GST Exemption for Design Engineering and Construction Services by Governmental Authority: Case Analysis

GST Exemption for Design Engineering and Construction Services by Governmental Authority: Case Analysis

Introduction: In the case of M/s. THDC India Limited v. Uttarakhand AAR [Advance Ruling No. 06/2023-24 dated February 26, 2024], the Uttarakhand Authority for Advance Ruling (AAR) addressed the applicability of GST on services provided by a Governmental Authority for design engineering and construction of water tanks.

Facts of the Case: M/s. THDC India Limited, a Public Sector Enterprise, entered into a Memorandum of Understanding (MOU) with Uttarakhand M/s Peyjal Sansadhan Vikas Evam Nirman Nigam (“Service Provider”) for the construction of a 500 KL RCC Overhead Tank at their campus in Rishikesh. The MOU specified that the Service Provider would perform design, engineering, and construction services on a “Deposit / Cost plus basis,” excluding GST and Labour Cess. Despite this, the Service Provider invoiced GST under Forward charge.

Issue: The main issue was whether GST is applicable on services of design engineering and contraction of water tank by the Government Authority.

Held: The Uttarakhand AAR ruled as follows:

This ruling clarifies the GST treatment for services provided by Governmental Authorities under specific contractual arrangements, highlighting exemptions under relevant GST notifications.

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