GST concession for works contract services ends for supplies to Governmental Authorities after notification amendment.
Works contract services supplied to the Bangalore Water Supply and Sewerage Board were examined under the amended GST notification for supplies to a local authority, Governmental Authority or Government Entity. The Board was treated as a Governmental Authority because it was constituted under State legislation and performed municipal functions relating to water supply and sanitation. However, after Notification No. 22/2021-Central Tax (Rate), the concessional entry applied only to supplies made to the Central Government, State Government, Union territory or a local authority, not to a Governmental Authority. As a result, the concessional rate ceased from 01.01.2022 and the services fell under the residual construction services entry, attracting GST at 18%.
Issues: (i) Whether the supply of works contract services by the applicant to the Bangalore Water Supply and Sewerage Board was covered by the amended notification applicable to supplies made to a local authority, Governmental Authority or Government Entity. (ii) What was the applicable rate of GST on such supplies from 01.01.2022.
Issue (i): Whether the supply of works contract services by the applicant to the Bangalore Water Supply and Sewerage Board was covered by the amended notification applicable to supplies made to a local authority, Governmental Authority or Government Entity.
Analysis: The Board was constituted under a State legislation and performed functions entrusted to a Municipality under Article 243W of the Constitution, namely water supply and sanitation-related functions. It was therefore treated as a Governmental Authority. After the amendment brought in by Notification No. 22/2021-Central Tax (Rate), the relevant entry continued to apply only to supplies made to the Central Government, State Government, Union territory or a local authority, and not to supplies made to a Governmental Authority or Government Entity.
Conclusion: The supply was covered under the earlier regime till 31.12.2021, but the amended notification did not continue that coverage for supplies made to a Governmental Authority from 01.01.2022.
Issue (ii): What was the applicable rate of GST on such supplies from 01.01.2022.
Analysis: Since the recipient was not a local authority for the amended entry and was only a Governmental Authority, the specific concessional entry ceased to apply from 01.01.2022. The services therefore fell under the residual construction services entry in the same notification framework.
Conclusion: The applicable rate of GST from 01.01.2022 was 18%.
Final Conclusion: The ruling accepted the recipient's status as a Governmental Authority, but denied the concessional 12% rate for supplies made from 01.01.2022 and applied the higher residual rate instead.
Ratio Decidendi: Concessional GST entries for works contract services are to be applied strictly according to the class of recipient specified in the notification, and once a Governmental Authority is omitted from the amended entry, supplies to such authority fall outside the concessional rate and are taxed under the residual entry.