AAR Maharashtra Rules on GST Exemption for Pure Labour Services in Property Tax Assessment

The Maharashtra bench of the Authority for Advance Ruling (AAR) recently considered an application by Sthapatya Consultants (India) Private Limited. The company sought clarification on whether the GST exemption under Notification No. 12/2017–Central Tax (Rate), Entry 3, applies to pure labour services related to property survey and tax assessment provided to municipal corporations and councils.

Sthapatya Consultants (India) Private Limited explained that their services involve assisting municipal corporations and municipal councils in property survey, numbering of properties, measurements, and data collection to evaluate property taxation as per the relevant Acts. The company argued that these activities are performed under the supervision and control of the Government Authority and involve no supply of goods, only labour, thereby qualifying as 'pure services'.

It was further submitted that the company only provides staff to the Government Authority to carry out work under the 12th Schedule to Article 243W of the Constitution, and that municipal bodies can choose to outsource these statutory obligations. The applicant contended that pure services provided to a local authority, in relation to a function entrusted to a municipality under Article 243W, should qualify for exemption.

The AAR examined the agreements, which described the applicant’s work as assisting Municipal Councils in door-to-door numbering, property survey, preparing computerized proportionate plans, photos, and required information of the properties for assessment of property tax and other allied taxes, and computerization of the work, as per the tender scope of work.

The Authority noted that functions include 'urban planning including town planning' and 'regulation of land-use and construction of buildings.' However, the AAR found that the applicant’s activities were specifically for the facilitation and assessment of property tax, which, although a statutory obligation for municipalities, is not listed as a function in the Twelfth Schedule.

The AAR observed that the function of levy of property 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. It was concluded that the said function does not fall under Article 243G or 243W of the Constitution, and therefore, 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.

Accordingly, the AAR held that pure labour services relating to property survey and tax assessment, though provided to municipal councils, are not exempt under Notification No. 12/2017.