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2021 (7) TMI 1364 - AAR - GSTConcessional rate of GST - Composite supply of works contract - construction services provided by the applicant to APIIC - Government entity or not - applicability of GST at 12% as prescribed in SLNo.3(vi) of the Notification no. 11/2017- Central Tax (Rate) dated 28.06.2017, as amended - appropriate rate and classification of GST to be charged by the applicant - whether M/s. APIIC is a Government Authority/Entity or otherwise? - HELD THAT - Andhra Pradesh Industrial Infrastructure Corporation Ltd. (APIIC) was formed in 1973 by GO No 831 dated 10.09.1973 issued by Government of Andhra Pradesh. As seen from the share holding ratios of the 41st Annual Report for the years 2013-2014 as made available by APIIC website https //www.apiic.in, the Government of Andhra Pradesh including its nominees have 100% of share holding and thus it is covered under the definition of 'Government Entity' under the above said provisions. Therefore, we conclude that M/s. APIIC is a Government Entity for the purpose of GST matters. Whether the construction work in which the applicant is engaged in is meant for any business or otherwise? - HELD THAT - The activities of M/s APIIC are business activities and not otherwise. The applicant claims that the works involved in the contract i.e., the RBF sheds are used by none other than the organisation (APIIC) itself. But a detailed examination of the activities of APIIC prove that the organisation runs on a business model as it would pass on any costs involved in its transactions to the end client. This would be sufficient enough to come to a conclusion that the said construction is for use of APIIC for conducting its activities, which are essentially business oriented and hence not eligible for concessional rate of 12% available under Notification No.24/2017 - CT (Rate) dated 21.09.2017. The contract entered by the applicant is classifiable under SAC heading No. 9954 under construction services, with entry no (ii) of serial No.3 of notification no. 11/2017 Central Tax (Rate) dated 28.06.2017 i.e., Composite Supply of Works Contract as defined in clause 119 of Section 2 of Central Goods and Services Act, 2017 and the applicable rate of tax is 18%.
Issues Involved:
1. Eligibility of the applicant to avail the concessional rate of GST at 12% for construction services provided to APIIC. 2. Appropriate rate and classification of GST to be charged by the applicant if the concessional rate is not applicable. Detailed Analysis: Issue 1: Eligibility for Concessional Rate of GST at 12% The applicant, M/s. KPC Projects Limited, entered into a contract with Andhra Pradesh Industrial Infrastructure Corporation Ltd. (APIIC) for the construction of ready-built factory (RBF) sheds at YSR Electronic Manufacturing Cluster, Kopparthy, YSR Kadapa District, Andhra Pradesh. The applicant contended that the rate of tax should be 12% as per Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017, as amended by Notification No. 24/2017 - Central Tax (Rate) dated 21.09.2017. The applicant argued that APIIC qualifies as a "Governmental Authority" or "Government Entity" as defined under the relevant GST notifications. They cited Notification No. 11/2017-Central Tax (Rate) which provides a concessional GST rate of 6% for works contract services provided to a governmental authority or entity for non-commercial purposes. The applicant further claimed that APIIC, being wholly owned by the Government of Andhra Pradesh, qualifies as a governmental authority or entity. They also referred to a previous ruling (AAR No.02/AP/GST/2020 dated 17.02.2020) which classified APIIC as a governmental entity. Issue 2: Appropriate Rate and Classification of GST The authority examined the nature of APIIC's activities and concluded that APIIC engages in business activities. APIIC's operations include land acquisition, development, and allotment of plots and sheds to industrial ventures, generating revenue from these activities. The authority referenced APIIC’s annual report, which indicated that APIIC’s activities are business-oriented, including the sale of sheds, land, and houses. Given that APIIC's activities are commercial in nature, the authority determined that the construction services provided by the applicant are for business purposes. Consequently, the concessional rate of 12% GST is not applicable. Ruling: 1. Eligibility for Concessional Rate of GST at 12%: - Answer: Negative. The applicant is not eligible to avail the concessional rate of GST at 12% for construction services provided to APIIC. 2. Appropriate Rate and Classification of GST: - Answer: The contract is classifiable under SAC heading No. 9954 (construction services), with entry no (ii) of serial No. 3 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017, as amended. The applicable rate of tax is 18% (9% Central Tax + 9% State Tax).
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