NHPC Ltd's Construction for Road Building Exempt from GST under Notification No. 12/2017-Central Tax (Rate)

The ruling concluded that NHPC Ltd's construction activity for road building, funded by the Ministry of External Affairs, is exempt from GST under Notification No. 12/2017-Central Tax (Rate). As NHPC Ltd qualifies as a Government Entity and meets all exemption criteria, including the work being entrusted by the Central Government, the service provided is exempt from GST. Consequently, the issues related to time of supply and GST liability on reimbursements do not apply due to the exempt status of the service.

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Issues Involved:
1. Requirement to pay GST under reverse charge for construction of road.
2. Time of supply when advance payment is released.
3. GST liability on the amount deposited with Central Fund and reimbursed by MEA.

Issue-Wise Detailed Analysis:

Issue (A): Requirement to Pay GST under Reverse Charge for Construction of Road

The applicant, M/s. NHPC, sought clarity on whether they must pay GST under reverse charge as per Notification No. 13/2017 dated 28.06.2017 for payments made to PWD, Uttarakhand for road construction. The construction activity involves both supply of goods and services, classified as supply of service under Schedule II of the CGST/SGST Act, 2017.

NHPC Ltd, a Government of India enterprise under the Ministry of Power, is entrusted by the Ministry of External Affairs (MEA) to construct the road with funds from the MEA's "Aid to Nepal" budget. The funds are considered grants, and NHPC acts as the implementing agency.

Notification No. 12/2017-Central Tax (Rate) exempts services supplied by a Government Entity to the Central Government against grants. NHPC Ltd qualifies as a "Government Entity" since it was established with 100% equity by the President of India and remains under the administrative control of the Ministry of Power.

The criteria for exemption under the notification are:
- Service provider must be a Government entity.
- Service receiver must be the Central Government.
- Consideration must be in the form of grants.
- Work must be entrusted by the Central Government.

NHPC Ltd meets all these criteria, making their service exempt from GST. Consequently, sub-contracting the work to PWD, Uttarakhand is also exempt from GST. The 25th GST Council Meeting recommended that if the principal contractor's work is exempt, sub-contractors are also exempt.

Thus, the ruling concluded that NHPC Ltd's activity is exempt from GST, and the question of reverse charge does not arise.

Issue (B): Time of Supply When Advance Payment is Released

Given that NHPC Ltd's activity is exempt from GST, the issues of time of supply and the applicability of GST on reimbursements are irrelevant. No GST provisions apply to these issues since the service in question falls under exempt services.

Issue (C): GST Liability on the Amount Deposited with Central Fund and Reimbursed by MEA

Similar to the time of supply issue, the GST liability on the amount deposited with the Central Fund and reimbursed by the MEA is not applicable. Since the primary service is exempt, any related financial transactions are also exempt from GST.

Order:

1. No GST is applicable on the applicant's activity as it falls under exempted services per Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.
2. Issues of time of supply and GST on reimbursement are not applicable since the service is exempt.

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