Government entities qualify for GST benefits but airport construction services taxed at 18% despite government supply

The AAR Karnataka ruled that Karnataka State Police Housing and Infrastructure Corporation Limited and Karnataka Residential Educational Institutions Society qualify as Government Entities under GST law. However, works contract services for airport terminal buildings and greenfield airports, though supplied to government authorities, are predominantly commercial in nature and not covered under concessional GST entries. Following amendments to notification 22/2021-Central Tax (Rate) dated 31.12.2021, these construction services attract GST at 18% (CGST 9% and KSGST 9%) effective from 18.07.2022 under entry 3(xii) of notification 11/2017.

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Issues Involved:
1. Applicable GST rates for various government works contract services executed by the applicant.

Issue-wise Detailed Analysis:

1. Admissibility of the Application:
The application is admissible under Section 97(2)(e) of the CGST Act, 2017, as it pertains to the determination of the liability to pay tax on any goods or services or both.

2. Facts of the Case:
The applicant, a Public Limited Company, seeks advance ruling on the applicable GST rates for several government works contracts, including:
- Construction of Airport Terminal Building at Sogane Village, Shivamogga.
- Development of Greenfield Airport at Vijaypur.
- Construction of High Security Prison at Central Prison, Parappana Agrahara, Bangalore.
- Construction of Basava International Center and Museum at Kudalasangam.
- Construction of Government School Buildings and Hostels at various places in Karnataka.

3. Applicable GST Rates:
The applicant refers to Notification No.15/2021-Central Tax (Rate) dated 18/11/2021, which increased the GST rate on certain works contract services provided to Government Authority and Government Entity from 12% to 18% effective from 01-01-2022.

4. Governmental Authority or Government Entity:
The ruling examines whether the entities to whom the applicant provides services qualify as Governmental Authority or Government Entity as per Notification No.11/2017-Central Tax (Rate), dated 28.06.2017, as amended by Notification No.31/2017-Central Tax (Rate), dated 13.10.2017.

5. Entities Considered as Government Entities:
- Karnataka State Police Housing and Infrastructure Corporation Limited: Incorporated under the Companies Act 1956 with all shares held by the Government of Karnataka, qualifies as a Government Entity.
- Kudala Sangama Development Board: Established under the Kudala Sangama Development Board Act 1994 with more than 90% of the board members from the State Government, qualifies as a Government Entity.
- Karnataka Residential Educational Institutions Society (KRIES): Formed under the Societies Registration Act, managed by the State Government, qualifies as a Government Entity.

6. Specific Works Contracts:
- Airport Terminal Building at Sogane Village and Greenfield Airport at Vijaypur: These are works supplied to the State Government but predominantly meant for commerce, thus covered under entry 3(xii) of Notification No.11/2017-Central Tax (Rate).
- Other Contracts: The construction of High Security Prison, Basava International Center and Museum, and Government School Buildings are covered under entry 3(xii) of Notification No.11/2017-Central Tax (Rate), as amended.

7. Amendments to Notifications:
- Notification No.22/2021-Central Tax (Rate), dated 31.12.2021: Removed Governmental Authority or Government Entity from the notification.
- Notification No.03/2022-Central Tax (Rate), dated 13.07.2022: Further amended the notification to specify applicable GST rates.

8. Applicable GST Rates Post-Amendments:
- All the contracts awarded to the applicant are covered under entry 3(xii) of Notification No.11/2017-Central Tax (Rate), as amended, attracting GST at 18% (CGST 9% and KSGST 9%) effective from 18.07.2022.

Ruling:
- Airport Terminal Building in Shivamogga: GST at 9% CGST as per entry No. 3(xii) of Notification No.11/2017-Central Tax (Rate).
- Greenfield Airport at Vijayapura: GST at 9% CGST as per entry No. 3(xii) of Notification No.11/2017-Central Tax (Rate).
- High Security Prison: GST at 9% CGST w.e.f 01.01.2022 as per entry No. 3(xii) of Notification No.11/2017-Central Tax (Rate), as amended.
- Basava International Center and Museum: GST at 9% CGST w.e.f 01.01.2022 as per entry No. 3(xii) of Notification No.11/2017-Central Tax (Rate), as amended.
- Residential School Complex in Chittapur: GST at 9% CGST w.e.f 01.01.2022 as per entry No. 3(xii) of Notification No.11/2017-Central Tax (Rate), as amended.

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