Government Tourism Projects Face Higher GST Rate: Service Contracts with Public Entities Now Taxed at 9% Effective January 2022

KPC Projects Limited sought an advance ruling on GST rates for services provided to Telangana State Tourism Development Corporation. SC determined TSTDC qualifies as a government entity. The GST rate was 6% until 31.12.2021, then increased to 9% from 01.01.2022. The ruling clarified tax rate changes for works contracts with governmental entities, confirming the new applicable rate of 9% CGST & SGST.

---

---

Issues:
1. Eligibility for concessional GST rate on services provided to a government entity.
2. Appropriate rate and classification of GST to be charged.

Issue 1: Eligibility for Concessional GST Rate
The applicant, M/s. KPC Projects Limited, sought an advance ruling to determine the rate of tax under CGST & SGST on their supplies to Telangana State Tourism Development Corporation Limited (TSTDC). The key query was whether the applicant is eligible for the concessional GST rate of 12% as per Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The ruling authority examined the definitions of 'Government Authority' and 'Government Entity' as per Notification No. 31/2017 and concluded that TSTDC qualifies as a Government entity. Consequently, the contracts executed by the applicant for TSTDC fall under S.No. 3(vi) of the notification, making them taxable at 6% under CGST & SGST. However, an amendment effective from 01.01.2022 increased the tax rate to 9% for works executed for Governmental Entities or Authorities. Therefore, the ruling clarified that the applicable tax rate changed to 9% of CGST & SGST from 01.01.2022 onwards.

Issue 2: Appropriate Rate and Classification of GST
Regarding the appropriate rate and classification of GST to be charged by the applicant, the ruling authority reiterated the change in tax rate discussed in the previous issue. As per the ruling, for works contracts, including material and services, the tax rate was 6% of both CGST & SGST until 31.12.2021. However, effective from 01.01.2022, the rate increased to 9% of both CGST & SGST due to the deletion of 'Government Entity' and 'Governmental Authority' from the relevant notification. Therefore, the ruling confirmed that the appropriate rate and classification of GST to be charged by the applicant remained the same, i.e., 9% of CGST & SGST from 01.01.2022 onwards.

In conclusion, the advance ruling provided clarity on the eligibility for concessional GST rates and the revised tax rates applicable to works contracts executed for Government Entities or Authorities, emphasizing the changes effective from 01.01.2022.

---