2019 (4) TMI 1945 - AAAR - GST

Classification of services - rate of GST - electrification work to the APEPDCL for procurement of plan, design, supply, install and commission certain facilities viz., providing underground cable work in Visakhapatnam city, package-1 and package-3 (replacement of existing 33/11 KV substation of Zone-1 division Visakhapatnam with underground power cable network on turnkey basis - Applicability of N/N. 20/2017-Central Tax (Rate), dated 22-8-2017 and No. 24/2017-Central Tax (Rate), dated 21-9-2017 - Government or a Government authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of, with respect to certain specified works services or not - whether APEPDCL would fit into the definition of business as per Notification No. 17/2018, dated 26-7-2018? - challenge to AAR decision - HELD THAT - The term business as defined above will not be applicable to the said transaction, as the transaction is not undertaken by the State Government in which it is engaged as public authority, but it is the activity undertaken by the APEPDCL, which is a company incorporated under the Companies Act, 1956 and having its registered office at Sai Shakti, Opp. Saraswathi Park, Daba Gardens, Vishakhapatnam-530020, for carrying on the business of Distribution and Retail Supply of electrical energy within the Area of Supply (as defined in this License) and with the powers and upon the terms and conditions specified therein. Moreover APEPDCL is a Government entity and it does not fall under the explanation provided for business vide Notification No. 17/2018, dated 26-7-2018, which includes transaction undertaken by the Central Government, State Government or any local Authority only. Government Entity or not - HELD THAT - As per Serial No. 3 of Entry No. vi(a) of Notification No. 24/2017-Central Tax (Rate), dated 21-9-2017, the services provided by the appellant towards APEPDCL does not qualify the category of services provided to Government Authority meant predominantly for use other than for commerce , as the services supplied by the appellant are purely commercial in nature even though the service recipient i.e., APEPDCL is a Government entity. With reference to the letters submitted by the appellant quoting various State Government Authorities such as, the Executive Director, APEPDCL, The Spl. Chief Secretary, Land DM, and Commissioner for DM EO Secretary to Government (FAC) Project Director, NCRMP/APDRP stating that the activities of APEPDCL are non-commercial in nature attracting 12% GST, it is considered that these opinions had no legal validity as per the Act, in view of the classification of the services. Hence we do not find any merit in the above contention and rejecting the same due to the lack of legal or statutory support to the argument. The decision of AAR upheld.

Summary

Issues:
1. Applicability of tax rate of 12% to the contract under Notification No. 20/2017-Central Tax (Rate) and No. 24/2017-Central Tax (Rate).
2. Determination of whether the work contract services provided to Eastern Power Distribution company of Andhra Pradesh Limited qualify as services provided to a Government entity for concessional GST rate.

Analysis:
1. The appellant filed an appeal before the Appellate Authority for Advance Ruling challenging the ruling of the Authority for Advance Ruling, A.P. The AAR had determined that the appellant was not entitled to the concessional GST rate of 12% as the works undertaken for APEPDCL were deemed for business purposes, falling under Entry No. (ii) of S. No. 3 of the table of Notification No. 11/2017-Central Tax (Rate). The AAR ruled the applicable tax rate as 18% (9% under Central Tax and 9% State tax).

2. The appellant contended that the services provided were non-commercial in nature, citing clarifications from various State Government Authorities. However, the Appellate Authority found that the transaction did not qualify as services provided to a Government Authority meant predominantly for non-commercial use. The Authority highlighted that the appellant's services were commercial, even though the service recipient, APEPDCL, was a Government entity. The opinions provided by State Government Authorities were deemed legally invalid and lacking statutory support, leading to the rejection of the appellant's contention.

3. During the personal hearing, the appellant argued that the services were solely for the Government of Andhra Pradesh and did not amount to business activities. However, the Authority clarified that the term 'business' as per Notification No. 17/2018 did not encompass activities undertaken by the State Government as public authorities. As the transaction was carried out by APEPDCL, a Government entity not falling under the definition provided for 'business,' the concessional rate of 12% was not applicable.

4. Ultimately, the Appellate Authority upheld the decision of the Authority for Advance Ruling, confirming that the work contracts service rendered by the appellant to APEPDCL did not qualify for the concessional tax rate of 12% as per the relevant Notification. The appellant's appeal was rejected based on the lack of legal or statutory support for their argument, and the original ruling was maintained.

This detailed analysis outlines the key contentions, legal interpretations, and findings of the Appellate Authority for Advance Ruling in the case, addressing the issues raised by the appellant regarding the applicability of GST rates to the services provided to APEPDCL.