2018 (6) TMI 111 - AAR - GST

Contract Deemed Indivisible & Not Eligible for Concessional GST Rate

In Re : Skilltech Engineers And Contractors Pvt. Ltd.

The Authority determined that the contract in question was indivisible and classified as a works contract under the CGST Act'2017. The applicant was found ... Classification - Nature supply - divisible contract [Supply of goods & Supply of Services] or an indivisible contract [works contract] - Construction of power lines, erection of transmission towers and transformers - single composite contract, but with three connected agreements for Supply of Materials, Erection and Civil Works respectively - KPTCL is a Government body or not - Whether the contract, executed by them for KPTCL, is a divisible contract [Supply of goods & Supply of Services] or an indivisible contract [works contract]? - Whether the tax rate of 12% [CGST-6% + SGST-6%] is applicable to the contract, in pursuance of N/N. 24/2017-Central Tax (Rate) dated 21.09.2017? Held that:- The composite supply of works contract as defined at Section 2 clause 119 of CGST Act 2017 is treated as supply of service in terms of serial no.6, Schedule II of CGST Act'2017 - the applicant, being the successful bidder, got the single composite contract, but with three connected agreements for Supply of Materials, Erection & Civil Works respectively. All the three agreements were awarded to the applicant in response to a single tender notification & the general terms and conditions are commonly applicable to all the three agreements. The applicant is supplying the material and providing the erection of towers service and also civil works service. Therefore the contract entered by the applicant is of the nature of “indivisible' and squarely falls under the works contract, which is a service. Whether the applicant is entitled for the concessional rate of GST @ 12% as per Notification No.24/2017 Central Tax (Rate) dated 24.09.2017 or not? - Held that:- The regulatory bodies and other autonomous entities would not be regarded as the government or local authorities for the purposes of the GST Acts. Therefore M/s KPTCL can not be a State Government - Further M/s KPTCL, who awarded the contract to the applicant, are registered under Companies Act 1956 as a company and is a separate entity. Therefore it can not be considered as the State Government or a State Government Authority. Hence the applicant is not entitled for the benefit of the concessional rate of GST @ 12%, in terms of N/N. 24/2017-Central Tax (Rate) dated 21.09.2017. Ruling:- The contract contract entered by the applicant is of the nature of 'indivisible' and squarely falls under the works contract, which is a service - The Applicant is not entitled for the benefit of concessional rate of GST @12% in terms of Notification No.24/2017-Central Tax (Rate) dated 21.09.2017. Issues:1. Whether the contract is divisible or indivisible.2. Applicability of tax rate under Notification No.24/2017-Central Tax (Rate).Issue 1: Whether the contract is divisible or indivisible:The applicant sought clarification on whether the contract with KPTCL is divisible into supply of goods and services or an indivisible works contract. The contract involved three connected agreements for supply of materials, erection, and civil works, awarded in response to a single tender notification. The Authority considered the definition of 'works contract' under Section 2 clause 119 of the CGST Act'2017, which includes various activities related to immovable property where transfer of goods is involved. The Authority concluded that the contract, being indivisible in nature, falls squarely under the category of a works contract, which is considered a service under the CGST Act'2017.Issue 2: Applicability of tax rate under Notification No.24/2017-Central Tax (Rate):The second issue revolved around whether the applicant is eligible for the concessional GST rate of 12% as per Notification No.24/2017-Central Tax (Rate). The applicant argued that KPTCL should be considered a 'State Government' entity based on the notification's wording. However, the Authority clarified that statutory bodies, corporations, or authorities created by Parliament or State Legislature are not considered government entities. As KPTCL is registered under the Companies Act'1956 as a separate entity, it does not qualify as a State Government or State Government Authority. Consequently, the applicant was deemed ineligible for the concessional GST rate of 12% under Notification No.24/2017-Central Tax (Rate).Conclusion:The Authority ruled that the contract was indivisible and classified as a works contract. Additionally, the applicant was not entitled to the concessional GST rate of 12% as per Notification No.24/2017-Central Tax (Rate) due to KPTCL not meeting the criteria to be considered a State Government entity.