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2019 (1) TMI 1669 - AAR - GSTBenefit of concessional rate of GST - supply of service - supply to Government, Government Agency or Government Entity in terms of the Notification No.20 dated 22-08-2017, Notification No. 24 dated 21-09-2017, Notification No.31 dated 13-10-2017 and, Notification No.32 dated 13-10-2017 - Government entity or not. HELD THAT - The Applicant Contractee i.e. APEPDCL is a Government Company i.e. wholly owned by the Government of Andhra Pradesh. When a copy of Audited Annual Accounts of M/s APEPDCL for the Financial Year 2016-17 is examined, 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. The works undertaken by APEPDCL are for business purpose and the benefit of Concessional Rate of 12% (6% under Central tax and 6% State tax) are any other concessional rate 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. The composite supply of works contract as defined at Section 2 of CGST Act 2017 and APGST Act, 2017 is treated as supply of service in terms of Serial No.6, Schedule II of CGST Act 2017 and APGST Act, 2017. 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).
Issues involved:
1. Determination of taxability and applicable rate of tax on works contracts executed for government entities. 2. Classification of services provided under works contracts. 3. Interpretation of notifications related to concessional GST rates for specific types of services. 4. Assessment of whether the contractees qualify as government entities for GST purposes. Analysis: Issue 1: Taxability and Applicable Rate of Tax on Works Contracts: The applicant sought an Advance Ruling on whether the works contracts executed for government entities would be considered supplies to the government, government agencies, or government entities under specific notifications. The Authority analyzed the nature of works contracts undertaken by the applicant for entities like Southern Power Distribution Company and Eastern Power Distribution Company in Andhra Pradesh. It was established that the works executed were commercial in nature, involving industrial feeders and not qualifying as non-commercial services. As per the CGST Act and APGST Act, works contracts are treated as supplies of services, and the applicable rate of tax for such services was determined to be 18% (9% under Central tax and 9% State tax). Issue 2: Classification of Services under Works Contracts: The Authority examined the provisions of the GST Acts and notifications related to the classification of services provided under works contracts. It was clarified that works contracts involving building, construction, fabrication, installation, etc., fall under the category of supply of services. The specific works undertaken by the applicant were analyzed to determine the correct classification and applicable tax rate. Issue 3: Interpretation of Concessional GST Rates Notifications: The Authority referred to notifications such as No. 24/2017-Central Tax (Rate) and No. 31/2017-Central Tax (Rate) to assess the eligibility of the applicant for concessional GST rates. It was concluded that the applicant was not entitled to the benefit of the concessional rate of GST at 12% and that the standard rate of 18% applied to the services provided under the works contracts. Issue 4: Assessment of Contractees as Government Entities: A crucial aspect of the ruling was determining whether the contractees, such as APEPDCL, qualified as government entities under the GST Act. The definition of "Government Entity" was examined, and it was established that entities wholly owned by the government, like APEPDCL, were considered government entities. The control and ownership structure of APEPDCL indicated that it fell under the definition of a government entity, affecting the tax treatment of the services provided to such entities. In conclusion, the Authority ruled that the applicant was not eligible for concessional GST rates and that the standard rate of 18% applied to the works contracts executed for government entities like APEPDCL in Andhra Pradesh. The determination of the taxability of services provided under works contracts and the classification of contractees as government entities were pivotal in reaching this decision.
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