2019 (11) TMI 159 - AAR - GST

Taxable Rates Clarified for Electrical Infrastructure Contracts under GST Notification

In Re: M/s. Maxwell Electrical Engineers

The applicant's services for works contracts involving transformers and electrical infrastructure were found to be taxable at 9% CGST and 9% KGST under ... Rate of tax - main contractor or sub-contractor - applicability of entry SI No 3 (vi) (a) of notification 11/2017-CGST (Rate) as amended till date or Entry SI No. 3 (ix) of 11/2017 -Central Tax (Rate) as amended - HELD THAT:- It is pertinent to note that the applicant is principal contractor and providing supply of service to government entities as composite works contracts per provision of 2(119) such as design, erection, testing, commissioning, including pre-commissioning activities in relation to or incidental to installation of transformer of various capacity and providing through electrical infrastructures by extending 11 KV high transmission lines and Low transmission lines - the recipient of supply is actively engaged in commerce, business and trading of Electricity. On this count the composite works carried out by the applicant for the said Corporation are predominantly meant for trade and commerce. Therefore the applicant does not fulfill the conditions as prescribed in item no. (vi)(a) of Serial number 3 of Notification No. 11/2017 - Central Tax (Rate) dated 28-06-2017. The applicant is therefore not eligible for the concessional rate of 6% CGST and 6% KG ST under item no. (vi)(a) of Serial number 3 of Notification No.11/2017 - Central Tax (Rate) dated 28-06-2017 - The composite supply of works contract provided by the applicant is taxable at the rate of 9% CGST and 9% KGST under item no. (ii) of serial no. 3 till 28.03.2019 and thereafter at the same rate under item no. (xii) of serial number 3 of the amended Notification No. 11/2017 - Central Tax (Rate) dated 28-06-2017. Issues Involved:1. Applicability of tax rate under entry SI No 3 (vi) (a) of Notification 11/2017-CGST (Rate) as amended.2. Applicability of tax rate under entry SI No 3 (ix) of Notification 11/2017-CGST (Rate) as amended.3. Determination of applicable tax rate if the above entries are not applicable.Issue-wise Detailed Analysis:1. Applicability of Tax Rate under Entry SI No 3 (vi) (a) of Notification 11/2017-CGST (Rate) as Amended:The applicant, a proprietorship concern registered under GST, sought an advance ruling to determine the applicable tax rate for their services. They are engaged in works contracts involving design, erection, testing, commissioning, and installation of transformers and electrical infrastructure. The applicant argued that their services fall under entry no. 3 (vi) (a) of Notification 11/2017-CGST (Rate), which specifies a 6% CGST and 6% KGST rate for services provided to government entities for non-commercial purposes.The authority examined the nature of the services and the contracts with government entities such as Chamundeshwari Electricity Supply Corporation Ltd. It was determined that the services provided by the applicant were predominantly for commercial purposes, as the recipient entity was engaged in the business of distributing and selling electricity. Therefore, the applicant's services did not qualify for the concessional tax rate under entry no. 3 (vi) (a).2. Applicability of Tax Rate under Entry SI No 3 (ix) of Notification 11/2017-CGST (Rate) as Amended:The applicant also sought clarification on whether their services as a sub-contractor would fall under entry no. 3 (ix) of Notification 11/2017-CGST (Rate), which provides a 6% CGST and 6% KGST rate for services provided by a sub-contractor to a main contractor offering services specified under entry no. 3 (vi).The authority noted that the applicant was the principal contractor and not a sub-contractor. Therefore, entry no. 3 (ix) was not applicable to the applicant's case.3. Determination of Applicable Tax Rate if the Above Entries are Not Applicable:Since the applicant's services did not qualify under entries no. 3 (vi) (a) or 3 (ix), the authority examined the applicable tax rate under other relevant entries of Notification 11/2017-CGST (Rate). It was concluded that the services provided by the applicant were taxable at the rate of 9% CGST and 9% KGST under item no. (ii) of serial no. 3 until 28.03.2019. After this date, the applicable rate remained the same under item no. (xii) of serial no. 3 of the amended notification.Ruling:1. The applicable tax rate for the composite supply of works contracts undertaken by the applicant is 9% under the CGST Act and 9% under the KGST Act under item no. (ii) of SI. No. 3 until 28.03.2019, and thereafter under item no. (xii) of SI. No. 3.2. The amendments to Notification 11/2017-CGST (Rate) do not affect the taxability of the applicant's transactions, as they are covered under item no. (ii) of Serial No. 3 until 28.03.2019 and under item no. (xii) of Serial No. 3 from 29.03.2019 onwards. The transactions are not covered under item no. (vi) of Serial No. 3.