APIIC deemed Government Entity but construction work attracts 18% GST rate, not concessional 12% under Notification 24/2017

The AAR held that APIIC qualifies as a Government Entity under GST provisions, having 100% government shareholding as per its 2013-2014 annual report. However, the construction work undertaken by the applicant was deemed business-oriented, meant for promoting business and industry activities rather than governmental functions. Consequently, the AAR ruled that the works contract is not eligible for the concessional 12% GST rate under Notification No.24/2017, but instead attracts the standard 18% GST rate under SAC heading 9954 for construction services as a composite supply of works contract.

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Issues Involved:
1. Eligibility for concessional GST rate of 12% under Notification No. 11/2017-Central Tax (Rate).
2. Appropriate rate and classification of GST if concessional rate is not applicable.

Issue-wise Detailed Analysis:

1. Eligibility for Concessional GST Rate of 12%:
The applicant, M/s. Siddartha Constructions, sought an advance ruling on whether they are eligible for a concessional GST rate of 12% for services provided to Andhra Pradesh Industrial Infrastructure Corporation Limited (APIIC). The applicant argued that APIIC qualifies as a "Governmental Authority" or "Governmental Entity" and that the services provided are not for commercial purposes but for the office of the Hon'ble Minister for Industries.

The notification in question, No. 11/2017-Central Tax (Rate), prescribes a concessional GST rate of 6% for services provided to the Central Government, State Government, Union Territory, local authority, or a Governmental Authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession.

The applicant contended that APIIC is wholly owned by the Government of Andhra Pradesh and functions as a Governmental Authority or Entity. They also argued that the work involved is not for commercial purposes but for governmental functions.

2. Appropriate Rate and Classification of GST:
The Authority for Advance Ruling (AAR) examined whether APIIC qualifies as a Governmental Authority or Entity and whether the services provided are for non-commercial purposes. APIIC was determined to be a Governmental Entity as it is wholly owned by the Government of Andhra Pradesh.

However, the AAR concluded that the services provided by the applicant are for the promotion of business and industry, which are commercial activities. Therefore, the concessional GST rate of 12% is not applicable.

The appropriate classification for the services provided by the applicant falls under SAC heading No. 9954 (construction services), and the applicable GST rate is 18% (9% Central Tax and 9% State Tax).

Judgment Summary:
The AAR ruled that the applicant, M/s. Siddartha Constructions, is not eligible for the concessional GST rate of 12% under Notification No. 11/2017-Central Tax (Rate). The services provided are classified under SAC heading No. 9954, and the applicable GST rate is 18% (9% Central Tax and 9% State Tax).

Ruling:
1. Question: Is the applicant eligible for the concessional GST rate of 12%Rs.
Answer: Negative.
2. Question: What is the appropriate rate and classification of GST to be charged by the applicantRs.
Answer: SAC heading No. 9954 under construction services, with an applicable GST rate of 18% (9% Central Tax and 9% State Tax).

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