2021 (8) TMI 526 - AAR - GST

Ruling on Construction Services Tax Rate & Input Credit Eligibility

The Authority for Advance Ruling, Andhra Pradesh, determined that the services provided by a company as a subcontractor for construction of roads and ... Works Contract services - Classification of services - services pertaining to construction, erection, commissioning and completion of 'Bridges and Roads' provided by the applicant as a subcontractor to the Contractors - award of construction contract pertaining to construction/widening of roads by the Government Entities such as National Highway Authority of India - rate of GST on outward supplies - RA bills raised on main contractor - input tax credit on inward supply of JCB, Road Roller, Grader, Hydra Crane, Transit Mixer, Generator, Excavator and Sensor Paver. HELD THAT:- The applicant has stated that they are proposed to be a sub-contractor for construction, erection, commissioning widening of Roads and completion of Bridges for the works awarded by the National Highway Authority of India to the main contractor on the National High Way (erstwhile NH 5). - National Highways Authority of India was set up by an act of the Parliament, NHAI Act, 1988, under the administrative control of the Ministry of Road Transport and Highways. It was set up as a central authority to develop, maintain and manage the National Highways entrusted to it by the Government of India. The principal rate Notification No. 11/2017 was amended vide Notification No. 1/2018-Central Tax (Rate), dated 25.01.2018 to amend the entries at Serial No 3 by inserting new entries at Serial No. 3(ix), 3(x), 3(xi) and 3(xii). The Composite Supply, of Works Contract services provided by a sub-contractor to the main contractor were dealt with in entries at Serial No. 3(ix) & 3(x) of the amended Notification No. 11/2017 dated 25.01.18. But the entry at serial No. 3(iv) was not clubbed in the newly created serial Nos. 3(ix) and 3 (x). Further, the said supply of service is excluded from the 18% tax rate entry newly enumerated at 3(xii) which reads as” (xii) Construction services other than (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x) and (xi) - the supply of service rendered by the applicant falls under the item 3(iv) of the amended provisions of the notification 11/2017 - Central Tax (Rate) and the Rate of Tax applicable is 12%. Input tax credit - JCB, Road Roller, Grader, Hydra Crane, Transit mixer, Generator, Excavator, Sensor Paver - HELD THAT:- The applicant is eligible to claim ITC with subject to the satisfaction of certain pre requisite conditions mentioned in Section 16 (2) such as, being in possession of tax invoice, having actually received goods or services, tax being paid by the supplier, return being filed under Section 39 etc. - Under Section 17(5) (c), the restriction on claiming Input Tax Credit by a taxable person is applicable on the inward supply of works contract service unless it is an input service for further supply of works contract service. The restriction applies only if the works contract service is used for the construction of immovable property other than plant and machinery. In the instant case, the applicant seeks clarification on the claim of input tax credit on inward supply of the following goods, JCB, Road Roller, Grader, Hydra Crane, Transit Mixer, Generator, Excavator and Sensor Paver, The inward supply of the stated goods neither fall under works contract services as per Section 17(5) (c) and these goods received by the applicant are made use of for the construction of an immovable property, which is certainly not on his own account as per section 17(5) (d) - it is clear that the clauses of blocked credits under section 17(5) (c) & (d) are not applicable to the instant case and thus eligible for claiming Input Tax Credit subject to the requisite conditions as mentioned in the Section 16 (2) of the CGST Act, 2017. Issues: Classification of works contract services; Rate of tax on outward supplies; Eligibility for input tax credit on specific goods.Classification of Works Contract Services:The Authority for Advance Ruling, Andhra Pradesh, considered an application by a company acting as a subcontractor for construction, erection, and commissioning of roads and bridges for the National Highway Authority of India (NHAI). The applicant sought clarification on the classification of their services. The authority analyzed the relevant provisions of the Central Goods and Services Tax Act, 2017 and the notifications issued thereunder. It was determined that the services provided by the applicant fell under Serial No. 3 (iv) of Notification No.11/2017 as amended, which pertains to composite supply of works contracts for construction of roads and bridges for public use. The rate of tax applicable was specified as 12% (CGST 6% + SGST 6%).Rate of Tax on Outward Supplies:The authority also addressed the query regarding the rate of tax chargeable on the outward supplies, specifically on the RA bills raised on the main contractor. It was clarified that the rate of tax applicable for such supplies was 12% (CGST 6% + SGST 6%), as per the relevant provisions of the CGST Act.Eligibility for Input Tax Credit on Specific Goods:Regarding the eligibility to claim input tax credit on inward supply of goods like JCB, Road Roller, Grader, Hydra Crane, Transit Mixer, Generator, Excavator, and Sensor Paver, the authority examined the provisions of Section 16 of the CGST Act. It was highlighted that the applicant could claim input tax credit on these goods, subject to fulfilling the conditions specified in Section 16(2) of the Act. The authority further explained the restrictions under Section 17(5) related to works contract services and construction of immovable property, clarifying that the applicant, as a subcontractor, was eligible for input tax credit on these goods as the restrictions did not apply to their scenario.In conclusion, the Authority for Advance Ruling, Andhra Pradesh, provided detailed analysis and rulings on the classification of services, rate of tax on outward supplies, and eligibility for input tax credit, ensuring clarity on the applicable provisions of the GST Acts for the specific circumstances presented in the case.