Kerala AAR rules that centage charges collected for pure PMC services provided to Government departments and local authorities are exempt from GST under Notification 12/2017.
Meetu Kumari | Jan 6, 2026 |
GST Not Applicable on Centage Charges Collected for PMC Services to Government Bodies
The applicant is a Public Sector Undertaking registered under the GST law and is involved in Project Management Consultancy (PMC) services for several Government departments and local bodies. The applicant collected “centage charges”, being a percentage-based consultancy and administrative fee.
During an audit conducted by the Comptroller and Auditor General, it was observed that GST had been charged on such centage charges, which were treated as avoidable expenditure on the ground that the services constituted “pure services”. Following the audit objection, certain Government departments declined to pay GST on future percentage charges and sought recovery or refund of GST amounts already paid. The applicant approached the Authority seeking clarity on the taxability of centage charges and eligibility to claim a refund of GST paid.
Issue Before the Authority: Whether GST is applicable on centage charges collected for consultancy /PMC services provided to Government entities and local authorities in relation to functions entrusted under Articles 243G and 243W of the Constitution.
Decision of the Authority: The Authority examined Entry No. 3 of Notification No. 12/2017–Central Tax (Rate) dated 28.06.2017 and noted that exemption is available where the supply qualifies as pure services, is rendered to Government or local authorities, and relates to functions entrusted under Articles 243G or 243W of the Constitution. The applicant’s PMC services involved no supply of goods and were provided to Government departments and Panchayats in connection with constitutionally assigned functions.
Thus, the Authority ruled that GST is not applicable on centage charges collected for such pure PMC services and the same are exempt under the said notification.With respect to refund of GST already paid, it was held that refund claims are governed strictly by Section 54 of the CGST Act, 2017. While the applicant may apply for refund within the statutory limitation period of two years, the Authority does not have jurisdiction to relax the limitation or rule on refund eligibility, which must be examined by the jurisdictional officer in accordance with law.
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