APIIC construction work classified as business promotional activity, not eligible for concessional 12% GST rate

AAR held that APIIC is a government entity as Andhra Pradesh government holds 100% shareholding through nominees. The construction work undertaken by applicant for APIIC was deemed business-oriented promotional activity, not eligible for concessional 12% GST rate under Notification 24/2017. The contract was classified as composite supply of works contract under SAC 9954, attracting 18% GST (9% CGST + 9% SGST) under Notification 11/2017 instead of the concessional rate sought by applicant.

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Issues Involved:
1. Eligibility of the applicant to avail the concessional rate of GST at 12% as prescribed in S.No.3(vi) of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017.
2. Appropriate rate and classification of GST to be charged by the applicant if the concessional rate is not applicable.

Issue-Wise Detailed Analysis:

1. Eligibility for Concessional Rate of GST at 12%:

The applicant, M/s. Siddartha Constructions, engaged in construction services, entered into a contract with Andhra Pradesh Industrial Infrastructure Corporation Limited (APIIC) for providing power infrastructure, fire fighting & alarm system, and street lighting to proposed RBF sheds. The applicant sought an advance ruling on whether they are eligible for a concessional GST rate of 12% under S.No.3(vi) of Notification No.11/2017-Central Tax (Rate).

The applicant argued that their services qualify as "works contract services" under Section 2(119) of the CGST Act, 2017, and that APIIC qualifies as a "Governmental Authority" or "Government Entity." They claimed that the works were for non-commercial purposes, thus eligible for the concessional rate.

The authority examined whether APIIC qualifies as a Governmental Authority or Entity and concluded that APIIC is a "Government Entity" as it is wholly owned by the Government of Andhra Pradesh.

However, the authority also examined the nature of the construction work and determined that the services provided were meant for business activities, primarily to promote industry and trade, thus falling under commercial use. Consequently, the services did not qualify for the concessional rate of 12%.

2. Appropriate Rate and Classification of GST:

Given that the concessional rate was deemed inapplicable, the authority classified the services provided by the applicant under SAC heading No. 9954, which pertains to construction services. The applicable rate of GST was determined to be 18% (9% CGST and 9% SGST) under entry no (ii) of serial No.3 of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017.

Ruling:

Question: In view of the services provided by the applicant to APIIC, is the applicant eligible to avail the concessional rate of GST at 12% as prescribed in S.No.3(vi) of the Notification No.11/2017- Central Tax (Rate) dt: 28.06.2017, as amended byRs.

Answer: Negative

Question: If not, what is the appropriate rate and classification of GST to be charged by the applicantRs.

Answer: SAC heading No. 9954 under construction services, with entry no (ii) of serial No.3 of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017 i.e., Composite Supply of Works Contract as defined in clause 119 of Section 2 of Central Goods and Services Act, 2017 and the applicable rate of tax is 18% (9% under Central Tax and 9% State Tax).

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