2018 (11) TMI 58 - AAR - GST

MPPGCL's Residential Quarters Construction GST Rate Determination

The Authority determined that Madhya Pradesh Power Generation Company Limited (MPPGCL) qualifies as a 'Government Entity' for GST purposes due to its ... Rate of GST - Construction services - works contract in relation to construction of road, bridges, buildings, civil structures of government, semi-government and private undertakings, secured through tenders in the case of government undertakings, and through personal negotiations in case of private undertakings - Scope of 'Government Entity' - N/N. 11/2017Central Tax (rate) dated 28.06.2017 - Concessional rate of GST @12% applicable or tax rate applicable at 18%? - Sr. No.3(vi)(c) of Notification no.11/2017-CT (Rate) dtd.28.06.2017. Whether MPPGCL, a Government Entity or not? - Held that:- In the Application itself that MPPGCL has been established by the Government of Madhya Pradesh and the Government of Madhya Pradesh has a 100% shareholding in the company. The State Government is also exercising full control over the activities of the said company. Needless to say that in the given circumstances M/s MPPGCL qualifies to be called and termed as a 'Government Entity' for the purpose of GST law, as it fulfils the necessary and sufficient conditions laid down under notification. Applicable Rate of GST - benefit of concessional rate of GST - Held that:- The civil construction of residential quarters is neither the primary work entrusted to MPPGCL nor it has any bearing on the work i.e. power generation by any means. Accordingly, we fail to understand as to why the benefit of concessional rate @12% GST should be available to this particular works contract awarded to the Applicant? The intention of the legislature has been to concessional rate to such work which has been entrusted to a government entity for public interest in general. Any work having direct involvement in the entrusted work i.e. power generation would merit exemption envisaged under Sr.No.3(vi)(c) of the Notification No.11/2017-CT(Rate) under CGST Act and corresponding notification under MPGST Act 2017, but extrapolating and extending this concessional rate to any or all activities of MPPGCL will not only be unwarranted but also defeat the very purpose of concessional rate. The impugned activity of the applicant would attract GST @18% (9% CGST + 9% SGST) classifiable under SAC 9954 read with Notification No.11/2017-Central Tax (Rate) and corresponding notification under MPGST Act 2017. Ruling:- M/s. Madhya Pradesh Power Generation Company Limited is a Government Entity as defined under Notification No.31/2017-Central tax (Rate) for the purpose of GST law. The works contract service of construction of 599 residential quarters allotted to the applicant by MPPGCL will merit classification under SAC 9954 and would attract GST @ 18% (9% CGST + 9% SGST). Issues Involved:1. Whether Madhya Pradesh Power Generation Company Limited (MPPGCL) is a 'Government Entity'Rs.2. Applicable GST rate for the works contract service of construction of 599 residential quarters provided to MPPGCL.Issue-wise Detailed Analysis:1. Whether Madhya Pradesh Power Generation Company Limited (MPPGCL) is a 'Government Entity'Rs.The applicant company, M/s. Shreeji Infrastructure Private Limited, raised the question of whether MPPGCL qualifies as a 'Government Entity' under GST law. According to Notification No. 31/2017 - Central Tax (Rate), a 'Government Entity' is defined as an authority or a board or any other body including a society, trust, or corporation, set up by an Act of Parliament or State Legislature, or established by any Government, with 90% or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Territory, or a local authority.The Authority found that MPPGCL was established by the Government of Madhya Pradesh, with the state government holding 100% shareholding and exercising full control over its activities. Thus, MPPGCL qualifies as a 'Government Entity' for the purpose of GST law.2. Applicable GST rate for the works contract service of construction of 599 residential quarters provided to MPPGCL.The applicant company charged GST at 18% (9% CGST + 9% SGST) for the construction of 599 residential quarters, whereas MPPGCL argued that the applicable rate should be 12% (6% CGST + 6% SGST) based on Notification No. 11/2017 - Central Tax (Rate), specifically entry 3(vi)(c) under Heading 9954, which applies to composite supply of works contract provided to a government entity by way of construction of a residential complex predominantly meant for self-use or for use by their employees.The Authority examined whether the construction of residential quarters for MPPGCL staff falls under the concessional rate of 12%. It was determined that although MPPGCL is a 'Government Entity', the construction of residential quarters is not a work entrusted to MPPGCL by the state government. The primary work entrusted to MPPGCL is power generation, and the construction of residential quarters does not directly relate to this principal work.The Authority agreed with the departmental opinion that the construction of residential quarters does not qualify for the concessional rate of 12% GST as it is not a service procured by MPPGCL in relation to a work entrusted by the state government. Therefore, the applicable GST rate for the works contract service of construction of 599 residential quarters is 18% (9% CGST + 9% SGST).Ruling:1. MPPGCL is a Government Entity as defined under Notification No. 31/2017 - Central Tax (Rate) for the purpose of GST law.2. The works contract service of construction of 599 residential quarters provided to MPPGCL will attract GST at 18% (9% CGST + 9% SGST).3. This ruling is valid subject to the provisions under section 103(2) until and unless declared void under Section 104(1) of the GST Act.