KSEBL eligible for input tax credit on deposit works under Sections 16-17 CGST Act Rules 42-43

The AAR Kerala ruled that questions regarding taxability of services provided by contractors to the applicant (KSEBL) fall outside advance ruling scope as they concern inward supplies, not transactions undertaken by the applicant. The authority held that KSEBL is eligible for input tax credit on deposit works subject to Sections 16-17 of CGST Act and Rules 42-43. KSEBL must pay GST under reverse charge mechanism on rent-a-cab services from unregistered suppliers per Notification 13/2017. For deposit works, time of supply is determined by payment receipt, requiring receipt vouchers and tax payment through GSTR-3B returns.

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Issues Involved:
1. Exemption from GST for Pure Services or composite supply services with material value less than 25%.
2. Refund of taxes collected by the contractor and remitted to the department.
3. Eligibility of input tax credit on Deposit works.
4. Proportionate credit based on data in GSTR-2A.
5. Applicability of Reverse Charge on Rent a Cab from Unregistered Suppliers.
6. Practice of raising GST invoice for Deposit works after the completion of service.

Summary:

Issue 1: Exemption from GST for Pure Services or composite supply services with material value less than 25%
The Authority ruled that no ruling can be given since the question does not pertain to a transaction undertaken or proposed to be undertaken by the applicant.

Issue 2: Refund of taxes collected by the contractor and remitted to the department
The question was deemed not relevant due to the ruling on Issue 1.

Issue 3: Eligibility of input tax credit on Deposit works
The Authority examined three scenarios:
a) When the work is wholly outsourced to a third-party contractor and GST is paid to the contractor.
b) When KSEBL purchases specific materials separately and outsources only the labor.
c) When KSEBL uses materials from its stock and outsources only the labor.
In all scenarios, the applicant is eligible for availing credit of tax paid on the inward supply of inputs, input services, and capital goods used or intended to be used for the purpose of the outward supply of services, subject to the conditions and restrictions prescribed in Sections 16 and 17 of the CGST Act, 2017 read with Rules 42 and 43 of the CGST Rules, 2017.

Issue 4: Proportionate credit based on data in GSTR-2A
The question was deemed not relevant due to the ruling on Issue 3.

Issue 5: Applicability of Reverse Charge on Rent a Cab from Unregistered Suppliers
The applicant is liable to pay GST as the recipient of services in respect of the services of renting any motor vehicle designed to carry passengers received from any person other than a body corporate, irrespective of the status of registration of the supplier as per entry at SI. No. 15 of Notification No. 13/2017 CT (Rate) dated 28.06.2017 as amended.

Issue 6: Practice of raising GST invoice for Deposit works after the completion of service
As per provisions of sub-section (2) of Section 31 of the CGST Act, 2017 read with Rule 47 of the CGST Rules, 2017, the applicant shall issue a tax invoice in respect of the supply of services, namely "Deposit Works," within 30 days from the date of supply of the service. The applicable GST in respect of the payments received in advance shall be discharged as mentioned in Para 7.22 above.

Ruling:
1. No ruling on exemption from GST for Pure Services or composite supply services.
2. Refund of taxes not relevant.
3. Eligible for input tax credit on Deposit works in all scenarios.
4. Proportionate credit not relevant.
5. Liable to pay GST under Reverse Charge for Rent a Cab services from unregistered suppliers.
6. Must issue tax invoice within 30 days from the date of supply of service; applicable GST on advance payments must be discharged accordingly.

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