Karnataka AAR Holds Pure Labour Contracts for Single Stand-Alone Residential Units Exempt from GST Under Notification No. 12/2017

Karnataka Authority for Advance Ruling (AAR) has delivered a significant ruling on the applicability of Goods and Services Tax (GST) to pure labour contracts provided for single residential dwelling units. The applicant, engaged exclusively in supplying pure labour services for construction and related activities to individual owners of stand-alone residential houses, sought an advance ruling on whether such services are exempt from GST.

The applicant clarified that their services are strictly limited to pure labour, with no supply of goods or materials, and are rendered solely to single residential dwelling units—not to apartments, residential complexes, or housing projects. The applicant relied on Entry No. 11 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, as amended, which exempts services by way of pure labour contracts for original works pertaining to a single residential unit otherwise than as part of a residential complex.

During the proceedings, the AAR examined the relevant statutory provisions and definitions under the notification. The Authority emphasized that the exemption applies only if the following conditions are met: (i) the contract is a pure labour contract with no transfer of property in goods; (ii) the activities relate to construction, erection, commissioning, or installation; (iii) the works qualify as ‘original works’ as defined; and (iv) the services pertain to a single residential unit, not forming part of a residential complex.

The AAR further clarified the definitions: ‘original works’ includes all new constructions and certain additions or installations; a ‘residential complex’ means any complex with more than one single residential unit; and a ‘single residential unit’ is a self-contained unit designed for use by one family. The Authority noted that the exemption does not extend to services provided in respect of apartment buildings, housing projects, or complexes with multiple units and shared facilities.

Upon reviewing the facts, the AAR found that the applicant’s services are strictly confined to single, stand-alone residential houses and do not involve any supply to residential complexes or apartments. The Authority concluded that the applicant’s services satisfy all the essential conditions for exemption under Entry No. 11 of Notification No. 12/2017-Central Tax (Rate).

Ruling: The Karnataka AAR held that pure labour contracts for construction, erection, commissioning, or installation of original works pertaining to a single residential dwelling unit, otherwise than as part of a residential complex, are exempt from GST under Entry No. 11 of Notification No. 12/2017-Central Tax (Rate), provided all stipulated conditions are fulfilled. This ruling provides clarity for service providers engaged in similar activities and reinforces the scope of GST exemptions for pure labour contracts in the context of single residential units.