GST on Works Contract

[Ethirajan Parthasarathy]

Earlier as per entry No.3(vi) of Notification 11/2017 of Central Tax (Rate) dt: ­28-06-17 services in the nature of works contract rendered to :

a) Central Government

b) State Government

c) Union Territory

d) Local authority

e) Government authority and;

f) Government entity

attracted concessional GST rate of 12%.

An amendment through Notification No.15/2021 of Central Tax (Rate) dt:-18/11/2021 out of the above list of 6 service recipients two viz.. Government entity and Government authority are removed

Hence, in my view such services to City Corporation or PWD department will continue to be 12%. Is this view correct?

[KASTURI SETHI]

Sh.Ethirajan Parthasarathy Ji,

Municipal Corporation is covered under Local authority and PWD is fully Govt department of State. Hence your view is correct. Also see Articles -243 P(e) and 243 Q of Constitution of India.

[PAWAN KUMAR]

dear sir, as per amendment only these has been removed "a Governmental Authority or a Government Entity", which is repitative, hence removed. The same does not amend the chargeability, tax rate will be same as 12% as per my view.

As per amended text:

[(vi) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, provided to the Central Government, State Government, Union Territory or a local authority, by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of -

[Shilpi Jain]

Government authority and government entity are different from SG, CG and Local authority.

Pls refer definition in the rate / exemption notification for def of GA and GE.

There was no repetition.

[KASTURI SETHI]

Sh.Pawan Kumar Ji,

Govt. authority is entirely different from Govt. entity and vice versa. Govt.authority and Govt. entity both are entirely different from Central Govt., State Govt., Union Territory, local authority. It is very much clear from the definitions. Govt.authority and Govt.entity have been omitted to disallow exemption. It is not repetitive.

Will you please inform the basis of your view ?

[PAWAN KUMAR]

Dear sir,

as per definition :

Governmental authority" means a board, or an authority or any other body established with 90% or more participation by way of equity or control by Government and set up by an Act of the Parliament or a State Legislature to carry out any function entrusted to a municipality under article 243W of the Constitution.

“Government Entity “ means an authority or a board or any other body including a society ,-

(i) Set up by an Act of Parliament or a State Legislature, or

(ii). Established by any Government,

With 90% or more participants by way of equity or control, to carry out any function entrusted by the Central Government, State Government, Union Territory or a Local Authority.

the definition is quire similar, no impact in terms of the tax virtue,

the ommission in the notification text was becasue of repitition of words, hence no impact, GST rate will be same.

[KASTURI SETHI]

Sh.Pawan Kumar Ji,

With due regards, I request you to peruse the literal/legal meaning of the words,'authority' and 'entity' in legal dictionary. In case you are not satisfied with mine replies as well as Madam Shilpi Jain's, I shall post my views with an illustration.

I am keen to know your response.

[PAWAN KUMAR]

Dear sir,

The definition which i shared was prescribed, in GST & service tax , you may please refer and extract the gist, if any other definition you may plz guide to us.

[KASTURI SETHI]

Q. How Govt. Authority is different from Central Govt. or State Govt. ?

A. It is worthwhile to go through the literal meaning of the word, 'authority'. As per the Law Lexicon (The Encyclopaedic Law Dictionary), 'Authority' is nothing but a power to do something; it is something given by word, and sometimes by writing; also it is by writ, warrant, commission, letter of attorney etc., and sometimes by law. The authority that is given must be to do a thing lawful.

In view of above legal meaning of the word, 'authority', 'Govt.Authority means Govt. authorizes/gives power to some person/institution/organization/corporation etc. to do something within framework of law. The authorised person works for Govt. Hence Govt. Authority. Such authority is separate from Central Govt. or State Govt. inasmuch as . The words, 'Central Govt.' or State Govt..' stand for where the Govt./controls/ rules/administers itself. Govt. does not authorise any person.Also see FAQs (Q.No.6) dated 18.8.2017. My views are to be read with the Explanation in clause 16 of Section 2 of IGST Act. Examples of Govt.Authority are DDA Delhi, Indian Institute of Technology, National Institute of Design etc.

[KASTURI SETHI]

Another example of Govt. Authority is Airport Authority of India

[KASTURI SETHI]

Q. How Govt. entity is different from Central Govt. or State Govt ?

Ans.It is worthwhile to go through the legal meaning of the word, 'entity' . As per S.B.Sarkar's dictionary of Central Excise, Customs & Service Tax 'entity' means a thing with distinct; a real thing, existence, an organization or being that possesses separate existence for tax purposes. This is in consonance with the definition of Govt.entity in terms of Notification No.12/17-CT(R) dated 28.6.17.

If we read conjointly above, NHPC is a Govt. entity because President of India and his nominee holds 100% in the company. Similarly, Uranium Corporation of India is a Govt.entity (100 % shares with President of India)- held AAR-Jharkhand in the case P.K.Aggarwal - 2019 (1) TMI 1369 - AUTHORITY FOR ADVANCE RULING, JHARKHAND.

To further clarify, Govt. Company is not Govt. or department of Govt.--held by the Supreme Court in the case Hindustan Steel Works.

This is how Govt. entity is different from Govt. Authority and Central Govt. and State Govt./UT.

AI Summary

GST rate on works contract: entitlement depends on whether the recipient qualifies as Central/State/UT or local authority under amended notification. Concessional GST applicability to works contracts depends on whether the recipient is within the preserved categories - Central Government, State Government, Union Territory or local authority - after Notification 15/2021 removed 'government authority' and 'government entity'. One view holds municipal corporations and PWDs remain eligible as local authority and State Government respectively; another contends the omitted, separately defined terms may have been intentionally excluded, so careful reference to definitions in the rate/exemption notifications is necessary to determine entitlement.