TaxTMI 
TaxTMI 
2020 (5) TMI 412
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....ised by Gaurish Sharma, (M/s G K Enterprises), A-3, Adarsh Nagar, Jaipur, Rajasthan 302004 (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2) (a) & (b) given as under: - (a) Classification of any goods or services or both; (b) Applicability of a notification issued under the provisions of this act; * Further, the applicant being a registered person (GSTIN is 08ARNPS7996R1Z3 as per the declaration given by him in Form ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the applicant is admitted to pronounce advance ruling. 1. SUBMISSION AND INTERPRETATION OF THE APPLICANT: * The National Highway Authority of India ("NHAI') is an agency of the government which carries out the function of construction of roads and matters incidental thereto. The task of development of highways by the NHAI is a multi-faceted process which involves various phases that must be carried out. In such cases, organisations like the NHAI may get this work executed through contractors. * In the present case, the work to....
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....able in relation to construction services with respect to 'construction of roads' has been given in Heading 9954 (iv) as 6% Similar rates have been prescribed under Rajasthan Goods and Services Tax Act, 2017 ("RGST Act"). On a combined reading of notifications issued under CGST Act and RGST Act, the effective rate of tax comes to 12% on construction of roads. The Rate Notification also notifies the applicable rate of GST for various kinds of construction services. As per the said Rate Notification, the rate of tax for civil structures or any other original works has been specified at the rate of 6% under Heading 9954(vi), and the effective rate of tax comes to 12%. * That the Applicant has filed the present application in order to determine whether Entry (iv) of Heading 9954 of the Rate Notification would be applicable to them for the contract proposed to be undertaken. The relevant text of the notification is reproduced as below: Chapter, Section or Heading Description of Service Rate (per cent) Condition Heading 9954 (Construction services) (iv) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Ac....
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....earth. * That in the present case, the construction at the site of the highway project including utilities like cables and wires are fastened to the earth by using cement and concrete or by using nuts and bolts and if in case they are required to be shifted from one location to another then they are first dismantled and then re-erected at another site. The scope of work of the Applicant also involves activities like drilling through the ground to lay down such new electrical lines. That within the scope of work, the Applicant will also have to erect "lattice towers", which are structures commonly used for transmission of power through electrical conductors on which conductors and electric wires can be affixed at a suitable height above the ground. Structurally these towers are required to be able to resist loads such as wind load, snow load and self-weight. In order to erect these structures, it is clear that the previously existing lattice towers will be dismantled and thereafter new towers shall be erected. In light of the above cited law and interpretation, it is submitted that the activity proposed to be undertaken by the Applicant will be in the nature of a 'works contra....
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....xcused for failure to perform any of its obligations hereunder if such failure is a direct consequence of delay on the part of the entity owning such electric lines, water pipes or telephone cables, as the case may be. ❖ That on a reading of Article II and V it is clear that each component of the scope of work as listed in the Agreement has to be carried out by the contractor in order for the Agreement to be fulfilled. Since the Agreement includes the obligations as given in Article XI of the Agreement as well, it is evident that carrying out the work as prescribed therein is a part of the process and a vital component of the work of construction of a four-lane highway to be carried out by the main Contractor in order to carry out the highway development project. Thus, it is submitted that the work proposed to be carried out by the Applicant in the present case is nothing more than the obligations of the main Contractor as specified in Article XI, which consists of construction as well as completion of a road. In the present case, the main contract awarded by NHAI to the Contractor itself includes in its scope of work the construction of project facilities ....
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....rtunities and equal level playing fields to business entities and avoid discrimination. Based on this reason, as well as the interpretation of the notification as explained above, it is submitted that the rate that should be applicable on the Applicant should be the same as that of the main contractor for providing the service of construction of civil works through a works contract. * That this intent of the GST Council has also been recognised by the Maharashtra AAR in the case of Shree Constructions [2018 (17) G.S.T.L. 504 (A.A.R. - GST)] = 2018 (9) TMI 854 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA, which has been upheld by the Appellate Authority as well [2019 (23) G.S.T.L. 473 (App. A.A.R. - GST)] = 2019 (3) TMI 1567 - APPELLATE AUTHORITY FOR ADVANCE RULING MAHARASHTRA. The relevant text of the Maharashtra AAAR is reproduced below for reference: It is very much clear that any supply of works contract pertaining to the railways including monorail and metro is subject to concessional rate of 12% GST. In the instant case, though the respondent i.e. M/ s. Shree Construction is providing works contract services to its main contractor who has entered into works contract....
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....NO. 11/2017-CIYR)? That alternatively, and without prejudice to the above, the contract proposed to be undertaken should be considered as a contract covered under entry (ix) of Heading 9954 under sub-clause (a). which relates to sub-contracting of construction services. The Rate Notification entry has been reproduced below: Chapter, Section or Heading Description of Service Rate (per cent) Condition Heading 9954 (Construction Services) (ix) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 provided by a sub-contractor to the main contractor providing services specified in item (Hi) or item (vi) above to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity 6 Provided that where the services are supplied to a Government Entity. They should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union territory or local authority, as the case may be. (vi) Composite supply of works contract as defined in clause (119) of section 2 of the Ce....
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....tract is for development and four-laning of a highway, which includes construction of the road, flyover, bridges and project facilities as specified in Schedule C of the Agreement. Since the main contract does not relate to the construction of any residential or commercial apartment in any manner, it is clear that the same will not be covered under the items listed in items (i), (ia), (ib), (ic), (id), (ie) and (if) of Heading 9954. ❖ That Government Entity has been defined in the Rate Notification and the same reads as reproduced under: "Government Entity" means an authority or a board or any other body including a society, trust, corporation, (i) set up by an Act of Parliament or State Legislature; or (ii) established by any Government, with 90 per cent or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Territory or a local authority." Reading the above with the definition of 'governmental authority', it is clear that NHAI will be a government entity since it is an agency of the Government of India itself, where the functions of the NHAI is to d....
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....thus by no means can it be construed for the purpose of commerce, industry, or any other business or profession. A perusal of the above notification and statute indicates that roads are for use by general public. * That based on the above discussion it is also clear that the main contract is for construction of the road, flyover, bridges, grade separators and project facilities as described in Schedule C of the Agreement. Additionally, the Agreement also includes dismantling and then constructing, erecting and installing electric cables, both underground and overhead, along with all the necessary structures to Support such cables. Thus, the main contract will clearly fall within the, definition of 'civil structure'. * That from the above discussion it is evident that the main contract in the present case will be for providing services of works contract by way of erection and installation, of a civil structure or the original works which is not meant for commerce, industry, or any other business or profession. Further, as discussed above, the main contract is for supply to NHAI, which is a 'governmental entity'. Hence, main contract shall fall under Entry (vi) of Heading 9954 ....
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....ding 9954 in the Rate Notification, since the Applicant is a sub-contractor proposing to undertake an activity where the main contractor is has been given the activity of development of four-lane highway, along with flyovers, bridges, grade separators and project facilities as per Schedule C of the Agreement, and such activity is covered by Entry (vi). Moreover, the supply is being made by the Contractor to NHAI, which is a government entity and task of construction of roads has been conferred on NHAI in the capacity of an agency of the government. 2 QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT * Whether in the facts and circumstances of the case, does the activity carried out by the Applicant falls under Entry No. (iv)(a) of Notification No. 11/ 2017-CT(R)? * Alternatively, whether in the facts and circumstances of the case, does the activity carried out by the Applicant falls under Entry No. (ix) of Notification No. 11/ 2017- CT(R)? 3 PERSONAL HEARING In the matter personal hearing was granted to the applicant on 5.2.2020 for which the applicant requested for adjournment. Further personal hearing was granted on 19.02.2020 at Room no. 2.29 NCRB, Statu....
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.... The cost of such shifting shall be borne by the Authority or by the entity owning such utility, If the Authority so directs, and in the event of any delay in shifting thereof, the Concessionaire shall be excused for failure to perform any of its obligations hereunder if such failure is a direct consequence of delay on the part of the entity owning such electric lines, water pipes or telephone cables, as the case may be." * During the personal hearing the authorized representative of the applicant submitted a letter dated 5.12.2019, issued by M/s Sadbhav (main contractor), addressed to the applicant, in which description of activities to be undertaken has been stipulated as under-: "Electrical utility shifting / erection of 11 KV & LT lines (due to road widening) for completion of Jodhpur Ring Road under (Sub Division CSD-B-V, Division-CD-II Jodhpur from Km. 27+290 to 34+000)" * In view of the above description of the work it is clear that the applicant is proposing to submit a bid for shifting / erection of electrical lines only to M/s Sadbhav Jodhpur Ring Road Pvt. Ltd who is the main Contractor of NHAI. Thus the activity to be carried out by the applic....
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....oad as classified under Entry number 3 (iv)(a) of the Notification No 11/2017-CT (Rate) dated 28.6.2017 (as amended). * We further, observe that since such cost of the above said activity will be borne by the Authority or by the entity owning such utility therefore such payment of above mentioned activity is not the part of the main contract i.e. construction of road as awarded to main contractor by NHAI. Thus, there establish no nexus between the main contract awarded for construction of road by the NHAI and the work proposed to be undertaken by the applicant. Therefore, the question of covering the activity under entry number 3(iv)(a) of the Notification No 11/2017-CT (Rate) dated 28.6.2017 does not arises. * Whether the activity carried out by the Applicant falls under Entry No. (ix) of Notification No. 11/2017- CT(R) dated 28.6.2017 or otherwise requires examination of the conditions mentioned in the said Notification. The relevant extract of Notification No. 11/2017- CT(R) dated 28.6.2017 is as under-: Notification No. 11/2017- CT(R) dated 28.6.2017 Chapter, Section or Heading Description of Service Rate (per cent) Condition Heading 9954 (Co....