AAR held that subcontracted labor services for PMAY, involving the supply of machinery and materials, do not qualify as ‘pure labor’ and are taxable at 18% under HSN 9954 (xii).
The Rajasthan Authority for Advance Ruling (AAR) has clarified that labor services provided by a subcontractor for a Pradhan Mantri Awas Yojana (PMAY) housing project do not qualify as a ‘pure labor’ contract and are liable to 18% GST services, which are classified under HSN code 9954 (xii).
The applicant, Build Layer Constructions, had entered into an agreement to supply labor construction services to BCM Builders LLP, which has a contract with the Rajasthan Government for constructing 380 flats under the Affordable Housing Scheme (PMAY).
The applicant contended that its work consisted only of labor, and the GST exemption under Entry 10 should apply to subcontractors. Since the exemption is “activity-based,” and should also apply to subcontractors.
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The AAR found that the applicant was required to provide machinery and other materials, in addition to labor, for the construction in the PMAY project.
The AAR held that the agreement between the applicant and B.C.M. BUILDERS LLP is not a pure labour contract service supplied for the construction of 380 flats and further noted that no proof or agreement has been provided by the applicant during or after the personal hearing.
The bench comprising Utkarsh (Central Tax Member) and Dr. Akhedan Charan (State Tax Member) found that the construction services fall under section 5 of Chapter 99. Hence, the service provided by the taxpayer falls under HSN code 9954 (xii) with GST rate 18%.
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The AAR classified the contract under HSN code 9954 (xii) as construction services not falling under specific exempted entries, thereby attracting GST at the rate of 18% as the exemption was denied
The applicant was represented by Ranjan Mehta.