GST Concessional Rate for Hospital Construction Works Contract

The Authority for Advance Ruling (AAR) determined that the supply of works contract service for the construction of the medical institute and hospital for SAIL qualifies for a concessional GST rate of 12% (CGST @ 6% + SGST @ 6%) as per relevant notifications. The ruling stated that the applicable rate of GST on the contract awarded by NBCC for this project is 12%. The ruling is valid unless declared void and can be appealed to the Odisha State Appellate Authority for advance ruling within 30 days.

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Issues Involved:
1. Applicable rate of Goods and Service Tax (GST) on the contract awarded by NBCC for construction of ISPAT Post Graduate Medical Institute and Super Specialty Hospital for SAIL in Odisha.

Issue-Wise Detailed Analysis:

1. Applicable Rate of GST on the Contract:

Submission of the Applicant:
- The applicant, a national contractor, was awarded a contract by NBCC for the construction of ISPAT Post Graduate Medical Institute and Super Specialty Hospital at Rourkela Steel Plant for SAIL in Odisha on a Design, Engineering, Procurement, and Construction (EPC) basis.
- The contract value is Rs. 259,60,13,257.00, inclusive of all taxes, with adjustments for any changes in GST rates.
- The applicant argued that the GST rate on Works Contract Service is governed by various amendments to Notification No. 11/2017-Central Tax (Rate), which specifies a 6% CGST rate (i.e., 12% GST) for services provided to a Government Entity for a clinical establishment.
- The applicant contended that SAIL qualifies as a "Government Entity" as it was set up by an Act of Parliament and has significant government participation.

Discussion and Findings:
- The Authority for Advance Ruling (AAR) examined the relevant entries of Notification No. 11/2017-Central Tax (Rate) and its amendments.
- The AAR identified three pre-requisites for the concessional GST rate:
1. The supply must be a composite supply of works contract service.
2. The services must be provided to the Central Government, State Government, Union Territory, local authority, Governmental Authority, or Government Entity.
3. If provided to a Government Entity, the services must be procured in relation to a work entrusted by the government.

Analysis of Pre-requisites:
- Composite Supply of Works Contract Service: The contract involves the construction of a medical institute and hospital, which qualifies as a clinical establishment. The scope includes the supply of all goods and services required for completion, falling within the definition of works contract under Section 2(119) of the CGST Act, 2017.
- Provision to a Government Entity: The applicant argued that the services are provided to SAIL, a Government Entity, with NBCC acting merely as an executing agency. The AAR noted that NBCC is a public limited company and not a government entity, but accepted the applicant's contention that the ultimate service beneficiary, SAIL, is a Government Entity.
- Entrusted Work by Government: The AAR confirmed that SAIL was established by an Act of Parliament and carries out functions entrusted by the Central Government. The construction of the hospital is part of a central government-funded project, fulfilling the condition of being a work entrusted by the government.

Conclusion:
- The AAR concluded that the supply of works contract service for the construction of ISPAT Post Graduate Medical Institute and Super Specialty Hospital for SAIL qualifies for the concessional GST rate of 12% (CGST @ 6% + SGST @ 6%) as per Notification No. 11/2017-Central Tax (Rate) and its amendments.

Ruling:
- The applicable rate of GST on the contract awarded by NBCC for the construction of ISPAT Post Graduate Medical Institute and Super Specialty Hospital for SAIL is 12% (CGST @ 6% + SGST @ 6%).

Validity and Appeal:
- The ruling is valid under Section 103(2) of the GST Act until declared void under Section 104(1).
- The applicant or jurisdictional officer may appeal to the Odisha State Appellate Authority for advance ruling within 30 days from the date of receipt of the ruling.

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