2019 (2) TMI 1999 - AAAR - GST

Levy of GST - Reverse charge mechanism - payment to PWD Uttarakhand for construction of road - N/N. 13/2017 dated 28.06.2017 - time of supply when advance payment is released to PWD Uttarakhand - amount deposited with Central Fund i.e Uttaranchal CAMPA and reimbursed by MEA considering as part cost of the road - HELD THAT - NHPC as the implementing agency delegated the responsibility of completing the project to PWD (construction agency) and a Memorandum of Understanding was made between these two agencies. To implement the project works contract was allotted by PWD through an open tender to their contractor M/s RG Buildwell Engineering Pvt. Ltd. In view of these facts it is clear that no GST is payable by NHPC on reverse charge or otherwise on the payments for this project that is/will be made by them to PWD as the issue is squarely covered by the entry serial- 9c of the notification no. 32/2017-CT(R) dated 13.10.2017 as rightly concluded by the Ld. AAR. This issue is not contested by the appellant also. Thus from MEA to NHPC up to the stage of PWD it is an exempt supply between one government entity to other govt entity. In the present case M/s NHPC had raised a specific query as to whether they need to pay GST on reverse charge to PWD and to that extent the ruling was that they are not required to do so. Whether the taxability on provision of works contract will be applicable on the works contract allotted by PWD is not an issue raised in the advance ruling application Hence we refrain from going into specifics of the same thus without going into the merits since there was no taxability till the stage of PWD on account of entry 9c of notification 12/2017 as amended time to time so discussions and findings of the Learned AAR on this issue become irrelevant and hence infructuous and need to be set aside.

Summary

Issues Involved:
1. Applicability of GST under reverse charge for payments made to PWD, Uttarakhand.
2. Time of supply when advance payment is released to PWD, Uttarakhand.
3. GST liability on the amount deposited with Central Fund (Uttaranchal CAMPA) and reimbursed by MEA.

Issue-wise Detailed Analysis:

1. Applicability of GST under Reverse Charge:
The appellant challenged the ruling of the Authority for Advance Ruling (AAR) which exempted NHPC from paying GST under reverse charge for payments made to PWD, Uttarakhand. The AAR had concluded that the activity fell under exempted services as per Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The appellant argued that the delegation of the project from MEA to NHPC was misconstrued as an award of a work contract, and NHPC was wrongly considered a contractor. The appellant emphasized that NHPC acted as an implementing agency, not a contractor, and PWD was a partner, not a sub-contractor. The Appellate Authority upheld that NHPC, as an implementing agency, did not owe GST under reverse charge for payments to PWD, affirming the AAR's decision based on Notification No. 32/2017-CT(R) dated 13.10.2017.

2. Time of Supply When Advance Payment is Released:
The AAR had ruled that the time of supply provisions were not applicable since the service in question was exempt. The appellant did not contest this point directly but argued that the AAR's interpretation could lead to an incorrect precedent where all contractors working under government entities would be exempt from GST. The Appellate Authority did not delve into this issue further, as it was not specifically contested by the appellant.

3. GST Liability on Amount Deposited with Central Fund (Uttaranchal CAMPA):
The AAR had concluded that no GST provisions were applicable to the amount deposited with the Central Fund and reimbursed by MEA, as the supply of service was exempt. The appellant argued that the AAR's interpretation could lead to a broader exemption chain, which was legally incorrect. The Appellate Authority clarified that the AAR's ruling was binding only on the applicant (NHPC) and specific to the questions raised. It emphasized that the exemption applied only up to the stage of PWD, and any further sub-contracts would need separate consideration.

General Observations:
The Appellate Authority noted that NHPC acted as an implementing agency for MEA, with no direct aid or grant made to NHPC. The responsibility for the project was delegated to PWD, which then contracted the work through an open tender. The Authority agreed with the AAR that no GST was payable by NHPC on payments to PWD under reverse charge, as this was an exempt supply between government entities. However, the Authority set aside the AAR's broader implications regarding sub-contracts, emphasizing that the ruling was specific to the questions raised by NHPC.

Ruling:
The Appellate Authority modified the AAR's ruling to clarify that while NHPC was exempt from GST under reverse charge for payments to PWD, the broader implications regarding sub-contracts were not addressed and should not be inferred from the ruling. The ruling was legally binding only on NHPC and specific to the issues raised in their application.