GST Exemption for Consultancy Services Provided to Government Agencies
Consultancy services for government housing schemes like PMAY may qualify as tax-exempt pure services under GST.
- Ruling
- Appeal Order No. 17/AAAR/02/7/2021 dated 02.07.2021
- Authority
- Appellate Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- The company asked if their consultancy services for PMAY are tax-exempt.
- The authority ruled these services relate to constitutional functions of local bodies.
- Services qualify as pure services and are exempt from CGST and UPGST.
In short
The company asked the Appellate Authority for Advance Ruling (AAAR) if their project management services for the Pradhan Mantri Awas Yojana (PMAY) should be taxed under GST. The core issue was whether these professional services count as 'pure services' provided to a government entity for functions related to local municipalities or panchayats.
What has changed
How it worked before
It was often unclear whether professional consultancy services provided to state-level nodal agencies for government schemes qualified for the specific GST exemptions granted to local government functions.
What has changed
The authority confirmed that these consultancy services are exempt from GST because they support functions listed in the Constitution for local bodies. In practice, this means businesses providing similar pure consultancy services to government agencies for these specific schemes do not need to charge GST.
Who this affects
Consultancy firms, project management companies, and professional service providers working on government-funded urban development or housing projects.
An example
A civil engineering firm provides project monitoring services to a state urban development agency for a slum rehabilitation project. They wonder if they should charge GST on their invoices. Based on this ruling, if their contract is strictly for professional services and contains no supply of goods, they may argue their services are exempt as pure services.
What you should do
If you provide similar services, review your contract to ensure it involves only professional services without the supply of goods. Remember that an advance ruling only binds the company that asked and its specific tax office; it is not a universal law that automatically applies to your business.
If you do nothing
If you assume this ruling applies to you and stop charging GST without a specific ruling for your own business, you risk a tax demand from your local officer. If the officer disagrees with your interpretation, you will be liable for the unpaid tax, interest, and potential penalties.
The terms explained
- Pure Services
- Services provided to a government entity where the contract does not involve the supply of any goods.
- Advance Ruling
- A formal decision from tax authorities on how GST laws apply to a specific business transaction.
- Nodal Agency
- A central organization or department appointed by the government to coordinate and manage a specific scheme or project.
The ruling in detail
Appellate Authority for Advance Ruling
M/s JAYESH ANIL KUMAR DALAL
Appeal Order No. 17/AAAR/02/7/2021 dated 02.07.2021 · Uttar Pradesh
Questions before the authority
- Whether the Project Development Service and Project Management Consultancy services provided by the applicant to the State Urban Development Authority 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?
- If answer to first question is in affirmative then, whether such services provided by the applicant would qualify as Pure services as provided in serial number 3 of Notification No. 12/2017- Central Tax (Rate) dated 28 June, 2017, as amended?
Facts
The Appellant is a proprietorship firm providing Project Development Report and Project Management Consultancy services to the State Urban Development Authority (SUDA) for the Pradhan Mantri Awas Yojana (PMAY). The Appellant sought an advance ruling on whether these services qualify as an activity in relation to functions entrusted to Panchayats or Municipalities under the Constitution and whether they qualify as Pure Services eligible for tax exemption.
Ruling
| Question | What the authority ruled |
|---|---|
| Classification of services | Services are in relation to functions entrusted to Municipalities and Panchayats under Article 243W and 243G None |
| Eligibility for exemption | Qualify as Pure Service Exempt from levy of CGST and UPGST under Notification No. 12/2017-Central Tax (Rate) |
The Appellate Authority held that the services rendered by the Appellant to SUDA for PMAY are in relation to functions entrusted to Municipalities and Panchayats under Article 243W and 243G of the Constitution of India. Consequently, the services qualify as Pure Services and are eligible for exemption from the levy of CGST and UPGST.
Reasoning
The Authority determined that SUDA acts as a state-level nodal agency for PMAY, which is a scheme for urban development and slum rehabilitation, falling under the functions listed in the 11th and 12th schedules of the Constitution. It observed that the services provided are professional consultancy services without the supply of goods, thus meeting the criteria for **Pure Services**. The decision relies on the exemption provided under **Serial No. 3 of Notification No. 12/2017-Central Tax (Rate)**, as amended, for services provided to a Governmental authority or entity in relation to functions entrusted to a Panchayat or Municipality.
Provisions relied on
- Article 243G of the Constitution of India
- Article 243W of the Constitution of India
- Section 51 of the CGST Act, 2017
- Serial number 3 of Notification No. 12/2017-Central Tax (Rate) dated 28 June 2017
- Notification No. 2/2018-Central Tax (Rate) dated 25 January 2018
For the practitioner
This ruling confirms that consultancy services provided to state-level nodal agencies for government housing schemes like PMAY can qualify as **exempt Pure Services**. It helps practitioners argue that such activities are in relation to constitutional functions of local bodies. However, it does not apply to contracts involving the supply of goods or composite supplies that do not meet the strict definition of Pure Services.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/2024-02/up_aaar_17_2021-22_02.07.2021_jd.pdf
Legibility of the scan, as read: high.
Prepared 13-10-2026.
About Patron Accounting LLP
Patron Accounting LLP is a CA and CS-led accounting and compliance firm that has been working with businesses across India since 2019. We handle the work that keeps a company correct with every department it answers to: day-to-day bookkeeping and accounting, GST registration and returns, income tax filing and assessments, TDS, payroll and PF/ESI, company and LLP incorporation, ROC and MCA compliance, statutory and internal audit, physical stock and inventory audits, trademark and other registrations, and the certificates and reports that banks, buyers and regulators ask for.
Our clients range from a first proprietorship registering for GST to established companies running operations across several states. Much of our work is exactly this: reading what a department has published and telling a business, in plain terms, whether it changes anything for them.
We operate from five offices and serve clients across the rest of India remotely:
- Pune (HQ): RTC Silver, B4-708, Sai Satyam Park, Wagholi, Pune, Maharashtra 412207
- Mumbai: 104, Rajshila Building, 597 J.S.S. Road, Marine Lines, Mumbai 400002
- Delhi: 3rd Floor, B-6/154-155, Sector 5, Rohini, Delhi 110085
- Gurugram: Pioneer Urban Square, B109, Golf Course Ext Road, Sector 62, Gurugram 122098
- Ahmedabad: Phoenix Tower, 1107, near Commerce Six Road, Drive In Road, Navrangpura, Ahmedabad, Gujarat 380009
If anything on this page affects you and you would like somebody to look at your own position, we are glad to help. Call +91 94594 56700, write to sales@patronaccounting.com, or visit patronaccounting.com. The first conversation costs nothing.