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2019 (3) TMI 1953 - AAAR - GSTExemption from GST - contractors/sub-contractors involved in the construction of Indo-Nepal Border Road - Applicability of N/N. 12/2017-Central Tax (Rate) dated 28.06.2017 (as amended from time to time) - Whether the exemption available to PWD Uttarakhand and M/s NHPC Ld. can be extended to the sub contractor also? - HELD THAT - Present case pertains to the GST period therefore we have to confine to the notification issued under CGST/SGST Act. With regard to the services rendered to the Government initially notification no 11/2017 Central fax (Rate) dated 28-06-2017 was issued by which contractor sub contractor were made liable to pay GST 18%. Further Notification no 24/2017 CT (Rate) dated 21 September 2017 was issued making govt. contractors liable to pay GST 12% - There is no specific entry in the notification no. 12/2019- CT (Rate) dated 28-06-2017 making sub contractor s supply of services to the main contractor as exempt. However in the process the sub contractors are to be taxed at the same rate as the main contractor not due to the reason of extrapolation. It is for the ease of calculation of ITC tax liability both the entities are made liable to be taxed at the same rate. The serial no. 9C of notification no. 12/2017 (amended vide notification no 32/2017) exempts the services by a govt. entity to another govt. entity. Neither this notification nor any other notification exempts the work contract services from govt. entity to private contractor or contractor to sub-contractor. The observation ni ade by the GST Council in reducing the tax liability of such contractor was made for the ease of calculations. This fortifies the fact that only the notification and the conditions specified therein determines the taxability on supply of goods/ services. The pre GST circular no 147/16/2011-ST dated 21-10-2011 and Para 29(h) of the Mega exemption notification no. 25/2012-ST dated 20-06-2012 to exempt sub contractor cannot be referred as Service Tax is now repealed and cannot be applied on the supply of services pertaining to GST regime. Thus the taxability on the sub contractor in such cases have to be decided in view of the notification issued under CGST/SGST Act. The works contract services for the road construction provided by the sub contractor to PWD Uttarakhand who in turn is providing works contract services of road construction to M/s NHPC Ltd is not exempted from GST.
Issues Involved:
1. Applicability of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 to contractors/sub-contractors involved in the construction of Indo-Nepal Border Road. Issue-wise Detailed Analysis: 1. Applicability of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 to Contractors/Sub-contractors: Background: The applicant sought an advance ruling on whether the exemption provided under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 is applicable to sub-contractors involved in the construction of the Indo-Nepal Border Road. Divergent Opinions: - Shri Vipin Chandra's View: - The applicant's activity of road construction was previously exempted from GST under Notification No. 12/2017-CT (Rate) dated 28.06.2017. - However, there is no specific entry in the exemption notification that exempts the supply by sub-contractors. - Entry (iv) of serial no. 3 of Notification No. 11/2017-CT (Rate) prescribes a GST rate of 12% for road construction. - Thus, sub-contractors are liable to pay GST @ 12% as their supply is not exempted under Notification No. 12/2017-CT (Rate). - Shri Amit Gupta's View: - The Ministry of External Affairs allotted the road construction work to NHPC, which sub-let it to PWD, Uttarakhand, who further sub-let it to a contractor. - The services provided by NHPC to MEA were exempted as per Notification No. 12/2017-CT (Rate). - The GST Council recommended reducing the GST rate on works contract services provided by sub-contractors to the main contractor. - The purpose of the GST Council's recommendation was to extend the benefit to the last chain of supply. - If the principal contractor is exempt from GST, then sub-contractors should also be exempt to avoid defeating the objective of the GST Council. Appellate Authority's Findings: - The issue was examined in light of the points raised by both members. - There is no specific entry in Notification No. 12/2017-CT (Rate) exempting sub-contractors' supply of services to the main contractor. - The exemption available to PWD Uttarakhand and NHPC Ltd. cannot be extended to sub-contractors. - The GST Council's recommendation was for ease of calculation and does not imply exemption for sub-contractors. - The Supreme Court's ruling in Commissioner of Custom (Import) Mumbai vs. M/s. Dilip Kumar and Company emphasized strict interpretation of exemption notifications. - Exemption notifications should be interpreted strictly, and any ambiguity should be resolved in favor of the revenue. Ruling: - The works contract services for road construction provided by sub-contractors to PWD, Uttarakhand, who in turn provides services to NHPC Ltd., are not exempted from GST. - The sub-contractors are liable to pay GST @ 12% (CGST 6% + SGST 6%). Personal Hearing: - A personal hearing was held where representatives reiterated their points and submitted additional documents. Conclusion: - The exemption under Notification No. 12/2017-Central Tax (Rate) cannot be extended to sub-contractors. - Sub-contractors involved in the construction of the Indo-Nepal Border Road are liable to pay GST at the prescribed rate of 12%.
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