AAR declines GST exemption ruling for water supply project due to insufficient documentation under Notification 02/2018-Central Tax

The AAR Rajasthan declined to rule on GST exemption applicability under Clause 3A of Notification No. 02/2018-Central Tax (Rate) for a composite supply involving operation and maintenance of water supply project. The applicant sought exemption for sub-contracted work but failed to provide essential documentation including scope of work, work orders, or evidence of proposed supply nature. The AAR found the tender document insufficient as it contained only general details without specific work scope. Without clear documentation establishing whether the supply would be goods, services, or both, and lacking material facts about the proposed transaction, the authority could not determine exemption eligibility and refused to make a ruling.

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Issues Involved:
1. Classification of goods or services.
2. Determination of the liability to pay tax on goods or services.

Issue-wise Detailed Analysis:

1. Classification of Goods or Services:

The applicant, M/s SKS Infra Projects, sought an advance ruling on whether the services provided by them as a sub-contractor to the principal contractor, who has been allotted a tender by the Government of Rajasthan, would attract the same 'nil' rate of tax under the GST regime as applicable to the principal contractor. The principal contractor's services involve a composite supply of goods and services, where the value of goods does not exceed 25% of the total value, thus attracting a 'nil' rate of tax as per Sr. no. 3A of Notification No. 02/2018-Central Tax (Rate) dated 25.01.2018. The applicant argued that since the sub-contractor performs the same functions and provides a composite supply of goods and services to the government entity, the same tax exemption should apply.

2. Determination of the Liability to Pay Tax:

The applicant contended that the liability of the sub-contractor should mirror that of the principal contractor to avoid frustrating the government's intent behind providing tax exemptions. They emphasized that the sub-contractor's work, being part of the overall project for the government, should also be eligible for the same 'nil' rate of tax.

Findings, Analysis & Conclusion:

1. The Authority for Advance Ruling (AAR) examined the facts and submissions, including the relevant provisions of the GST Act and Notification No. 02/2018-Central Tax (Rate).

2. The AAR noted that the applicant had only applied for a tender document and had not entered into any contract or agreement with the principal contractor by the date of the personal hearing.

3. The applicant provided a 'Notice Inviting Tender' (NIT) document, which lacked specific details about the scope of work to be performed by the applicant. This absence of clear scope made it difficult to ascertain whether the work would involve a composite supply, works contract, or immovable property.

4. The AAR highlighted that without concrete information or documents, it could not determine if the work to be awarded would meet the criteria of Clause 3A of the Notification No. 02/2018-Central Tax (Rate).

5. The applicant did not furnish any supporting documents to substantiate the exemption eligibility of the principal contractor or any documentary evidence of acceptance of the tender by the principal contractor. Furthermore, the name of the principal contractor was not provided.

6. Without documentary evidence to substantiate the proposed scope of work, mode of supply, or any contractual agreements, the AAR found it prudent to refrain from pronouncing a ruling.

Ruling:

No ruling was extended due to the lack of material evidence and specifics of the proposed supply, as stated in para 13 of the judgment.

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