GST not applicable to Labour Contract Services for Construction of Flats under PMAY: AAR [Read Order]

The Rajasthan Authority of Advance Ruling (AAR) held that Goods and Services Tax (GST) not applicable to labour contract service for construction of flats under Pradhan Mantri Awas Yojana (PMAY).

M/s Sunrise Construction Company (Party A) entered into an agreement with Government of Rajasthan for construction of 270 flats under affordable housing scheme under Pradhan Mantri Awas Yojana (PMAY) which includes material and labour.

Party ‘A’ further sublets the work to M/s Banna Ram Choudhary (party B) to construct above 270 flats under a separate work contract which includes material and labour. Party B further entered in a sub-contract with party C (the applicant) for “Pure labour Service” in said project. These labour services will be used for “Chunai and Plaster Work only” in the above-said project. The applicant will have all the control over the labour and responsible for dues and other concerns.

The government does the contract of housing development projects including material and labour and not merely for “pure labour services”. Main contractors further sublet the work to other sub-contractors for different types of work related to the project.

The AAR bench comprising of J.P Meera, Additional Commissioner and Hemanth Jain, Joint Commissioner delivered the ruling based on an application filed by M/s S.R.S Enterprises.

While going through the entry 10 of the notification, Authority observed following elements-

1. Services by way of the pure labour contract,
2. Work-related to construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original work;
3. Pertaining to beneficiary-led individual house construction; or enhancement under the Housing for All (Urban) Mission; or Pradhan Mantri Awas Yojana.

The Authority further observed that the services of pure labour contract supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works under PMAY is exempted from GST vide Entry 10 of the Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 (as amended).

While allowing the application, the Authority also said that the services provided by way of pure labour contract supplied by the applicant for the construction of flats under Pradhan Mantri Awas Yojana (PMAY) are covered under Entry 10 of the Notification.