A. Except as otherwise provided in this subsection, there is exempted from the compensating tax the use of property and services by the United States or the state of New Mexico or any governmental unit or subdivision, agency, department or instrumentality thereof. The exemption provided by this subsection does not apply to:

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(1)     the use of property that is or will be incorporated into a metropolitan redevelopment project under the Metropolitan Redevelopment Code [N.M. Stat. Ann. Chapter 3, Article 60A]; or

(2)     the use of construction material.

B. Exempted from the compensating tax is the use of property by any Indian nation, tribe or pueblo or any governmental unit, subdivision, agency, department or instrumentality thereof on Indian reservations or pueblo grants.