Concessional GST for works contract denied where toll management supply to private concessionaire failed road and government-entry conditions.

Concessional works contract treatment under Notification No. 11/2017-C.T. (R) requires strict satisfaction of the recipient, subject-matter and end-use conditions. A composite supply for supply and commissioning of a Toll Management System to a private concessionaire was not to a specified recipient and was connected with a commercial highway project, so it did not qualify under Entry 3(vi). The contract also did not amount to construction or commissioning of a road, bridge, tunnel or terminal for road transportation under Entry 3(iv), and the subcontractor entry in Entry 3(ix) was unavailable because the underlying supply itself was not covered. The supply was therefore taxable at 18%.

---

---

Issues: (i) Whether the composite supply of works contract for supply and commissioning of a Toll Management System fell under Entry 3(vi) of Notification No. 11/2017-C.T. (R) dated 28 June 2017; (ii) whether the said supply fell under Entry 3(iv) of the said notification; (iii) whether the supply qualified under Entry 3(ix) as a works contract supplied by a sub-contractor to the main contractor; and (iv) whether GST was leviable at 12% or 18%.

Issue (i): Whether the composite supply of works contract for supply and commissioning of a Toll Management System fell under Entry 3(vi) of Notification No. 11/2017-C.T. (R) dated 28 June 2017.

Analysis: Entry 3(vi) applies only where the composite supply of works contract is provided to the Central Government, State Government, Union Territory, local authority, Governmental Authority or Government Entity, and the civil structure or original works are predominantly meant for use other than for commerce, industry or any other business or profession. The supply in question was made to a private concessionaire and not to the specified governmental recipient. The toll-related activity also had a business character within the meaning of business under section 2(17) of the Central Goods and Services Tax Act, 2017, so the condition of predominant non-commercial use was not met.

Conclusion: The supply did not fall under Entry 3(vi), and the answer was against the assessee.

Issue (ii): Whether the said supply fell under Entry 3(iv) of Notification No. 11/2017-C.T. (R) dated 28 June 2017.

Analysis: Entry 3(iv) covers composite supply of works contract by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of a road, bridge, tunnel or terminal for road transportation for use by the general public. The contract was only for supply, erection and commissioning of a Toll Management System on an already constructed highway stretch. The system was held not to be a road, bridge, tunnel or terminal, and the contract did not amount to construction of the roadway or terminal itself.

Conclusion: The supply did not fall under Entry 3(iv), and the answer was against the assessee.

Issue (iii): Whether the supply qualified under Entry 3(ix) as a works contract supplied by a sub-contractor to the main contractor.

Analysis: Entry 3(ix) applies only when the sub-contractor supplies composite works contract services to a main contractor providing services specified in item (iii) or item (vi) to the specified governmental recipients. Since the underlying supply itself was not covered by Entry 3(vi), the subcontractor entry was not attracted. The ruling also noted that the cited advance ruling turned on different facts and was binding only on the applicant in that case under section 103 of the Central Goods and Services Tax Act, 2017.

Conclusion: The supply did not fall under Entry 3(ix), and the answer was against the assessee.

Issue (iv): Whether GST was leviable at 12% or 18%.

Analysis: Since the supply was not covered by Entries 3(iv), 3(vi) or 3(ix) of Notification No. 11/2017-C.T. (R) dated 28 June 2017, the concessional rate of 12% was unavailable. The supply therefore fell under the residuary rate entry applied by the ruling.

Conclusion: GST was leviable at 18%, and the answer was in favour of the Revenue.

Final Conclusion: The Toll Management System contract was not entitled to the concessional works contract rate and was taxable at the higher applicable rate under the notification.

Ratio Decidendi: Concessional GST entries for works contract services must be strictly satisfied on the recipient, subject-matter and end-use conditions, and a toll-management supply to a private contractor for a commercial highway project does not qualify as works contract service for a road or as a non-commercial governmental works contract.

---