2019 (1) TMI 1670 - AAR - GST

Works contract - Exemption from GST - Services supplied by Electricity Distribution Utilities - benefit of exemption to the Applicant being the contractor executing works to APSPDCL - exemption both for supply of material as well as service or limited only to service? - ITC on inward supplies of material and services for use in the execution of works to APSPDCL - process to get refund of ITC. HELD THAT - The works executed by the applicant in this case included design, manufacture, test, deliver, install, complete and commission facilities for conversion of existing LT Net Work into High Voltage Distribution System in various districts of Andhra Pradesh the World Bank Funding on turnkey basis - As seen from the nature of the work stated by the applicant, the works are industrial in nature as it involves conversion of existing LT network into High Voltage Distribution System. 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). However, funding by the World Bank to either Government of Andhra Pradesh or to the Contractee i.e. APSPDCL has no bearing on the rate of tax. Whether exemption under SI.No. 10A of Notification no. 12/2017-Central Tax (Rate), dated 28.06.2017, amended by notification no. 14/2018-Central Tax (Rate), dated 26.07.2018 is applicable to their works? - HELD THAT - The said entry clearly states that the services supplied by Electricity Distribution Utilities attract nil rate of tax. Whereas, the said entry do not prescribe any nil rate for the services supplied to the Electricity Distribution Utilities. Therefore, the said exemption is not applicable to the services rendered by the applicant to the Contractee. Since the works undertaken are classifiable under works contract service, segregation or vivisection will not arise. However, as the said exemption is not applicable to the said works contract, this query and also the queries on entitlement of ITC on the inward supplies, and refund of ITC in the event of the applicant is entitled for exemption from payment of GST, have lost their relevance.

Issues Involved:
1. Eligibility for GST exemption for services supplied by the applicant to APSPDCL.
2. Applicability of GST exemption to both supply of material and services.
3. Entitlement to Input Tax Credit (ITC) on inward supplies.
4. Process for refund of ITC if entitled to exemption.

Issue-wise Detailed Analysis:

1. Eligibility for GST Exemption for Services Supplied by the Applicant to APSPDCL:
The applicant sought clarification on whether the benefit of GST exemption under SI.No. 10A of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017, as amended by Notification No. 14/2018-Central Tax (Rate), dated 26.07.2018, applies to their works executed for APSPDCL. The Authority examined the nature of the works, which involve the conversion of existing LT Net Work into High Voltage Distribution System under various funding schemes. These works are classified as "works contract" under clause (119) of Section 2 of the CGST Act, 2017 and APGST Act, 2017, and treated as supply of service under Serial No.6, Schedule II of the Acts. The Authority concluded that the exemption under SI.No. 10A, which applies to services supplied by Electricity Distribution Utilities, does not extend to services supplied to these utilities. Therefore, the exemption is not applicable to the applicant's services, and the applicable rate of tax is 18% (9% CGST + 9% SGST).

2. Applicability of GST Exemption to Both Supply of Material and Services:
The applicant queried whether the exemption under SI.No. 10A extends to both supply of material and services or is limited only to services. The Authority clarified that since the works are classified as a "works contract service," segregation or vivisection of material and services does not arise. However, as the exemption is not applicable to the works contract, this query becomes irrelevant.

3. Entitlement to Input Tax Credit (ITC) on Inward Supplies:
The applicant questioned whether they are entitled to claim ITC on inward supplies of material and services used in the execution of works for APSPDCL if they are entitled to the GST exemption. The Authority stated that since the exemption is not applicable, the query about ITC entitlement is irrelevant.

4. Process for Refund of ITC if Entitled to Exemption:
The applicant sought clarification on the process for obtaining a refund of ITC if they are entitled to the GST exemption. The Authority reiterated that since the exemption is not applicable, the query regarding the refund of ITC is also irrelevant.

Ruling:
The Authority ruled that the applicant is not entitled to the benefit of NIL rate of GST under SI No 10A of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017, as amended by Notification No. 14/2018-Central Tax (Rate), dated 26.07.2018, for the stated works executed. The applicable rate of tax is 18% (9% CGST + 9% SGST) for the services referred by the applicant. The supplementary queries on ITC entitlement and refund process are answered as irrelevant due to the inapplicability of the exemption.

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