GST Rate Applicable as on 31-03-2022 Works contract (Road Work) to Govt. Entity

[sacheen Patil]

Hello Sir/Madam

What is the GST rate applicable as on 31-03-2022 for Works contract from Govt. Entity.

scenario 1 & 2 as below

1) Road Work not for general public use i.e. service road besides canal.

2) Road Work for general public use i.e. service road besides canal for the use of farmers

Thank you.

[Shilpi Jain]

Road whether for use for general public or otherwise is to be regarded as road and the rate of tax for both have to be the same.

[sacheen Patil]

 Shilpi Jain Madam,

Please guide me with below

POINT NO I

"irrigation work"  as defined in THE KARNATAKA IRRIGATION ACT, 1965.

(h) "irrigation work" includes,-
(i) all reservoirs, tanks, wells, anicuts, bandharas, ponds, spring ponds, canals, field-channels, thalapariges, pipes, channels, aqueducts and sluices constructed, maintained or controlled wholly or partly by Government for the supply, conveyance or storage of water;
(ii) all works, embankments, structures, supply and escape channels, connected with such reservoirs, tanks, anicuts, bandharas, channels, canals, pipes, sluices, and all roads constructed for facilitating the construction or maintenance of such reservoirs, tanks, anicuts, bandharas, canals, channels pipes and sluices;

POINT NO II

GST RATE IS 18% for Supply of service to Governmental Authority or a Government Entity, as per Notification No. 22/2021- Central Tax (Rate) Dated: 31st December, 2021

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

(a) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);

(b) canal, dam or other irrigation works;

(c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal.

POINT NO III

GST rate applicable is 12% 

(iv) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,-

(a) a road, bridge, tunnel, or terminal for road transportation for use by general public;

Thank you

[Sadanand Bulbule]

In my opinion, the road on the side of the irrigation canal is integrated part of canal itself. And such service roads  are not for general public use except for the departmental authorities. Further such service road does not come under the control/property of the Local Authorities, but the Irrigation Department since such land is also acquired from the land owners while constructing the irrigation projects.

[Shilpi Jain]

There are decisions under ST which have held that road is any road. The condition for being use for general public is only for the last part of that entry and not for all the aspects listed out in that entry.

Also, a view as mentioned by the expert can be taken that it is part of the irrigation works which will also yield the same result.

[KASTURI SETHI]

(i) Here road is an access to irrigation (specific purpose) works i.e. canal, dam & others like well, tubewell, tanks, wells, anicuts, bandharas, ponds, spring ponds etc. One cannot reach the above without road. Hence it is a composite supply. Canal & dam are also integrally related to irrigation purpose/works.

(ii) Concessional rate or exemption stands withdrawn for Govt. Authority and Govt. entity w.e.f. 1.1.22 inasmuch as both the words, ''Govt. Authority' and "Govt. Entity" stand omitted 1.1.22. Some exceptions are still there but the same are not applicable to the present scenario. Thus GST @ 18 % is applicable for the specific purposes mentioned in (i) above.

(iii) In Service Tax era also, the activity of construction of road for the usage of general public was exempted from Service Tax.

(iv) The purpose of road is very much relevant for determination of admissibility/inadmissibility of exemption or concessional rate of tax. Hence the function and purpose of "road" draw a line.

(v) Thus I fully concur with the views of Sh. Sadanand Bulbule, Sir at serial no.3 above.

AI Summary

GST rate for works contract: roads integral to irrigation attract higher tax, while public-use roads attract lower tax. Roads that are integral to irrigation projects (service roads alongside canals and other irrigation structures) are treated as part of irrigation works and, when supplied as composite works contracts to a government entity, attract the rate applicable to irrigation works. By contrast, construction of a road expressly for use by the general public falls under a separate entry with a lower rate. The determinative criterion is the road's function and purpose, and many concessional treatments for supplies to government entities were narrowed effective January 2022.