Interim stay on SCN as determination of Delhi Jal Board’s status as “local authority” impacts GST rate on works contracts

The Hon’ble Delhi High Court in the case of SSP PRIVATE LIMITED Versus JOINT DIRECTOR DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE DELHI ZONAL UNIT & ANR. - 2026 (3) TMI 1520 - DELHI HIGH COURT held that the issue as to whether the Delhi Jal Board is a “local authority” under Section 2(69) of the CGST Act, 2017, which determines whether works contracts awarded to private contractors attract GST at 12% or 18%, is a legal issue requiring adjudication, and accordingly stayed proceedings pursuant to the impugned show cause notice.

Facts:

SSP Private Limited (“the Petitioner”) is a contractor engaged by the Delhi Jal Board for carrying out certain works and had executed works contracts for the said authority.

Joint Director, Directorate General of GST Intelligence, Delhi Zonal Unit & Anr. (“the Respondent”) issued a Show Cause Notice dated September 19, 2025 calling upon the Petitioner to pay differential GST of 6% on works contracts executed for the Delhi Jal Board.

The Petitioner contended that the works assigned by the Delhi Jal Board attract GST at 12%, and GST at such rate had already been deposited. The Petitioner further submitted that the issue affects numerous contractors who have been issued similar notices.

The Respondent contended that the Delhi Jal Board is not a local authority, and therefore the contractor is not entitled to the concessional GST rate applicable where services are supplied to a local authority under Section 2(69) of the CGST Act, 2017.

Aggrieved by the issuance of the impugned SCN and the demand of differential tax, the Petitioner approached the Court by way of a writ petition seeking quashing of the SCN and interim protection.

Issue:

Whether works contracts assigned by the Delhi Jal Board to private contractors attract GST at 12% or 18%, dependent upon whether the Delhi Jal Board qualifies as a “local authority” under Section 2(69) of the CGST Act, 2017?

Held:

The Hon’ble Delhi High Court in SSP PRIVATE LIMITED Versus JOINT DIRECTOR DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE DELHI ZONAL UNIT & ANR. - 2026 (3) TMI 1520 - DELHI HIGH COURT held as under:

• Observed that, the Petitioner was issued an SCN seeking differential GST of 6% on works contracts executed for the Delhi Jal Board.
• Noted that, the core question is whether works assigned by the Delhi Jal Board to private contractors would attract GST at 12% or 18%.
• Observed that, the GST Department took the position that the Delhi Jal Board is not a local authority, whereas the Delhi Jal Board itself submitted that it is a local authority.
• Held that, the issue whether the Delhi Jal Board is a local authority is a legal issue which deserves consideration and accordingly proceedings in the impugned SCN were stayed and counter affidavits were directed to be filed, with the matter listed for further hearing.

Our Comments:

The Court has extended interim protection following the approach adopted in TIRUPATI CEMENT PRODUCTS AND LR SHARMA AND CO. Versus JOINT DIRECTOR DIRECTORAT GENERAL OF GOODS AND SERVICES JOINT DIRECTOR TAX INTELLIGENCE DELHI ZONAL UNIT & ANR. - 2026 (3) TMI 1422 - DELHI HIGH COURT wherein this court recorded that determination of whether the Delhi Jal Board is a “local authority” is a pure legal issue warranting writ jurisdiction and proceedings pursuant to the SCN were stayed. The reasoning in the present case aligns with the said decision as the Court applied the interim order mutatis mutandis and emphasized avoidance of protracted adjudication.

Relevant Provisions:

Section 2(69) of the Central Goods and Services Tax Act, 2017

“(69) 'local authority' means-

(a) a 'Panchayat' as defined in clause (d) of article 243 of the Constitution;

(b) a 'Municipality' as defined in clause (e) of article 243P of the Constitution;

(c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal fund or local fund;

Explanation.– For the purposes of this sub-clause —

1. “local fund” means any fund under the control or management of an authority of a local self-government established for discharging civic functions in relation to a Panchayat area and vested by law with the powers to levy, collect and appropriate any tax, duty, toll, cess or fee, by whatever name called;
2. “municipal fund” means any fund under the control or management of an authority of a local self-government established for discharging civic functions in relation to a Metropolitan area or Municipal area and vested by law with the powers to levy, collect and appropriate any tax, duty, toll, cess or fee, by whatever name called;

(d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006 (41 of 2006);

(e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution;

(f) a Development Board constituted under article 371 and article 371J of the Constitution; or

(g) a Regional Council constituted under article 371A of the Constitution;”

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