2018 (6) TMI 463 - AAR - GST

GST Ruling: Services by Consortium to Development Authority under Notification 11/2017.

The ruling determined that the services provided by M/s TPL - SUCG Consortium to Jaipur Development Authority under the contract fall under notification ... Governmental Authority / Government Entity - original works - services by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure - GST at 12% on works contract services provided to a Governmental Authority - sub-contractor leg liable to same GST rate as main contractorGovernmental Authority / Government Entity - Jaipur Development Authority is a Governmental Authority/Entity for the purposes of the rate notifications. - HELD THAT: - The Authority was constituted under the Jaipur Development Authority Act, 1982 and exercises functions and powers subject to direction and control of the State Government under the Act, including composition of membership and provisions for State control and transfer of officers. The notification definition of 'Governmental Authority/Entity' includes bodies set up by a State Legislature or established by Government to carry out functions entrusted to a Municipality/Panchayat; on these facts Jaipur Development Authority falls within that definition. [Paras 8]Jaipur Development Authority is covered under the definition of a Governmental Authority/Entity.Original works - services by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure - GST at 12% on works contract services provided to a Governmental Authority - The services under the contract for rejuvenation of Amanishah Nallah are 'original works' covered by the entry at serial no. 3(vi)(a) and attract GST at the rate of 12% (CGST 6% + SGST 6%). - HELD THAT: - The project scope-course correction and strengthening of an existing river channel, construction of STPs, laying of pipelines, interception chambers and preparation of a master plan for reclaimed land-constitutes construction and civil works falling within the description of 'original works' and the list of works contract services in the notification. Given that the recipient (Jaipur Development Authority) is a Governmental Authority, the services fall within the entry at SI. No. 3(vi)(a) of the relevant rate notification, making the applicable GST rate 12% (6% CGST + 6% SGST). [Paras 1, 4, 6, 8]Services supplied under the contract are covered by SI. No. 3(vi)(a) as 'original works' and GST @12% is applicable.Sub-contractor leg liable to same GST rate as main contractor - GST at the same rate as the main contractor is applicable to the sub-contractor leg. - HELD THAT: - In accordance with the decisions recorded by the GST Council and the insertion in the relevant notification, works contract services provided by a sub-contractor to the main contractor for services to a Governmental Authority attract GST at the same rate as applicable to the main contractor. Therefore the sub-contractor supplying works under the subject contract is liable to GST at 12%. [Paras 8, 9]The sub-contractor leg is liable to GST at the same rate (12%) as the main contractor.Final Conclusion: The Advance Ruling holds that Jaipur Development Authority is a Governmental Authority; the rejuvenation works constitute 'original works' under SI. No. 3(vi)(a) of the rate notification and attract GST @12% (CGST 6% + SGST 6%); the same rate applies to the sub-contractor leg. Issues Involved:1. Whether Jaipur Development Authority is covered under the status of Government Authority/Entity.2. Whether the nature of services provided under the contract are covered under Sl.no.3(vi)(a) of notification no. 11/2017 - Central Tax (Rate) dated 28th June 2017, as amended.3. What is the GST rate applicable on the project.4. What is the GST rate applicable on the subcontractor leg.Issue-wise Detailed Analysis:1. Status of Jaipur Development Authority:The applicant contended that the Jaipur Development Authority (JDA) is a Government Entity as per the notification no. 32/2017-Central Tax (Rate) dated 13.10.2017. JDA was established under the Jaipur Development Authority Act, 1982, to implement urban development in Jaipur. The definition of a Government Entity includes any authority set up by an Act of Parliament or State Legislature, with 90% or more participation by way of equity or control, to carry out functions entrusted by the government. The JDA meets these criteria as it was constituted under an act of the state legislature and functions under the guidelines laid down by the Government of Rajasthan.2. Nature of Services Provided:The services provided by the applicant under the contract with JDA include course correction/strengthening of Amanishah Nallah, sewerage interception, treatment and disposal, and preparation of a Master Plan for reclaimed lands. These services are aimed at enhancing the utility of the Dravyavati River (Amanishah Nallah) and include construction of civil structures, sewage treatment plants (STPs), and other development works. The applicant argued that these services fall under the category of 'original works' as defined in notification no. 12/2017-Central Excise (Rate) dated 28.06.2017, which includes new constructions, additions and alterations to abandoned or damaged structures, and erection, commissioning, or installation of plant, machinery, or equipment.3. Applicable GST Rate on the Project:The applicant contended that the GST rate applicable for the services provided under the contract is 12% (CGST 6% + SGST 6%), as per notification no. 11/2017 - Central Tax (Rate) dated 28th June 2017, amended with notification no. 24/2017-Central Tax (Rate) dated 21.09.2017 and notification no. 31/2017 - Central Tax (Rate) dated 13.10.2017. The services provided to the Central Government, State Government, Union Territory, local authority, or a Governmental Authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession are subject to this GST rate.4. GST Rate Applicable on Subcontractor Leg:The ruling clarified that the GST rate applicable to the subcontractor leg is the same as that applicable to the main contractor. As per the decisions taken in the 25th meeting of the GST Council held on 18.01.2018, Works Contract Services (WCS) provided by the subcontractor to the main contractor, who is providing WCS to the Central Government, State Government, Union Territory, local authority, Governmental Authority, or Government Entity, will attract GST at the rate applicable to the main contractor.Ruling:The services provided by M/s TPL - SUCG Consortium to Jaipur Development Authority under the contract are covered under notification no. 11/2017 - Central Tax (Rate) dated 28th June 2017, as amended, and the applicable GST rate is 12% (CGST 6% + SGST 6%). This rate is also applicable to the subcontractor leg under the said contract.