2018 (12) TMI 1732 - AAR - GST

Government entity or not - Rate of GST - Electrification work for procurement of plant, design, supply, install and commission certain facilities viz Providing Underground cable works in Visakhapatnam city, package -1 and Package - 3 - whether tax rate of 12% CGST-6% SGST- 6% is applicable? - N/N. 20/2017-Central Tax (Rate) Dated.22-08-2017 and N/N. 24/2017-Central Tax (Rate) dated 21.09.2017? - works contract services provided to Eastern Power Distribution Company of Andhra Pradesh Limited - HELD THAT - The Government of India, vide notification No. 11/2017-Central Tax (Rate), dated - 28th June 2017 notified the rate of GST applicable on supply of services. Under this notification for heading 9954 the applicable rate of GST is 9%. The Applicant Contractee i.e. APEPDCL is a Government Company i.e. wholly owned by the Government of Andhra Pradesh. The applicant had submitted the copy of Audited Annual Accounts of M/s APEPDCL for the FY 2016-17. It is evident from the schedule of Equity Share Capital of the Annual Statement that 100% share capital is held by the Government of Andhra Pradesh in the name of Honourable Governor of Andhra Pradesh. Thus, based on the above facts, it is concluded that the Government of Andhra Pradesh is having full control over the APEPDCL and covered under the definition of Government Entity. Nature of work undertaken by the applicant - execution of works awarded by M/s Eastern Power Distribution Company of Andhra Pradesh Limited for Procurement of plant, design, supply, install and commission certain facilities - HELD THAT - The works under discussion have been undertaken to execute/Implement various schemes for constructing sub stations, erection of distribution transformers, implementation of World Bank Projects etc.. Moreover, the above works undertaken by APEPDCL are for business purpose and the benefit of Concessional Rate of 12% (6% under Central tax and 6% State tax) as per notification is not available to the applicant - As per Section 2 of CGST Act, 2017 and APGST Act, 2017 defines works contract as a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. In the instant case, the contract entered by the applicant squarely falls under the works contract and falls under entry no. (ii) of S.No.3 of the table of notification no. 11/2017 - Central Tax (Rate), Dated - 28th June 2017 as amended from time to time and corresponding notifications under APGST Act, 2017, and the applicable rate of tax is 18% (9% under Central tax and 9% State tax).

Summary

Issues involved:
- Interpretation of tax rate for a specific contract under CGST and APGST Acts
- Determination of whether the contract qualifies for a concessional GST rate
- Evaluation of the nature of the contract and the entities involved

Analysis:
1. Tax Rate Interpretation:
The applicant sought an advance ruling on the tax rate applicability for a specific contract under Notification No. 20/2017-Central Tax (Rate) and No. 24/2017-Central Tax (Rate). The issue revolved around whether the works contract services provided to a specific entity fell under the category of services provided to a government or a government authority. The applicant referenced GO MS no. 58 dated 8th May 2018, highlighting the applicable GST rates under the APGST/CGST Act. The jurisdictional officer confirmed no pending proceedings related to the applicant.

2. Nature of Contract and Entities Involved:
The Authority examined the nature of the contract undertaken by the applicant, focusing on the services provided to the Eastern Power Distribution Company of Andhra Pradesh Limited. The discussion delved into the definition of a "Government Entity" under Notification No. 31/2017-Central Tax (Rate) and concluded that the contractee was a Government Company wholly owned by the Government of Andhra Pradesh. This determination influenced the tax rate applicability.

3. Works Contract Classification:
The Authority analyzed the nature of the work undertaken by the applicant, emphasizing the execution of works awarded by the Eastern Power Distribution Company of Andhra Pradesh Limited. The contract was deemed a single composite contract with two connected agreements. The discussion highlighted the definition of a "works contract" under the CGST Act and APGST Act, emphasizing the treatment of composite supply of works contract as a supply of service. The ruling clarified that the contract entered by the applicant fell under the works contract category, subject to an applicable tax rate of 18%.

In conclusion, the Authority ruled that the applicant was not entitled to the concessional GST rate of 12% and that the applicable tax rate for the services referred to in the application was 18%. The detailed analysis of the contract nature, entities involved, and relevant notifications under the CGST and APGST Acts formed the basis of the ruling provided by the Authority for Advance Ruling, Andhra Pradesh.