GST Exemption for Consultancy Services Provided to Government Metro Rail Entities
Consultancy services for urban transport planning provided to a 100% state-owned government authority are exempt from GST.
- Ruling
- Ruling No. AAR/AP/07(GST)/2018 dt. 02.07.2018
- Dated
- 02 Jul 2018
- Authority
- 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
- Amaravathi Metro Rail asked if it is a government authority under GST.
- It asked if transport planning consultancy services are exempt from GST.
- The authority ruled that 100 percent state ownership makes it a government authority.
- Urban transport planning falls under municipal functions listed in the Constitution.
- Consultancy services for transport studies and project reports are exempt from GST.
In short
Amaravathi Metro Rail Corporation Limited, set up with 100 percent state ownership, hired consultants for urban transport studies and project reports. The company asked whether it qualifies as a government authority and if the consultancy services it receives are exempt from Goods and Services Tax (GST) under Notification No. 12/2017-Central Tax (Rate). The main issue was whether urban transport planning counts as a municipal function under the Constitution of India.
What has changed
How it worked before
Before this ruling, vendors providing consultancy services to government-owned special purpose vehicles were uncertain whether urban transport planning qualified as a municipal function. Many consultants charged full GST on transport studies and detailed project reports, fearing tax demands if they claimed the exemption without formal clarity.
What has changed
The Andhra Pradesh Authority for Advance Ruling (AAR) ruled under order AAR/AP/07(GST)/2018 that the company is a government authority due to 100 percent government ownership. It also decided that preparing transport studies, mobility plans, and detailed project reports directly relates to municipal functions under Article 243W of the Constitution. As a result, third-party consultancy services for these transport projects are exempt from GST under Notification No. 12/2017-Central Tax (Rate).
Who this affects
Consultancy firms and transaction advisors providing urban transport, mobility, or detailed project planning services to fully government-owned development agencies.
An example
A civil engineering consultancy firm in Andhra Pradesh wins a contract to prepare a detailed project report for a new city bus corridor owned fully by the state government. The firm wants to know if it should charge 18% GST on its consultancy fee. Following the logic of this ruling, because the project relates to municipal transport functions and the buyer is 100% government-owned, the service qualifies for GST exemption. The firm should still confirm its tax position before issuing tax-free invoices.
What you should do
Consultancy firms working with state-owned development bodies should review their service contracts to see if their work aligns with municipal functions. However, an advance ruling only binds the business that applied for it and its local tax officer. Other businesses facing similar questions should seek their own advance ruling or professional advice before stopping GST collection.
If you do nothing
If a consultancy firm assumes this ruling automatically applies to its business and stops charging GST without a ruling of its own, local tax officers may disagree during an audit. The tax department can demand unpaid GST along with interest and penalties. Relying on another company's advance ruling without proper verification creates a serious financial risk.
The terms explained
- Governmental Authority
- A board, authority, or body set up by Parliament or a State Legislature, or established by the government with 90 percent or more equity, to carry out functions given to municipalities or panchayats.
- Detailed Project Report
- A comprehensive document outlining the technical, financial, and operational plans for an infrastructure project before execution begins.
- Exemption Notification
- An official government notice under tax law that removes or reduces the tax payable on specific goods or services.
- Input Tax Credit
- The tax a business pays on its purchases that it can subtract from the tax it owes on its sales.
The ruling in detail
Authority for Advance Ruling
M/s AMARAVATHI METRO RAIL CORPORATION LIMITED
Ruling No. AAR/AP/07(GST)/2018 dt. 02.07.2018 · Andhra Pradesh
Questions before the authority
- Whether M/s AMARAVATHI METRO RAIL CORPORATION LIMITED, GSTIN: 37AANCA9264G1Z8, is a Government authority as per Notification No. 12/2017 of Central Tax (Rate), dated: 28th June 2017, read with Notification No. 32/2017 of Central Tax (Rate), dated: 13th October 2017.
- Whether the consultancy services for preparation of transport studies such as comprehensive mobility plan, transit oriented development plan, NMT plan and consultancy services of transaction advisors/preparation of DPRs comes within the purview of the functions of Municipality under article 243W read with Twelfth Schedule to the constitution of India, to fall within the purview of the aforesaid exemption notification.
Facts
The applicant is a Special Purpose Vehicle established with 100% equity ownership by the Government of Andhra Pradesh to carry out metro rail and transport projects. It procures third-party consultancy services for preparation of Detailed Project Reports (DPRs), Comprehensive Mobility Plans, Transit Oriented Development Plans, and transaction advisory. The applicant sought an advance ruling to clarify if it qualifies as a Government Authority and if these consultancy services are exempt under GST.
Ruling
| Question | What the authority ruled |
|---|---|
| Status of Applicant as Government Authority | Yes 100% owned by the State Government of Andhra Pradesh |
| Exemption for consultancy services for transport studies/DPRs | Exempt Covers municipal functions under Article 243W read with Twelfth Schedule of the Constitution |
The Authority held that the applicant qualifies as a **Government Authority** under Notification No. 12/2017-Central Tax (Rate) as amended, owing to 100% state government equity control. It further held that consultancy services for transport planning, mobility studies, and DPR preparation are functions entrusted to a municipality under Article 243W and the Twelfth Schedule of the Constitution. Accordingly, these services **fall within the purview of exemption** under the relevant notification.
Reasoning
The applicant satisfies the definition of a 'governmental authority' as it was set up by the State Government with 100% equity participation. Urban transport planning is an integral component of urban planning, which is a municipal function listed under Article 243W and the Twelfth Schedule of the Constitution (specifically urban planning, town planning, and public amenities). Consequently, third-party consultancy services procured for transport studies, DPR preparation, and mobility plans are directly tied to these constitutional municipal functions, qualifying them for exemption under Notification No. 12/2017-Central Tax (Rate).
Provisions relied on
- Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017
- Notification No. 32/2017-Central Tax (Rate) dated 13.10.2017
- Article 243W of the Constitution of India
- Twelfth Schedule to the Constitution of India
- Section 2(16) of the Integrated Goods and Services Tax Act, 2017
- Section 98(1) of the CGST/APGST Act, 2017
For the practitioner
This ruling establishes that 100% government-owned SPVs qualify as **governmental authorities** for GST purposes. It clarifies that consultancy services procured for urban mobility, DPR preparation, and mass transport planning relate directly to **Article 243W municipal functions**, thereby qualifying for GST exemption.
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/AAR/ap_07-2018_02.07.18_amaravathi_mrcl.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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.