Taxability of Construction Services to Forest Department under GST Notification

The composite supply of construction services provided to the Forest Department was deemed taxable under Notification No. 11/2017-Central Tax (Rate) at a rate of 12% [6% CGST + 6% SGST]. The authority clarified that the Forest Department's classification of the service as exempt from GST could not be ruled upon as it fell outside the scope of its jurisdiction under section 97(2) of the Act.

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Issues Involved:

1. Whether the composite supply of construction service to the Forest Department is an exempted service under any notification.
2. If not exempted, what will be the rate of GST on such supply of service.
3. Whether the Forest Department is correct in not giving GST to the applicant on the composite supply as the said department classified the same as exempted service.

Issue-wise Detailed Analysis:

1. Exemption of Composite Supply of Construction Service:

The applicant sought an advance ruling to determine whether the composite supply of construction services provided to the Forest Department is exempt under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 or any other exemption notification. The authority examined the legal provisions and found that the applicant is providing composite supply (works contract) services such as construction of Machan, laying of foundation, construction of pillars, and labor services like clearing paths and areas in the forest. The authority concluded that these services are not exempted. The contracts involve the transfer of property in goods and are classified as "works contract" services, which are composite supplies of both services and goods, with the service element being dominant. As per Para 6(a) of Schedule II to the CGST Act, 2017, works contracts are treated as a composite supply of services.

2. GST Rate on Composite Supply of Construction Service:

Since the composite supply of construction services provided to the Forest Department is not exempt, the authority determined the applicable GST rate. The authority referred to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (as amended), which specifies the tax rates for various services. The services provided by the applicant to the Forest Department do not fall under any exemption and are taxable under entry no. 3(vi)(a) of the notification. These services are not for commerce, industry, or any other business or profession and thus attract GST at the rate of 12% [6% CGST + 6% SGST].

3. Forest Department's Classification of Service as Exempt:

The applicant questioned whether the Forest Department was correct in not paying GST on the composite supply by classifying it as an exempted service. The authority stated that it could not pass a ruling on this question as it does not qualify for a ruling under section 97(2) of the Act. The authority's jurisdiction is limited to the matters specified in section 97(2), which does not include determining the correctness of the Forest Department's classification.

Order:

i. The composite supply of construction services provided by the applicant to the Forest Department, Uttarakhand is not an exempted service and is a taxable event under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (as amended).

ii. The applicable GST rate for the said service is 12% [6% CGST + 6% SGST].

iii. The authority cannot issue a ruling on whether the Forest Department is correct in not giving GST to the applicant as the question does not qualify for a ruling under section 97(2) of the Act.

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