GST rate changes apply to ongoing construction contracts based on advance payment or invoice dates under Section 14

The AAR, UP ruled on GST rate applicability for civil construction contracts with government departments. The applicant was awarded a redevelopment contract by Aligarh Smart City Limited dated 23.12.2021. Initially, works contract services were taxable at 12% under Notification 11/2017-CT (Rate). However, the rate was enhanced to 18% w.e.f 18.07.2022 vide Notification 03/2022. The AAR held that for ongoing continuous services, Section 14 of CGST Act, 2017 applies. Where advances are received or invoices raised before 18.07.2022, 12% GST rate applies; for advances/invoices after 18.07.2022, 18% rate applies.

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Issues Involved:
1. Applicability of a notification issued under the provisions of the CGST Act.
2. Determination of the liability to pay tax on any goods or services or both.

Summary:

Issue 1: Applicability of Notification No. 03/2022-Central Tax (Rate) dated 13.07.2022 w.e.f. 18.07.2022

The applicant, M/s PPS Builders Private Limited, sought clarification on whether to charge GST at 12% or 18% for contracts executed before the notification No. 03/2022-Central Tax (Rate) dated 13.07.2022, which increased the GST rate from 12% to 18% effective from 18.07.2022.

Issue 2: Determination of Liability to Pay Tax

The applicant is involved in civil construction work primarily with government departments. The contract in question was awarded by Aligarh Smart City Limited (ASCL) and executed on 27th December 2021. The applicant argued that the GST rate applicable at the time of bidding was 12%, and sought clarification on the applicable rate after the notification.

Discussion and Findings:

The Authority for Advance Ruling (AAR) examined the provisions under Section 14 of the CGST Act, 2017, which deals with changes in the rate of tax in respect of supply of goods or services. The AAR noted that the rate of GST on work contracts for roads, bridges, railways, metros, etc., was increased from 12% to 18% effective from 18.07.2022.

Ruling:

1) For contracts where advance payments were received or invoices were issued before 18.07.2022, the applicable GST rate is 12%.

2) For contracts where advance payments were received and invoices were issued after 18.07.2022, the applicable GST rate is 18%.

The ruling is valid within the jurisdiction of the Authority for Advance Ruling, Uttar Pradesh, and subject to the provisions under Section 103(2) of the CGST Act, 2017, until declared void under Section 104(1) of the Act.

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