Taxable status of sub-contract services for worker training under GST clarified by Authority

The Authority ruled that the services provided under a sub-contract to the main contractor for training workers were taxable at 18% GST. Exemptions under SI. No. 69 or SI. No. 72 of Notification 12/2017-Central Tax (Rate) did not apply to the applicant as the services were not directly provided to the State Government. The main contractor could qualify for exemption under SI No. 72 if specific conditions were met.

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Issues:
Rate of tax applicable on services provided under sub-contract to main contractor for training workers and admissibility of SI. No. 69 and SI No. 72 of Notification 12/2017-Central Tax (Rate).

Analysis:
The applicant sought an advance ruling on the tax rate for services provided under a sub-contract to the main contractor for training workers and the applicability of SI. No. 69 and SI No. 72 of Notification 12/2017-Central Tax (Rate). The applicant claimed that the main contractor is eligible for exemption under SI. No. 69 or SI. No. 72 based on the nature of services provided. They relied on a ruling from Madhya Pradesh Advance Ruling Authority to support their interpretation of the law.

During the personal hearing, the applicant's representative reiterated the facts and submissions. They argued that the services provided under the sub-contract should also be exempted based on the exemption granted to the main contractor. They emphasized that the services are ultimately provided to the Government of Maharashtra under a training program funded by the state government.

The Authority considered the submissions and relevant facts. They analyzed the provisions of the CGST Act and the KGST Act, noting that the two statutes are similar. The Authority examined the entitlement of the main contractor for exemption under SI. No. 69 and SI No. 72 of the Notification. They found that the main contractor would not be eligible for exemption under SI. No. 69 but could qualify for exemption under SI No. 72 if certain conditions were met.

The Authority concluded that the exemption applicable to the main contractor was not extended to the applicant as the services were not directly provided to the State Government. Therefore, the services to be provided by the applicant under the sub-contract were deemed taxable at 18% IGST or 9% each of CGST & KGST. The ruling stated that SI. No. 69 or SI. No. 72 of Notification 12/2017-Central Tax (Rate) were not applicable to the applicant.

In summary, the Authority ruled that the rate of 18% GST applied to the services to be provided under the sub-contract to the main contractor for training workers, and the exemptions under SI. No. 69 or SI. No. 72 of Notification 12/2017-Central Tax (Rate) did not apply to the applicant based on the specific circumstances and conditions outlined in the ruling.

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