The Rajasthan Authority for Advance Ruling ( RAAR ) has ruled 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 not exempted from Goods and Services Tax (GST) under Notification No. 12/2017-Central Tax (Rate), Entry 10.

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. It was further contended that the exemption is “activity-based,” and should also apply to subcontractors.

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) thus found that it cannot be stabilized that the applicant is working for Pradhan Mantri Awas Yojana and the service provided by the applicant for construction of flats is not covered under entry No 10 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

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.