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The applicant, M/s. Core Construction, provides work contract services (WCS) as a sub-contractor for the construction of roads used by the general public. They argue that their services fall under Notification No. 20/2017-CT(Rate) dated 22/08/2017, which specifies a 12% GST rate for such services. The applicant cites various entries and notifications, including Notification No. 01/2018 C.T. (R) dated 25/01/2018, and contends that the 12% rate should apply to sub-contractors as well, given that their work is identical to that of the main contractor. The applicant also references several rulings from different Advance Ruling Authorities to support their position.
The jurisdictional officer, however, argues that the majority of the subcontractor's work is completed and that retrospective amendments to invoices would be difficult. They also contend that Notification 1/2018-Central Tax (Rate) dated 25 January 2018 specifies a 12% GST rate only for services provided to the Central Government, State Government, Union territory, a local authority, a Governmental Authority, or a Government Entity, and that the applicant's services do not qualify for this rate, thus attracting an 18% GST rate.
Upon review, the Authority finds that the applicant's services fall under Entry No. (iv) of Notification No. 20/2017-Central Tax (Rate) dated 22nd August 2017, which specifies a 12% GST rate for the construction of roads, bridges, tunnels, or terminals for road transportation for use by the general public. The Authority notes that this entry does not specify that it applies only to main contractors, and thus should apply to sub-contractors as well. The Authority also observes that the GST Council's 25th meeting recommended a 12% GST rate for WCS provided by sub-contractors to main contractors providing services to government entities, further supporting the applicant's position.
The Authority concludes that the applicant's services are covered under Entry No. 3(iv) of Notification No. 20/2017-Central Tax (Rate) dated 22nd August 2017, and thus attract a 12% GST rate (6% CGST and 6% SGST).
Issue 2: Applicability of 12% or 18% GST rateThe jurisdictional officer's argument that the applicant's services should attract an 18% GST rate is based on the absence of a specific entry for sub-contractors under Notification No. 1/2018-Central Tax (Rate) dated 25 January 2018. However, the Authority finds that the principal Notification No. 11/2017, as amended, does not restrict the 12% GST rate to main contractors only. The Authority also notes that the GST Council's recommendations and the wording of the relevant entries support the application of the 12% GST rate to sub-contractors.
The Authority concludes that the applicant's services are taxable at a 12% GST rate (6% CGST and 6% SGST), as specified under Entry No. 3(iv) of Notification No. 20/2017-Central Tax (Rate) dated 22nd August 2017.
Order:Question 1: What Tax Rate to be charged by the sub-contractor to the main contractor on Work Contract Services on Construction of RoadsRs.
Answer: The rate to be charged is 6% SGST plus 6% CGST, total 12%, as discussed above.
Question 2: Whether to Charge GST tax of 12% or 18%Rs.
Answer: As mentioned in Answer to Question No. 1 above.
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