2019 (5) TMI 1399 - AAAR - GST

Rate of GST - works contract service supplied for construction of the a multi-modal terminal at Haldia, West Bengal - N/N. 24/2017-CT (Rate) dated 21/09/2017 and 31/2017-CT (Rate) dated 13/10/2017 - whether or not the civil structures created by the Appellant are meant for commerce, industry, or any other business or profession? - HELD THAT - It is clear from the very nature of the project that it creates infrastructure for commercial utilization of the national waterway. Though the Multi-modal IWT Terminal will facilitate commerce and business in and around Haldia, West Bengal, its creation is not for propagating any business or commercial interests of IWAI. IWAI is facilitating the vision of Government of India s Jal Marg Vikas Project for creating infrastructure for economic development of the country. The Appellant is supplying works contract services to IWAI, a government entity, for an original work that is meant for infrastructural development of waterways of India and is not meant for commerce and business. It therefore satisfies the conditions laid down under Serial No. 3 (vi) (a) of the Rate Notification. The amendment 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 applicable to the Appellant s supply of Works Contract Service towards IWAI for construction of the Multi-modal IWT Terminal at Haldia, West Bengal. Appeal disposed off.

Summary

Issues:
1. Applicability of Notification No. 24/2017-CT (Rate) and 31/2017-CT (Rate).
2. GST rate for works contract service for construction of a multi-modal terminal.

Analysis:
1. The appeal was filed against an advance ruling stating that the amendments to the Rate Notification were not applicable to the supply of works contract service for the terminal construction. The ruling determined GST at 18% under Serial No. 3(xii) of the Rate Notification.

2. The appellant challenged the ruling on various grounds. Firstly, arguing that the terminal construction was not for commerce but for developing waterways. Secondly, emphasizing the project's objective of creating an environment-friendly transport mode. Thirdly, disputing the classification of IWAI's fees as business proceeds.

3. The appellant contended that IWAI, being a government entity, should be taxed at 12% under the GST Act. They referenced a GST Council letter supporting this claim for works contracts to government entities.

4. The authority reviewed the arguments and established IWAI as a government entity. The key issue was whether the structures were for business purposes. It was concluded that the terminal aimed at economic development, not commercial interests.

5. The IWAI Act allows fee collection for infrastructure use, with remittances to the Consolidated Fund of India. This indicated government revenue, meeting the conditions for tax treatment under Serial No. 3(vi) of the Rate Notification.

6. Consequently, the amendments to the Rate Notification were deemed applicable to the works contract service for the terminal construction. The original ruling was modified, and the appeal was disposed of accordingly.