2024 (7) TMI 1194 - AAR - GST

GST rate for road bridge construction services depends on supply timing: 12% before July 18 2022, 18% after under Section 97(2)

Kerala AAR ruled that GST rate determination for works contract services provided to Kerala State Transport Project (KSTP) for road and bridge ... Scope of Advance Ruling - Status of Kerala State Transport Project (KSTP) in GST - Government Authority or Government Entity or Government Department - GST rate on the works contract services provided by a Government Contractor to KSTP i.e., construction of Roads and bridges for public use Scope of Advance Ruling - What is the status of KSTP in GST viz, Government Authority or Government Entity or Government Department? - HELD THAT:- This question is not covered in any of the matters enumerated under sub-section (2) of Section 97 of the CGST Act. Hence, there is no need to pronounce ruling on the same. What is the GST rate on the works contract services provided by a Government contractor to KSTP, ie., construction of roads and bridges for public use? - HELD THAT:- In the instant case, the recipient of the applicant i.e, Kerala State Transport Project (KSTP) is a wing constituted under the Kerala Public Works Department to execute externally aided projects and specialized projects. The main aim of this wing is the upgradation of the State highway roads. The strategic option study made for the upgradation of State highways and major district roads conducted by M/s. Rail India Technical and Economic Service Limited led to the formation of KSTP under the Kerala Public Works Department - the works contract services provided by the applicant to KSTP by way of construction of roads and bridges is for the use of the general public. As such, the rate of tax for works contract services provided by the applicant to KSTP by way of construction of roads and bridges for public use will be taxable @ 12% - till 17.07.2022 the rate of tax for works contract services by way of construction of roads and bridges for public use was 12% (CGST @ 6% and SGST @ 6%) and thereafter, i.e, w.e.f 18.07.2022 it is 18%. The services provided by the applicant by way of construction of roads and bridges for public use will be taxable @ 12% (CGST @ 6% and SGST @ 6%) if the time of supply as determined in accordance with section 14 of the CGST Act falls any date prior to 18.07.2022, otherwise it will be taxable @ 18%. Issues Involved:1. Status of Kerala State Transport Project (KSTP) in GST: Government Authority, Government Entity, or Government Department.2. GST rate on works contract services provided by a Government Contractor to KSTP for construction of roads and bridges for public use.Issue-wise Detailed Analysis:1. Status of Kerala State Transport Project (KSTP) in GST:- The applicant sought clarification on whether KSTP is a Government Authority, Government Entity, or Government Department.- The Authority for Advance Ruling (AAR) determined that this question does not fall under any of the subject matters listed in sub-section (2) of Section 97 of the CGST Act.- Consequently, no ruling was issued on this question.2. GST Rate on Works Contract Services Provided to KSTP:- The applicant provides composite supply of works contract services, specifically the construction of roads and bridges, to various government departments, including KSTP.- The applicant was uncertain about the applicable GST rate due to the recent increase from 12% to 18% as per Central Tax Notification No. 13/2021, effective from 01.01.2022.- The AAR examined the relevant provisions and notifications under the CGST Act and KSGST Act, noting that the provisions are substantially the same except for certain differences.Key Points Discussed:- Notification No. 11/2017-Central Tax (Rate): Entry No. 3(iv) specifies that works contract services for the construction of roads and bridges for public use are taxable at 12% (CGST @ 6% and SGST @ 6%).- Amendment via Notification No. 03/2022-Central Tax (Rate): Effective from 18.07.2022, the reduced rate of 12% was omitted, increasing the tax rate to 18% (CGST @ 9% and SGST @ 9%).Conclusion:- The AAR ruled that the works contract services provided by the applicant for the construction of roads and bridges for public use are taxable at 12% (CGST @ 6% and SGST @ 6%) if the time of supply, determined as per Section 14 of the CGST Act, is before 18.07.2022.- If the time of supply is on or after 18.07.2022, the services will be taxable at 18% (CGST @ 9% and SGST @ 9%).Ruling:- Question 1: No ruling issued as the question is not covered under sub-section (2) of Section 97 of the CGST Act.- Question 2: The GST rate for works contract services provided by the applicant to KSTP for the construction of roads and bridges for public use is 12% (CGST @ 6% and SGST @ 6%) if the time of supply is before 18.07.2022, and 18% (CGST @ 9% and SGST @ 9%) if the time of supply is on or after 18.07.2022.