RCM applicability of Government Entity

[Raman Juyal]

If a government entity receives construction services from CPWD (a government agency), the CPWD is liable to pay tax under the Forward Charge Mechanism (FCM), or the government entity under the Reverse Charge Mechanism (RCM).

[KASTURI SETHI]

Sh.Juyal Ji,

Pl.elaborate your query with full facts.  Also mention name of Govt. entity. Are you sure it is a Govt. entity ? 

[Raman Juyal]

Sh. Kasturi Ji,

Yes it is government entity as established by the act of parliament. Govt. entity has received a SCN regarding the RCM applicability on construction services received from CPWD. THerefore, the question arises that:

1. Is CPWD a Central Govt. and services provided are liable to RCM?

2. Are services received by govt. entity from CPWD are exempt?

[KASTURI SETHI]

What is the period involved ?  There was a change in the definition of 'Government'. 

[Raman Juyal]

The matter is related to 2017-2022

[KASTURI SETHI]

1. Is CPWD a Central Govt. and services provided are liable to RCM ?  

 Ans. Yes. In simple words, Govt. entity is not 100% Govt. GST is to be paid by Govt. entity  under RCM. 

2. Are services received by govt. entity from CPWD are exempt ? 

Ans. No. See Notification no. 12/17-CT (R) dated 28.06.17 as amended (Serial No.8). Services provided by Central Govt, State Govt., U.T. or Local Authority to another Central Govt, State Govt, U.T. or Local Authority are exempt but Govt. entity and Govt. Authority are not mentioned for the purpose of exemption.

[KASTURI SETHI]

In the query,  you have wrongly mentioned CPWD as a Govt. agency. CPWD is a Central Govt. department and not agency and it is conspicuous by the name itself.

 Pl. also go through the definitions of 'Govt. entity' and 'Govt. authority' in GST laws in this context.

[KASTURI SETHI]

Even Govt. Company is not 'Govt.' or 'Govt. Department' ---held by Hon'ble Supreme Court in a number of judgements.

Even if all the shares of company are owned by Govt. of India, the company is not a department of Govt. It is distinct from Govt. of India----Hon'ble Supreme Court 

[Raman Juyal]

Sh. Kasturi Ji,

Thank you for your valuable comments on the issue. 

[Shilpi Jain]

Wikipedia mentions this

The Central Public Works Department (CPWD, Hindi: केंद्रीय लोक निर्माण विभाग) is a department under the Ministry of Housing and Urban Affairs of India and is in charge of public sector works. It serves as the builder, developer and manager of Central government properties. With time, its area of operations has also expanded to roadways and Bridge engineering.

So it looks like it is a Govt department and thereby to be regarded as Govt.?

AI Summary

Reverse charge mechanism applies where Central Government department supplies services to a separate government entity, not covered by exemption. Supplies from CPWD, a Central Government department, to an entity established by statute are subject to the Reverse Charge Mechanism where the recipient is a separate government entity; Government-to-Government exemption notifications cover services between Central/State/UT/Local Authorities but do not extend to 'government entity' or separate government companies, so the recipient may be liable under RCM.