Concessional GST on works contract services applied to a State-controlled public health institution until the notification was prospectively amended.
Works contract services for construction and extension of immovable property qualified for concessional GST because the recipient institution was treated as a governmental authority, being State-controlled and engaged in a public health function entrusted to municipalities and panchayats. The supply was also within the works contract category involving construction in execution of a contract. The concessional 12% rate applied up to 31.12.2021 under the then-current notification entry, but the amended entry effective from 01.01.2022 withdrew that concession for this category, so the higher 18% rate applied thereafter.
Issues: (i) Whether the recipient institution qualified as a governmental authority or government entity for the purpose of the concessional GST rate on works contract services. (ii) Whether the works contract services supplied for construction and extension of the site and building were taxable at 12% or 18%, and for what period.
Issue (i): Whether the recipient institution qualified as a governmental authority or government entity for the purpose of the concessional GST rate on works contract services.
Analysis: The concessional entry for works contract services applied where such services were supplied to the Central Government, State Government, local authority, governmental authority, or government entity and were connected with works entrusted to such entity. The institution was established by the State Government, remained under its administrative control, and its governing body was composed of government functionaries and nominees. Its functions were aligned with public health, which is a function entrusted to municipalities and panchayats under the Constitution.
Conclusion: The institution was treated as a governmental authority for the purpose of the notification.
Issue (ii): Whether the works contract services supplied for construction and extension of the site and building were taxable at 12% or 18%, and for what period.
Analysis: The supply was held to be a works contract because it related to construction and extension of immovable property involving transfer of property in goods in execution of the contract. The recipient also fell within the description of a clinical establishment. Accordingly, the concessional rate under the specified entry applied up to the amendment made effective from 01.01.2022. After that date, the revised notification withdrew the concessional treatment for this category and the general higher rate became applicable.
Conclusion: GST was chargeable at 12% up to 31.12.2021 and at 18% from 01.01.2022 onwards.
Final Conclusion: The ruling granted concessional treatment for the earlier period and applied the enhanced rate prospectively from the date of amendment, resulting in a mixed outcome on the tax rate question.
Ratio Decidendi: A works contract supplied to a State-controlled body performing a constitutionally entrusted public function can qualify for the concessional notification rate only while the applicable notification entry remains in force; once the entry is amended prospectively, the revised rate governs later supplies.
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AI Drafter ✕
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