Local authority status determines GST concessional works contract rate for water infrastructure supplies under the amended exemption entry.

Composite works contract services for construction and design of PCCP pipelines and a pumping plant were examined for concessional tax treatment under Entry 3(iii) of Notification No. 11/2017-Central Tax (Rate). The decisive issue was whether Uttar Pradesh Jal Nigam qualified as a "local authority" under Section 2(69) of the CGST Act. Applying the statutory definition, the authority found that the Jal Nigam was not elected by inhabitants, lacked the requisite autonomy, and did not control a municipal or local fund in the prescribed manner; it was only a governmental authority. Because Entry 3(iii), as amended, applies only to supplies to the Central Government, State Government, Union territory, or a local authority, the concessional rate was held inapplicable and the residual construction rate applied.

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Issues: Whether the composite works contract services supplied for construction and design of PCCP pipelines and a pumping plant to Uttar Pradesh Jal Nigam fall under Entry 3(iii) of Notification No. 11/2017-Central Tax (Rate) as services supplied to a local authority, and consequently attract the concessional rate of tax.

Analysis: The applicant's supply was examined as a composite works contract involving construction, erection and commissioning of a water supply infrastructure. The decisive question was whether the recipient, Uttar Pradesh Jal Nigam, qualified as a "local authority" within Section 2(69) of the Central Goods and Services Tax Act, 2017. Applying the statutory definition and the settled indicia of a local authority, the authority found that the Jal Nigam was not elected by inhabitants, did not enjoy sufficient autonomy, and did not control or manage a municipal or local fund in the manner required by the definition. The authority also noted that the Jal Nigam answered the description of a governmental authority, but after the amendment made by Notification No. 15/2021-Central Tax (Rate), Entry 3(iii) was confined to supplies made to the Central Government, State Government, Union territory or a local authority. Since the recipient was not a local authority, the concessional entry was held inapplicable, and the residual rate for construction services applied.

Conclusion: The composite works contract services supplied to Uttar Pradesh Jal Nigam were not covered by Entry 3(iii) of Notification No. 11/2017-Central Tax (Rate) and were taxable at the higher applicable rate. The ruling was against the applicant.

Final Conclusion: The recipient did not satisfy the statutory test of a local authority, so the concessional works contract entry could not be invoked for the supply in question.

Ratio Decidendi: For the concessional rate under Entry 3(iii) of Notification No. 11/2017-Central Tax (Rate) to apply, the recipient must fall strictly within the categories named in the entry, and a body that is only a governmental authority does not qualify once the entry is confined to the Central Government, State Government, Union territory or a local authority.

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