2021 (4) TMI 615 - AAR - GST

Sub-contractor's work contract services taxed at 18% pre-2018; reduced to 12% after.

In Re: M/s. Kunal Structure India Private Limited.

The authority ruled that the services of work contract provided by the applicant as a sub-contractor were taxable at the rate of 18% for the period prior ... Classification of service - rate of tax - Works Contract - Construction service provided by the applicant in the capacity of sub-contractor to the main contractor - taxable at the rate of 12% for the period prior to 25.01.2018 or not - N/N. 11/2017-CT (Rate) dated 28.06.2017 was amended by N/N. 01/2018-CT (Rate) dated 25.01.2018 - HELD THAT:- Notification No. 01/2018-CT (Rate) dated 25.01.2018 a new entry no. 3(ix) was inserted in the principal rate Notification No. 11/2017-CT (Rate) dated 28.06.2017 vide which “Composite supply of works contract as defined in Clause (119) of Section 2 of the Central Goods and Services Tax Act, 2017 provided by a sub-contractor to the main contractor providing services specified in item (iii) or item (vi) above to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity” was made taxable @12% . The said amended Notification came into effect from the date of issue of the Notification. The said Notification is also published on the date of Notification in the Gazette of India. Further, an amendment in the Notification is prospective in nature, unless clearly specified to be clarificatory. Also the effective date of a Notification is always date of issue of Notification unless it is specified date of effect of the Notification. The Notification always came into effect from the date it was published in the Gazette of India and the subject Notification was issued in the Gazette of India on 25.01.2018 i.e. on the date it was issued. Therefore, Notification No. 01/2018-CT (Rate) dated 25.01.2018 is applicable/ came into effect prospectively and from the date of issue i.e. from 25.01.2018. The GST rate 12% prescribed under Sr. No. (ix) vide Notification No. 01/2018-CT (Rate) dated 25.01.2018 is effective from the date of issue of said Notification i.e. 25.01.2018. Issues Involved:1. Classification of services provided by the applicant.2. Applicability of GST rates on services provided by a sub-contractor before and after 25.01.2018.3. Interpretation of amendments to Notification No. 11/2017-CT (Rate) and Notification No. 01/2018-CT (Rate).Issue-wise Detailed Analysis:1. Classification of Services Provided by the Applicant:The applicant, M/s. Kunal Structure (India) Pvt. Ltd., entered into a contract for the construction of Deendayal Upadhyay Govt. Medical College, Rajkot with M/s. HLL Infra Tech Service (HITES) Ltd., a Government of India Enterprise. The services provided by the applicant are classifiable under heading No. 9954 (Construction service) as per the Scheme of classification of service annexed to the Notification No. 11/2017-CT (Rate) dated 28.06.2017.2. Applicability of GST Rates on Services Provided by a Sub-contractor Before and After 25.01.2018:The applicant sought an advance ruling to determine whether the services provided by them as a sub-contractor were taxable at the rate of 12% for the period prior to 25.01.2018. The relevant notifications and amendments considered were:- Notification No. 11/2017-CT (Rate) dated 28.06.2017: Initially provided the GST rate for construction services.- Amendment by Notification No. 01/2018-CT (Rate) dated 25.01.2018: Introduced new categories and rates for works contract services provided by sub-contractors.The applicant argued that the amendment introduced by Notification No. 01/2018-CT (Rate) should be considered prospective, effective from 25.01.2018, and not applicable retrospectively. They relied on the principle that amendments are prospective unless specified as clarificatory.3. Interpretation of Amendments to Notification No. 11/2017-CT (Rate) and Notification No. 01/2018-CT (Rate):The authority examined the notifications and amendments in detail:- Notification No. 11/2017-CT (Rate) dated 28.06.2017: Provided a GST rate of 18% for composite supply of works contract as defined in clause 119 of Section 2 of the CGST Act, 2017.- Notification No. 01/2018-CT (Rate) dated 25.01.2018: Introduced a reduced GST rate of 12% for services provided by a sub-contractor to the main contractor supplying services to the government.The authority concluded that the amendment by Notification No. 01/2018-CT (Rate) dated 25.01.2018 is prospective in nature and effective from the date of its issue, i.e., 25.01.2018. Therefore, the reduced GST rate of 12% is not applicable for the period prior to 25.01.2018.Ruling:The authority ruled that the services of work contract provided by the applicant as a sub-contractor were taxable at the rate of 18% for the period prior to 25.01.2018. The reduced rate of 12% introduced by Notification No. 01/2018-CT (Rate) is applicable only from 25.01.2018 onwards.