2023 (1) TMI 631 - AAAR - GST

AAAR allows 12% concessional GST rate for residential quarters construction at nuclear power project under Notification 11/2017

The AAAR, Tamil Nadu ruled that a works contract service for construction of residential quarters at Kudankulam Nuclear Power Project qualified for ... Classification of supply - rate of GST - execution of works contract service at Kudankulam Nuclear Power Project - Applicability of S.No vi (or) vii of Notification No.24/2017 dated 21.09.2017 attracting GST@12% or 18%? - HELD THAT:- From a joint reading of the MOA of NPCIL and the certificate dt.21.07.2022, it is evident that the works relating to construction of residential quarters are exclusively meant for use of the employees of NPCIL at Kundankulam Project and acquiring such buildings are objectives incidental or ancillary to attainment of the main object of NPCIL, a government entity - the AAR had held that in the absence of substantiation with regard to the fulfillment of the condition that the services were procured by NPCIL, a Government Entity, in relation to the work entrusted to them by the Central government, the concessional rate provided was not available to them. The appellant, through the MOA and the certification from NPCIL has established that the residential quarters constructed at Anuvijay township were meant exclusively for the employees and that as per the MOA, one of the Objects incidental to attainment of the main objects, provide NPCIL to acquire apartments as seen expedient, necessary or convenient to the Company for the purposes of its main object/business. The condition that the services so procured by the Government entity, in this case, NPCIL, is in relation to the work entrusted to it and therefore, the appellant are/were eligible for the concessional rate of tax @6% of CGST plus 6%of SGST as per entry 3(vi) of Notification No. 11/2017-C.T.(Rate) dated 28.06.2017 (as amended) read with the corresponding Notification under TNGSTA for the period upto 31.12.2021. Issues Involved:1. Applicability of GST rate for works contract service at Kudankulam Nuclear Power Project.2. Procedural aspect of paying differential tax through debit note under GSTR 1.Issue-wise Detailed Analysis:1. Applicability of GST Rate for Works Contract Service:The appellant, engaged in civil engineering and construction contracts, sought clarification on whether their works contract service at Kudankulam Nuclear Power Project would attract GST at 12% or 18%. The original ruling by the Authority for Advance Ruling (AAR) determined that the applicable GST rate was 18% under Sl. No. 3(xii) of Notification 11/2017-CT-Rate, not 12% under Sl. No. 3(vi). The AAR concluded that the construction of residential quarters for NPCIL employees was not in relation to any work entrusted to NPCIL by the Central Government.The appellant contended that the AAR did not adequately use its powers under Section 105 of the GST Act to obtain necessary documents from NPCIL. They argued that the construction of residential quarters was directly related to NPCIL's main activity of generating electricity, a function entrusted by the Central Government. The appellant provided a Memorandum of Association (MOA) of NPCIL and a certification letter from NPCIL confirming that the residential quarters were for the exclusive use of NPCIL employees and aligned with NPCIL's objectives.Upon review, the Appellate Authority found that the construction of residential quarters was indeed for the exclusive use of NPCIL employees and was incidental to NPCIL's main objectives. Therefore, the services procured by NPCIL were in relation to the work entrusted to it by the Central Government. Consequently, the appellant was eligible for the concessional GST rate of 12% (6% CGST + 6% SGST) under entry 3(vi) of Notification No. 11/2017-CT-Rate until 31.12.2021. However, due to an amendment effective from 01.01.2022, the applicable rate post-amendment was 18% (9% CGST + 9% SGST).2. Procedural Aspect of Paying Differential Tax:The appellant questioned whether they should pay the differential tax through a debit note under GSTR 1 if the GST rate was determined to be 18% instead of 12%. The AAR did not address this question, stating it was a procedural aspect outside the purview of Section 97(2).Ruling:The Appellate Authority modified the AAR's ruling, stating that the execution of works contract service for constructing residential quarters exclusively for NPCIL employees at Anuvijay Township was covered under entry Sl.No.3(vi) of Notification No. 11/2017-CT-Rate for the period up to 31.12.2021. Post 01.01.2022, due to the amendment, the applicable GST rate was 18%.This comprehensive analysis ensures all relevant legal terminologies and significant phrases from the original judgment are preserved, providing a detailed understanding of the issues and the final ruling.