GST Vidhi | GST Advance Ruling

GST On Labour Services Provided for PMAY Housing Project: Ruling Against M/s Build Layer Constructions

Introduction: In a significant ruling impacting subcontractors working on government housing schemes, the Rajasthan Authority for Advance Ruling (AAR), in its Order No. RAJ/AAR/2025-26/53 dated 23.05.2025, has held that M/s Build Layer Constructions, a subcontractor engaged in providing labour services for a PMAY-linked project, is not eligible for GST exemption under Entry 10 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The authority clarified that the exemption applies only to pure labour contracts directly related to beneficiary-led individual housing construction under PMAY.

Applicant Details

• Name: M/s Build Layer Constructions
• GSTIN: 08AATFB8617M1Z0
• Ruling Date: 23.05.2025
• Authority: Rajasthan AAR

Background

M/s Build Layer Constructions entered into a subcontract with M/s BCM Builders LLP, which held a main contract with the Rajasthan Government for construction of 380 flats under the “Affordable Housing Scheme” of the Pradhan Mantri Awas Yojana (PMAY). The applicant claimed to be supplying pure labour services for this project.

The applicant approached the AAR seeking clarity on whether such subcontracted labour supply would be exempt from GST under Entry 10 of Notification No. 12/2017-Central Tax (Rate).

Questions Raised

1.    Whether Entry 10 of Notification No. 12/2017-CT(R) dated 28.06.2017 applies to the pure labour services provided by the applicant?

2.    If not applicable, what would be the HSN classification and applicable GST rate?

Applicant’s Submissions

• They are engaged in pure labour construction services and do not supply materials.
• Their subcontract is with M/s BCM Builders LLP, the main contractor for the PMAY housing project.
• Entry No. 10 of Notification No. 12/2017 exempts pure labour contracts related to construction under Housing for All (Urban) Mission / PMAY.
• The exemption is activity-based and should extend to subcontractors too, since the nature of work remains unchanged.

Relevant Legal Provision

Entry No. 10 of Notification No. 12/2017–Central Tax (Rate):

“Services provided by way of pure labour contracts of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works pertaining to the beneficiary-led individual house construction or enhancement under the Housing for All (Urban) Mission or Pradhan Mantri Awas Yojana”
→ GST Rate: NIL (exempt)

Observations by Jurisdictional Officer

• A subcontract does not change the character of the main contract.
• The benefit of exemption under the said notification should extend to subcontractors, provided conditions are met.
• Cited earlier Rajasthan AAR ruling (RAJ/AAR/2019-20/28) where exemption was granted to a subcontractor working under PMAY.

AAR’s Discussion and Findings

Despite favorable arguments, the AAR made the following key findings against the applicant:

i. Not a Pure Labour Contract

• The agreement submitted by the applicant (with BCM Builders LLP) revealed that the applicant is also responsible for supplying certain machines and materials, not just labour.
• This violates the “pure labour” condition under Entry 10 of Notification 12/2017.

ii. Lack of Proof Linking Main Contract to PMAY

• The applicant was asked to submit documentary proof that M/s BCM Builders LLP was executing the contract under PMAY.
• Despite assurance during the hearing, no proof was submitted within the specified time.
• In absence of evidence, the AAR could not establish a direct link to PMAY or Housing for All (Urban) scheme.

Final Ruling

Conclusion

This ruling serves as a cautionary precedent for subcontractors in government housing projects:

• Exemption under Entry 10 of Notification 12/2017 is strictly interpreted.
• To claim the benefit:
• The contract must be exclusively for labour.
• The end-use must be proven to be under beneficiary-led PMAY.
• Absence of supporting documentation or inclusion of material/machinery responsibility disqualifies the exemption.

Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.

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