Clarification on GST Rates for Government Works Contracts

The Authority for Advance Rulings, Kerala clarified the GST rates for various works contracts. Works contracts awarded by the Government and Central University of Kerala attract a 12% GST rate, while projects like the construction of a Biotech lab and administrative block at Life Science Park, Trivandrum, undertaken by a State Public Sector Undertaking, are subject to an 18% GST rate. The ruling emphasized that the nature of the work and the entities involved determine the applicable GST rate for works contracts in government projects and subcontracts.

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Issues:
1. Determination of GST rate for works contracts undertaken by a contractor for various government projects and subcontracts.

Analysis:
The applicant, a contractor for government projects, sought an advance ruling on the GST rate for different contracts involving construction works. The issue revolved around the applicability of GST rates for works contracts awarded by different entities. The Authority examined the relevant provisions of the GST Act, specifically the amendment to notification No. 8/2017, to determine the applicable tax rates. It was clarified that composite supply of works contracts provided to specified entities such as Central Government, State Government, local authorities, etc., falls under either 12% or 18% GST category based on the nature of the work.

In the first case, the ruling confirmed that works contracts awarded by specific government departments, including civil structural, plumbing, electrical, and other installations, attract 12% GST. Similarly, for the construction of a non-science building at Central University of Kerala, the applicable tax rate was also deemed to be 12% GST, irrespective of the involvement of RITES Ltd. The judgment emphasized that the Central University of Kerala falls under the category of entities eligible for the 12% GST rate.

Furthermore, regarding the construction of a Biotech lab and administrative block at Life Science Park, Trivandrum, the ruling determined that the project, being a commercial venture of a State Public Sector Undertaking, is subject to 18% GST. This decision was based on the classification of services under Notification No. 11/2017 Central Tax (Rate). The Authority concluded that works contracts awarded by the government attract 12% GST, including subcontracts, whereas specific projects like those at Central University of Kerala and Life Science Park, Trivandrum, are subject to different GST rates based on their nature and entities involved.

In summary, the Authority for Advance Rulings, Kerala issued specific rulings for each type of works contract, clarifying the applicable GST rates as follows:
i) Works contracts awarded by the Government - 12% GST.
ii) Works contracts awarded by Central University of Kerala - 12% GST.
iii) Works contracts awarded by HLL Infra Tech Services Ltd. for the construction of Biotech lab and administrative block at Life Science Park, Trivandrum - 18% GST.

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