Works contract concessional GST rate denied for TANGEDCO retrofitting work; residual 18% tax applied.

Works contract services for retrofitting and strengthening TANGEDCO's headquarters were examined as a composite supply under the CGST Act. The concessional GST rate under entry 3(vi) of Notification No. 11/2017-Central Tax (Rate) was unavailable because the work was not shown to be a civil structure or original work meant predominantly for non-business use, and it was not connected to a function entrusted by the Government to the Government Entity. As TANGEDCO's core activity is generation and distribution of electricity on commercial principles, the service did not satisfy the concessional conditions and was taxed at 18% under the residual entry.

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Issues: Whether the works contract services provided to TANGEDCO for retrofitting and strengthening works were eligible for the concessional GST rate under entry 3(vi) of Notification No. 11/2017-Central Tax (Rate), and if not, what rate applied.

Analysis: The supply was examined as a composite supply of works contract under section 2(119) of the CGST Act, 2017. Although TANGEDCO was treated as a Government Entity, the concessional entry required the service to be for a civil structure or original work meant predominantly for use other than commerce, industry, or business, and, in the case of a Government Entity, to relate to a work entrusted to that entity by the Government. The work in question related to retrofitting and modification of the headquarters building of TANGEDCO, whose core activity is generation and distribution of electricity on commercial principles. The work was not linked to the entrusted function of generation and distribution of electricity, and therefore the conditions for the concessional entry were not satisfied.

Conclusion: Entry 3(vi) of Notification No. 11/2017-Central Tax (Rate) was held inapplicable, and the services were taxed at 18% under the residual entry.

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