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2025 (6) TMI 918 - AAR - GSTScope of Clause 1 2 of twelfth Schedule of Article 243W - pure labour services - Services provided by the applicant fall under the Exemption N/N. 12/2017 dated 28th June 2017 (Entry No. 3 of Exemption Notification) as amended from time to time - Whether the services supplied would be covered under Clause 1 2 of Twelfth schedule of Article 243W? - HELD THAT - It is seen that the work is mainly for assisting and facilitation of property tax assessment. For this the applicant undertakes property survey numbering of properties measurement and data collection digitalization of data etc. As per the agreements with various Municipal Councils activities being undertaken by the company are assisting Municipal Councils for door to door Numbering Property Survey Preparing Computerized proportionate plans photos required information of the properties for assessment of property tax and other allied taxes. The work undertaken by the applicant is in relation to assessment of property tax by the municipal councils. The intent of entire work is to facilitate assessment and collection of property tax. The Maharashtra Municipal Act 1949 u/s. 99 mandates Municipal Corporations to levy property taxes. Specifically clause 2 (49) (a) enumerates tax on building or lands as a compulsory levy. The applicant submits that Chapter VII Rule 20 delineates the procedure for property assessment underscoring the necessity of comprehensive property survey to ensure accurate tax imposition. The applicant has provided services for meeting this end. The function of levy of properly tax may be mandatory and necessary for the functioning of the Municipal Councils. However it is not listed as one of the functions in the twelfth Schedule of Article 243W of the Constitution. All the services provided by the applicant are for facilitation of levy of properly tax using the appropriate technology and process - The terms of the agreement and the work order indicate that the scope of work and intent of procurement of services is for facilitation and assessment of property tax by the Municipal Councils. The said function does not fall under Article 243G or 243W of the Constitution. The services supplied by the applicant are pure services provided to the local authority but not by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. Hence the provisions as per SI. No. 3 of the Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017 as amended do not apply to the services provided by the applicant. Conclusion - The applicant is providing pure services (without the supply of goods) to the various Municipal Councils. It is found that the said services are not in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. Hence the applicant is not entitled to the benefit of Notification No. 12/2017-CT (Rate) Dated 28/06/2017 as amended from time to time.
The core legal questions considered by the Authority for Advance Ruling (AAR) in this case are:
1. Whether the services provided by the applicant fall under Clause 1 and 2 of the Twelfth Schedule of Article 243W of the Indian Constitution, which enumerates functions entrusted to Municipalities. 2. Whether the services provided by the applicant qualify for exemption under Notification No. 12/2017-Central Tax (Rate) dated 28th June 2017 (Entry No. 3), which exempts pure services provided to government/local authorities in relation to functions entrusted to Panchayats or Municipalities under Articles 243G and 243W respectively. Issue-wise Detailed Analysis Issue 1: Applicability of Clause 1 & 2 of Twelfth Schedule of Article 243W to the services provided Legal Framework and Precedents: Article 243W empowers Municipalities with functions listed in the Twelfth Schedule, which includes urban planning, regulation of land use and construction of buildings, planning for economic and social development, and other municipal functions. The 12th Schedule's Clause 1 and 2 specifically mention "Urban planning including town planning" and "Planning of land-use and construction of buildings." The Maharashtra Municipal Corporation Act and Municipal Councils Act provide statutory mandates for property tax assessment and levy. Court's Interpretation and Reasoning: The applicant's services primarily involve assisting Municipal Corporations and Councils in property surveys, numbering, measurements, data collection, computerization, and preparation of tax assessment databases to facilitate property tax levies. The applicant contended that these activities relate to urban planning and land-use regulation as per the Twelfth Schedule. The AAR analyzed the nature of the services and the statutory provisions. It noted that while property tax assessment is mandatory under the Maharashtra Municipal Corporation Act (Section 99) and Municipal Councils Act, the function of levying property tax itself is not explicitly listed in the Twelfth Schedule under Article 243W. The activities performed by the applicant are facilitative and assist in property tax assessment but do not constitute urban planning or land-use regulation functions. The agreements and work orders indicated that the applicant worked under the supervision and control of the Municipal Councils, carrying out data collection and survey work to aid tax assessment, not planning or regulatory functions. Key Evidence and Findings: The contracts with various Municipal Councils and Corporations detailed the scope as assisting in property surveys, data digitization, and tax assessment facilitation. The work involved no independent planning or regulatory authority but was limited to data collection and processing to enable municipal tax functions. The AAR also reviewed dictionary meanings and legislative objectives of urban planning and land-use regulation, finding that the applicant's activities did not fall within these categories. Application of Law to Facts: Since the applicant's services do not directly relate to the functions enumerated in the Twelfth Schedule, particularly urban planning or land-use regulation, the services do not fall under Clause 1 and 2 of Article 243W. Treatment of Competing Arguments: The applicant relied on dictionary definitions, statutory provisions, and prior Advance Rulings where similar services were held exempt under Article 243W. However, the AAR distinguished those cases on facts, noting that the applicant's services were limited to property tax facilitation, which is not a scheduled municipal function. The jurisdictional officer argued that the services were skilled manpower services and not exempt, emphasizing the absence of direct statutory delegation of planning functions to the applicant. Conclusion: The services provided by the applicant are not covered under Clause 1 and 2 of the Twelfth Schedule of Article 243W. Issue 2: Eligibility of the services for GST exemption under Notification No. 12/2017-Central Tax (Rate), Entry No. 3 Legal Framework and Precedents: Notification No. 12/2017 exempts "pure services" (excluding works contracts or composite supplies involving goods) provided to government/local authorities by way of any activity in relation to functions entrusted to Panchayats under Article 243G or Municipalities under Article 243W. The exemption is conditional on the service being a pure service, provided to a government/local authority, and relating to functions entrusted under the Constitution. Several Advance Rulings and judicial decisions were cited by the applicant supporting exemption for services rendered to municipal bodies in relation to urban planning, infrastructure projects, and other municipal functions. Court's Interpretation and Reasoning: The AAR examined whether the applicant's services met all conditions of the exemption notification. It found that the services were indeed pure services provided to local authorities (Municipal Councils and Corporations). However, the critical condition that the services must relate to functions entrusted under Article 243G or 243W was not satisfied, as established under Issue 1. The department's contention that the services were manpower supply with technical instruments was addressed. The applicant clarified that no high-end technical equipment was supplied, only basic survey tools were used, and aerial images were sourced from government agencies for reference. The services did not involve transfer of goods or software, fulfilling the pure service criterion. Key Evidence and Findings: The AAR reviewed the contract terms, scope of work, and submissions clarifying that the services were purely labor and consultancy in nature, without supply of goods or technology. The exemption notification's conditions were analyzed in light of these facts. Application of Law to Facts: Since the services do not relate to functions entrusted under Article 243W, the exemption under Notification No. 12/2017 cannot apply, notwithstanding the services being pure and provided to local authorities. Treatment of Competing Arguments: The applicant relied heavily on previous Advance Rulings and High Court/Supreme Court decisions affirming exemptions for services to municipal bodies. The AAR distinguished these precedents based on factual differences, emphasizing that the nature of services in those cases was directly connected to scheduled municipal functions, unlike the present case. Conclusion: The services provided by the applicant do not qualify for exemption under Notification No. 12/2017 as they are not in relation to any function entrusted to a Panchayat or Municipality under Articles 243G or 243W. Significant Holdings The Authority for Advance Ruling held: "The services supplied by the applicant are pure services provided to the local authority but not by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. Hence the provisions as per SI. No. 3 of the Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017 as amended do not apply to the services provided by the applicant." Core principles established include:
Final Determinations: 1. The services provided by the applicant do not fall under Clause 1 and 2 of the Twelfth Schedule of Article 243W. 2. The services are not exempt under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate) as they do not relate to any function entrusted to a Panchayat or Municipality under Articles 243G or 243W.
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