2019 (1) TMI 485 - AAR - GST

Works contract service - construction of a multi-modal IWT terminal at Haldia on EPC basis - applicability of Notification No. 24/2017-CT (Rate) dated 21/09/2017 and 31/2017 CT (Rate) dated 13/10/2017 - rate of GST - Held that - The IWAI is clearly not the Government of India, but a Government Entity having no sovereign authority to collect Government revenue. Moreover, contrary to what the Applicant claims, the user fees that IWAI collects is not credited to the Consolidated Fund of India and is, therefore, not revenue but proceeds from business as defined under section 2(17) of the GST Act. The Applicant is supplying works contract service for an original work that is meant for commerce and business. It does not, therefore, satisfy the conditions laid down under Serial No. 3(vi)(a) of the Rate Notification - The Applicant s supply of works contract service for construction of the Multi-modal IWT Terminal at Haldia, therefore, attracts GST at 18% rate under Serial No. 3(xii) of the Rate Notification. Ruling - Amendments to Serial No. 3(vi) of Notification No. 11/2017 CT (Rate) dated 28/06/2017, brought about by Notification No. 24/2017-CT (Rate) dated 21/09/2017 and 31/2017 CT (Rate) dated 13/10/2017, are not applicable to the Applicant s supply of works contract service for construction of the Multi-modal IWT Terminal at Haldia. It will attract GST at 18% rate under Serial No. 3(xii) of 11/2017 CT (Rate) dated 28/06/2017.

Summary

Issues:
Applicability of Notification No. 24/2017-CT (Rate) and 31/2017-CT (Rate) on works contract service for construction of a multi-modal IWT terminal. Rate of GST to be charged on the works contract service.

Analysis:
1. Admissibility of Application: The Applicant seeks a ruling on the GST rate for works contract service supplied for the construction of a terminal at Haldia. The question falls under section 97(2)(b) of the GST Act, and the concerned officer has no objection to the admissibility of the Application, which is subsequently admitted.

2. Amendments to Rate Notification: Notification No. 24/2017-CT (Rate) and 31/2017-CT (Rate) have amended Notification No. 11/2017-CT (Rate), impacting the applicability of GST rates on works contract services. The amendments specify conditions for the rate of GST to be charged on various types of works contracts provided to Government Entities.

3. Classification of the Contract: The Applicant argues that the construction of the terminal constitutes a composite supply of works contract service to a Government Entity, i.e., the Inland Waterways Authority of India (IWAI). The Applicant cites a letter from the GST Council supporting the 12% GST rate for such services to Government Entities.

4. Identification of Government Entity: The IWAI, established under the IWAI Act, 1985, is considered a Government Entity as per Notification No. 31/2017-CT (Rate). The IWAI's functions and control by the Central Government affirm its status as a Government Entity eligible for the 12% GST rate.

5. Conditions for GST Rate: The 12% GST rate on works contract services to Government Entities is subject to specific conditions under the Rate Notification, including procurement by the Entity for works entrusted by the Government. The construction project at Haldia meets these conditions, justifying the 12% GST rate.

6. Nature of the Project: The construction project involves various infrastructural elements for commercial utilization of the national waterway, indicating a primary use for commerce and business. The Applicant's argument regarding user fees credited to the Consolidated Fund of India is countered by the IWAI's authority to collect fees for business purposes.

7. Revenue Collection by IWAI: The IWAI's collection of user fees and charges is not considered revenue for the Government but proceeds from business activities. The IWAI's functions and fund management support the classification of its activities as commercial in nature, attracting an 18% GST rate under the Rate Notification.

Conclusion:
The ruling states that the amendments to the Rate Notification do not apply to the Applicant's works contract service for the terminal construction, attracting an 18% GST rate under a specific entry. The ruling remains valid unless declared void under the provisions of the GST Act.