. F. 3(K)/Esta./PD/DLB/14/4169 dated 12th April, 2016 has been issued in this regard. Rajasthan Urban Infrastructure Development Project (RUIDP) was merged into RUDSICO vide Administrative order no.dated 13/04/2016.
- The official records of the company such as Director’s Report, List of Stakeholders published on the Ministry of Corporate Affairs (MCA) Portal mentions it as ‘A Government of Rajasthan Undertaking’. TheAnnual Return Forms (MGT-7) submitted by the Undertaking on the Ministry of Corporate Affairs (MCA) portal also states it as a ‘State Government Company’. A copy of the same has been attached for your reference in Annexure- 2.
- RUDSICO is a State Government Company where more than 90 percent of the equity or control to carry out any function is owned by the Government of Rajasthan. It functions directly under the Minister of UDH & LSG, Government of Rajasthan as its Chairman.
Appellant further submitted that they shall be eligible for exemption underEntry 3 of the notification no. 12/2017- Central Tax (Rate) dated 28.06.2017, as al/ the three conditions of the entry has been fulfilled, i.e.
- The Project Management & Consultancy service provided by the Applicant is a Pure Service’, as ruled in the Advance Ruling Order. The objective of the Project mentioned in the Contract 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, as ruled in the Advance Ruling.
- As per the Grounds of Appeal submitted above, the Recipient of service, i.e. RUDSICO, having more than 90% Equity Control of Government of Rajasthan qualifies to be a ‘Governmental Authority.
Concluding the above, the Project Management and Consultancy service, being a Pure Service’, provided by the Applicant to RUDSICO, should be eligible for exemption under Entry 3 of the notification no. 12/2017Central Tax (Rate) dated 28.06.2017.
RULING
Para No. 8.5 In view of above discussion, we find that holding of equity control of RUDSICO by Jaipur Development Authority and Rajasthan Housing Board cannot be treated as holding of equity control by government. Accordingly, we hold that RUDSICO is not a Governmental Authority. Therefore, appellant is not eligible for exemption under notification no. 12/2017 central tax (Rate) dated 28.06.2017.
CONCLUSION
The Project Management Consultancy (PMC) services provided by the appellant to RUDSICO under the Rajasthan Secondary Towns Development Sector Project do not qualify for exemption under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate). The appellant had claimed that these services were “pure services” provided to a government authority, and thus exempt from GST. However, the AAAR ruled that RUDSICO does not meet the definition of a “Government Authority” under GST law, despite being controlled by government entities. As a result, the services rendered by the appellant are taxable under GST and not eligible for exemption.
