Construction company eligible for concessional GST rate for government contracts under CGST Act: Implications and Application The ruling determined that the construction company is eligible for a concessional GST rate of 12% for works contracts awarded by government entities like ...
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Construction company eligible for concessional GST rate for government contracts under CGST Act: Implications and Application
The ruling determined that the construction company is eligible for a concessional GST rate of 12% for works contracts awarded by government entities like the Vikram Sarabhai Space Centre and Mis. Infrastructure Kerala Ltd. The contracts involving supply of materials and services fall under the definition of works contracts per the CGST Act, 2017. Notification No. 11/2017 - Central Tax (Rate) specifies the applicable rate for such contracts to be 12% GST (6% CGST and 6% SGST) for projects awarded by Central or State Government bodies, including those related to specific projects like building construction and medical college development.
Issues: Rate of tax applicable for works contracts awarded by Government authorities.
Analysis: The applicant, a construction company, received work orders for projects from the Vikram Sarabhai Space Centre and Mis. Infrastructure Kerala Ltd. The contracts included both supply of materials and services. The applicant sought an advance ruling on the applicable tax rate for these government-awarded works contracts.
The Vikram Sarabhai Space Centre, a part of the Indian Space Research Organisation, awarded a contract to the applicant for the construction of a building. The recipient of the services provided by the applicant in this case is the Department of Space of the Government of India.
Similarly, Mis. Infrastructure Kerala Ltd, acting as a Special Purpose Vehicle for the Department of Health and Family Welfare of the Government of Kerala, awarded a project to the applicant for the development of a Medical College. The recipient of services in this contract is the Department of Health and Family Welfare of the Government of Kerala.
The services provided by the applicant fall within the definition of a works contract as per Section 2(119) of the CGST Act, 2017, which involves the transfer of property in goods during the execution of the contract.
Notification No. 11/2017 - Central Tax (Rate) specifies that composite supply of works contracts provided to Central or State Government entities for specific types of projects are eligible for a concessional GST rate of 12%.
Considering the nature of the contracts and the recipients of the services, the applicant is eligible for the concessional GST rate of 12% as per the relevant notification. Therefore, the ruling issued states that the services provided by the applicant under the government-awarded works contracts are covered under the specified entry of the notification and attract GST at the rate of 12% [6% CGST and 6% SGST].
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