2022 (7) TMI 749 - AAR - GST

Construction work for medical institute qualifies for concessional 12% GST rate under Notification 11/2017

AAR Odisha ruled that construction work for ISPAT Post Graduate Medical Institute and Super Specialty Hospital at Rourkela qualified for concessional GST ... Concessional rate of GST on works contract services - qualification as a Government Entity for concessional GST - composite supply as works contract - eligibility under Notification No. 11/2017 for construction of clinical establishment - advance ruling jurisdiction under Section 97(2) of the CGST Act, 2017Composite supply as works contract - eligibility under Notification No. 11/2017 for construction of clinical establishment - concessional rate of GST on works contract services - Whether the supply by the applicant to SAIL is a composite works contract for construction of a clinical establishment and eligible for concessional GST @ 12% (CGST 6% + SGST 6%). - HELD THAT: - The Authority examined the scope of the MoU and the Letter of Award and applied the definition of 'works contract' in Section 2(119) of the CGST Act. The project involves design, engineering, procurement and construction of an immovable property (medical institute and super specialty hospital) with transfer of property in goods in execution of the contract and thus falls within the ambit of works contract. The structure is predominantly for use as a clinical establishment and not for commerce or industry. All pre-requisites of entry 3(vi)(b) of Notification No. 11/2017-(i) nature of service as works contract for construction of a clinical establishment, (ii) supply to a Government Entity, and (iii) procurement by the Government Entity in relation to a work entrusted to it by the Central Government-were found satisfied on the materials before the Authority. Applying the Notification, the works contract service supplied to SAIL attracts the concessional combined rate of 12% (CGST 6% + SGST 6%). [Paras 6, 7]The supply is a composite works contract for construction of a clinical establishment and is taxable at concessional rate of 12% (CGST 6% + SGST 6%).Qualification as a Government Entity for concessional GST - advance ruling jurisprudence applied - Whether Steel Authority of India Ltd. (SAIL), Rourkela qualifies as a 'Government Entity' for the purpose of Notification No. 11/2017. - HELD THAT: - The Authority relied on its earlier ruling in Order No. 07/ODISHA-AAR/2020-21 dated 09.03.2021 which examined SAIL's statutory origin, legislative history and funding and concluded that SAIL satisfies the conditions of Explanation 4(x) to the Notification. On those findings, SAIL was held to be a 'Government Entity' for GST purposes. The present application accepts and applies that earlier conclusion as binding for the instant supply. [Paras 6, 7]SAIL, Rourkela qualifies as a 'Government Entity' for the purposes of the Notification and the concessional rate.Advance ruling jurisdiction under Section 97(2) of the CGST Act, 2017 - scope of admissible questions before AAR - refund procedure under Section 54 of the CGST Act, 2017 - Admissibility and treatment of the applicant's questions on excess tax already paid and entitlement to refund; and the procedure to claim refund. - HELD THAT: - The Authority observed that the question whether taxes already paid in excess (difference between 18% paid and 12% applicable) constituted an excess tax did not fall within the matters adjudicable under Section 97(2) and therefore was not a fit question for advance ruling before the AAR. Questions on refund and procedure were noted to concern Section 54 of the CGST Act; the Authority did not adjudicate entitlement to refund on merits but directed the applicant to follow the statutory refund provisions under Section 54 for any claim. [Paras 6, 7]The question on whether the 6% paid in excess falls outside the AAR's remit is inadmissible before the Authority; questions on refund and procedure are to be pursued under Section 54 of the CGST Act and are not decided on merits by this Ruling.Final Conclusion: The Authority rules that the works contract for construction of ISPAT Post Graduate Medical Institute and Super Specialty Hospital supplied to SAIL, Rourkela is a composite works contract for a clinical establishment and, with SAIL held to be a Government Entity, the supply is taxable at the concessional combined rate of 12% (CGST 6% + SGST 6%) under Notification No. 11/2017; the AAR declined to adjudicate the applicant's question on excess tax paid as outside its jurisdiction and directed that any refund claim be pursued under Section 54 of the CGST Act, 2017. Issues Involved:1. Applicable rate of GST on the contract awarded by SAIL to the Applicant.2. Applicability of the determined tax rate to the entire value of the works contract.3. Eligibility for refund of excess tax paid.4. Procedure for claiming the excess amount paid.Issue-Wise Detailed Analysis:1. Applicable Rate of GST on the Contract Awarded by SAIL:The Applicant sought an advance ruling on the applicable rate of GST for the contract awarded by Steel Authority of India Ltd. (SAIL) for the construction of 'ISPAT Post-Graduate Medical Institute and Super Specialty Hospital' at Rourkela Steel Plant. The ruling confirmed that SAIL is a Government Entity and the construction work is entrusted by the Central Government to SAIL. Therefore, the tax rate applicable to the value of the contract between the Applicant and SAIL is leviable at 12% [CGST @ 6% + SGST @ 6%] as per Entry no 3(vi) (a) or (b) of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017.2. Applicability of the Determined Tax Rate to the Entire Value of the Works Contract:The ruling clarified that the determined tax rate of 12% is applicable to the entire value of the works contract covered by the Memorandum of Understanding dated 13.08.2018. The Applicant's supply is classified under serial no. 3(vi)(a) or (b) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, which covers services provided to a Government Entity by way of construction of a structure predominantly for use as a clinical establishment.3. Eligibility for Refund of Excess Tax Paid:The Applicant had paid 18% tax on its invoices raised to SAIL and sought clarification on whether the excess tax of 6% (18% paid - 12% applicable) is refundable. The ruling stated that the question does not fall under the provisions of Section 97(2) of the CGST Act, 2017 and thus does not merit discussion/consideration at the forum.4. Procedure for Claiming the Excess Amount Paid:Regarding the procedure for claiming the excess amount paid, the ruling referred to Section 54 of the CGST Act, 2017, which deals with the refund of taxes. The Applicant was advised to follow the procedure/provision of Section 54 for claiming a refund.Conclusion:The ruling confirmed that the applicable GST rate for the contract between the Applicant and SAIL is 12% [CGST @ 6% + SGST @ 6%]. The excess tax paid by the Applicant may be eligible for a refund under Section 54 of the CGST Act, 2017, and the Applicant should follow the prescribed procedure for claiming the refund. The ruling is valid subject to provisions under Section 103(2) and until declared void under Section 104(1) of the GST Act. Appeals can be made to the Odisha State Appellate Authority for Advance Ruling under Section 100 of the CGST/OGST Act, 2017 within 30 days from the date of receipt of the advance ruling.