GST Exemption for Project Management Consultancy Fees to Government Entities
Project management consultancy fees charged to government bodies for functions under Articles 243G and 243W are exempt from GST.
- Ruling
- ADVANCE RULING No. KER/41/2025 Dated 08.12.2025
- Dated
- 08 Dec 2025
- 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
- Consultancy fees for government projects are exempt from GST.
- Services must be 'pure services' without the supply of goods.
- Refunds for past GST payments are possible within a two-year limit.
In short
Steel Industrials Kerala Limited asked the Authority for Advance Ruling (AAR) if their 'centage charges'—a fee for managing government infrastructure projects—should be taxed under the Goods and Services Tax (GST). The company also wanted to know if they could get a refund for GST they had already paid on these services since 2017.
What has changed
How it worked before
Many businesses were uncertain whether project management fees charged to government entities qualified as exempt 'pure services' or if they were taxable consultancy services.
What has changed
The authority ruled that these services are exempt under Entry 3 of Notification No. 12/2017-Central Tax (Rate). This means businesses providing similar pure consultancy services to local government bodies do not need to charge GST. It also confirms that if you paid tax on these services by mistake, you can apply for a refund, provided you act within the two-year legal window.
Who this affects
Public sector undertakings and private consultancy firms providing project management services to Panchayats, Municipalities, or government departments.
An example
Imagine a private engineering firm that manages road construction for a local Municipality. They charge a 5% management fee for their supervision services. Based on this ruling, they might argue their service is a 'pure service' exempt from GST. They would need to verify if their specific contract falls under the functions listed in the 12th schedule of the Constitution before adjusting their billing.
What you should do
This ruling only applies to the company that asked for it. If your business provides similar services, you should consult with your tax advisor to see if your specific contract qualifies for this exemption. Do not stop charging GST or file for a refund based solely on this document, as your local tax officer may have a different view.
If you do nothing
If you stop charging GST without a formal assessment of your specific contract, you risk a tax demand, interest, and penalties if the department disagrees. Furthermore, refund claims are subject to strict scrutiny, including checks for 'unjust enrichment' where the department ensures you did not pass the tax cost on to your client. Assuming this ruling applies to you automatically is a high-risk strategy that could lead to significant financial liability.
The terms explained
- Pure services
- Services that involve only labor or professional expertise without the supply of any physical goods or materials.
- Centage charges
- A fee calculated as a percentage of the total project cost, typically charged by consultants for managing or supervising a project.
- Unjust enrichment
- A legal principle used by tax authorities to ensure that a business does not receive a refund for taxes they already collected from their customers.
The ruling in detail
Authority for Advance Ruling
STEEL INDUSTRIALS KERALA LIMITED
ADVANCE RULING No. KER/41/2025 Dated 08.12.2025 · Keralam
Questions before the authority
- Whether GST is applicable on the centage charges collected being the centage charges levied for consulting services provided to a Government entity which is covered under Article 243G/243W of the Indian constitution (12th schedule)
- Whether the company can claim refund of GST already paid for the year 2017-18 onwards?
Facts
The applicant is a Public Sector Undertaking that provides Project Management Consultancy (PMC) services to various government departments and local authorities. These services involve supervision, coordination, and administrative management of civil and infrastructure projects. The applicant collects a percentage-based fee, referred to as centage charges, for these services.
Ruling
| Question | What the authority ruled |
|---|---|
| Applicability of GST on centage charges | Not applicable Exempt under Entry 3 of Notification No. 12/2017-CTR for pure services provided to government/local authorities in relation to functions under Article 243G/243W |
| Eligibility for refund of GST paid | Eligible to claim Subject to the statutory limitation of two years prescribed under Section 54 of the CGST Act |
The authority ruled that the centage charges for pure PMC services provided to government entities in relation to functions under Article 243G or 243W are exempt from GST. Regarding the refund, the applicant is entitled to claim a refund for GST paid, subject to the statutory two-year limitation period prescribed under the GST law.
Reasoning
The authority determined that the applicant's PMC services qualify as **pure services** as they do not involve the supply of goods. These services are rendered to government departments and local authorities in relation to functions entrusted to Panchayats and Municipalities under Articles 243G and 243W of the Constitution. Consequently, the services fall under the **exemption provided by Entry 3 of Notification No. 12/2017-Central Tax (Rate)**. Regarding the refund, the authority clarified that while the applicant is eligible to claim a refund for erroneously paid tax, it must strictly adhere to the **two-year limitation period** stipulated under Section 54 of the CGST Act.
Provisions relied on
- Section 54 of the CGST Act
- Section 97(2) of the CGST Act
- Entry 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017
- Article 243G of the Constitution of India
- Article 243W of the Constitution of India
For the practitioner
This ruling confirms that **percentage-based consultancy fees** charged by PSUs to government bodies for pure project management services are exempt from GST. It provides a clear path for practitioners to seek refunds for past tax payments, provided the **two-year limitation period** has not expired. However, the authority explicitly declined to rule on the merits of specific refund claims, noting that issues like unjust enrichment must be examined by the jurisdictional officer.
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/steel_industrials_kerala_limited.pdf
Legibility of the scan, as read: high.
Prepared 13-10-2026.
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