2021 (7) TMI 1361 - AAR - GST

Works Contract or not - Contract with Andhra Pradesh Eastern Power Distribution Company Limited (APEPDCL) for extension of electricity lines taxability of the supply made by the applicant to APEPDCL relating to Erection of S-Ph 16KVA DTRs, 6.3KV LT lines to extend Grid supply to Tribal habitations which were already electrified with DDG Projects in Srikakulam and Visakhapatnam Circles on partial turnkey basis under Tribal Sub-Plan (TSP) - APEPDCL can be treated as a limb of Government of AP or not - rate of tax - SAC/HSN Code - HELD THAT - On examination of Memorandum of Association of the APEPDCL Company, the main objects to be pursued by the Company on its incorporation are to engage in the business of procurement, supply and distribution of electricity; to take over the distribution and supply of electricity business from the Transmission Corporation of Andhra Pradesh Limited; to acquire business/companies; to acquire know-how etc. Thus, the incorporation of the company itself is based on business purposes. Thus, the services were provided by the applicant to a business entity i.e., APEPDCL in the present context. It is an undeniable fact that APEPDCL is not rendering any non commercial services but receiving payment/reimbursement for its commercial activity from the Government of A.P. in form of 100% grants. Finally, even though APEPDCL has been considered as a 'Government entity', the services provided by the applicant are proved to be for the use of business purpose. Hence, The Applicant is not entitled for the benefit of concessional rate of GST @12% (6% under Central tax and 6% State tax) in terms of Notification No.24/2017-Central Tax (Rate) dated 21.09.2017 read with Notification No.31/2017-Central Tax (Rate) dated 13.10.2017.

Issues Involved:
1. Whether APEPDCL can be treated as a limb of Government of AP or not?
2. The rate of tax is 12% or 18% and also under which SAC/ HSN code the work falls.
3. Whether the rate of tax to be charged as directed by APEPDCL for tribal sub work implemented with 100% grants.

Analysis:

Issue 1:
The Authority examined if APEPDCL qualifies as a 'Government Entity' under the GST Acts. APEPDCL, being wholly owned by the Government of Andhra Pradesh, was deemed to have full control by the Government and thus classified as a 'Government Entity.'

Issue 2:
Regarding the tax rate applicable, the Authority referred to Notification No. 11/2017 - Central Tax (Rate) and identified the applicable rate as 18% (9% under Central tax and 9% State tax) under Heading 9954 for the services provided by the Applicant.

Issue 3:
The Authority delved into whether the services provided for tribal sub work, funded by 100% grants from the Government of AP, should be taxed at 12% or 18%. Despite APEPDCL being considered a 'Government entity,' the services were deemed to be for commercial purposes, thus not qualifying for the concessional rate of 12%.

In conclusion, the rulings were as follows:
1. APEPDCL is classified as a 'Government Entity.'
2. The applicable tax rate is 18% under Heading 9954.
3. The services provided do not qualify for the concessional rate of 12% due to being for commercial purposes, even with 100% grants from the Government of AP.

These findings were based on detailed analysis of the nature of the work, relevant notifications, and the commercial aspect of the services provided to APEPDCL.

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