Kochi Water Metro Project works contract services qualify for 12% GST under Section 2(119) CGST Act as state government public authority project.

The AAR Kerala ruled that works contract services for the Kochi Water Metro Project qualify as works contract under Section 2(119) of CGST Act, involving construction of terminals and infrastructure for integrated water transport. The contract, though awarded by Kochi Metro Rail Ltd, is executed on behalf of Kerala Government as the de jure owner. The project falls under the exclusion from "business" definition as it's undertaken by state government as public authority. Therefore, the works contract services attract GST at 12% rate under Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017.

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Issues Involved:
1. Classification of the Kochi Water Metro Project under the term 'business' as per the explanation to heading 9954, item (vi) of Notification No. 11/2017 dated 28th June 2017.
2. Applicability of the CGST rate of 6% to the works contract awarded to Kool Home Builders as per Notification No. 11/2017 - Central Tax (Rate) dated 28th June 2017.
3. Applicability of the SGST rate of 6% to the works contract awarded to Kool Home Builders as per Notification SRO.No.370/2017 dated 30th June 2017.

Issue-Wise Detailed Analysis:

1. Classification of the Kochi Water Metro Project:
The applicant, Kool Home Builders, requested an advance ruling to determine whether the Kochi Water Metro Project falls under the exclusion specified for the term 'business' as per the explanation to heading 9954, item (vi) of Notification No. 11/2017 dated 28th June 2017. The project, managed by Kochi Metro Rail Limited (KMRL), involves constructing terminals and other infrastructure as part of urban planning to improve public amenities. The applicant argued that KMRL, a joint venture between the Government of India and the Government of Kerala, operates the project on behalf of the Government of Kerala, making it a governmental authority. The project is funded by the Government of Kerala and a loan from a German agency. The ruling referenced the Kerala Authority for Advance Ruling's earlier decision (KER/75/2019) that KMRL qualifies as a governmental authority under Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. The project is intended for public use, not for commerce or business, and thus falls under the exclusion from the term 'business' as defined in the notification.

2. Applicability of CGST Rate:
The applicant sought clarification on whether the works contract awarded to them qualifies for a 6% CGST rate under Notification No. 11/2017 - Central Tax (Rate) dated 28th June 2017. The ruling confirmed that the works contract services provided by the applicant, which include constructing terminal facilities, shore protection works, and access roads, fall under the definition of a works contract as per Section 2(119) of the CGST Act, 2017. The services provided are to the Government of Kerala through KMRL, a governmental authority, for a project intended predominantly for public use. Therefore, the works contract services are taxable at 12% GST (6% CGST + 6% SGST) as per entry at SI No. 3 (vi) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017.

3. Applicability of SGST Rate:
Similarly, the applicant sought clarification on the applicability of the 6% SGST rate under Notification SRO.No.370/2017 dated 30th June 2017. The ruling reiterated that the works contract services provided by the applicant to the Government of Kerala through KMRL are taxable at 12% GST (6% CGST + 6% SGST) as per the corresponding state tax notification. The project is classified under functions entrusted to the government under Article 243W of the Constitution, making it a public authority activity and not a business.

Ruling:
1. The Kochi Water Metro Project is an activity undertaken by the Government of Kerala as a public authority and is covered by the exclusion from the term 'business' as per the explanation to heading 9954 item (vi) of Notification No. 11/2017 dated 28th June 2017.
2. The works contract services performed by the applicant are taxable at 6% CGST as per entry at SI No. 3 (vi) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended.
3. The works contract services performed by the applicant are taxable at 6% SGST as per entry at Sl.No.3 (vi) of Notification No. 370/2017 State Tax (Rate) dated 30.06.2017 as amended.

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