2019 (6) TMI 1341 - AAR - GST

Taxability - contract for sectioning of Makara River (Right Drainage) and Garanimunha branch of Makara River (Part A, Makara Right Drainage) in Orissa - Government Entity - clause 2 (zfa) of N/N. 9/2017 Integrated Tax (Rate) dated 28/06/2017 - applicability of Sl 3A vide Notification No. 2/2018-Integrated Tax (Rate) dated 25/01/2018 - whether the supply being made is a composite supply, where supply of goods constitutes not more than 25% of the value of the composite supply? - whether the recipient is government, local authority, governmental authority or a government entity? - whether the supply is in relation to any function entrusted to a Panchayat or a Municipality under the Constitution? HELD THAT - The functions of a Panchayat under the Constitution needs to be discussed. Article 243G of the Constitution discusses the powers, authority and responsibilities of Panchayats. It states, Subject to the provisions of this Constitution the Legislature of a State may, by law, endow the Panchayats with such powers and authority as may be necessary to enable them to function as institutions of self-government..subject to such conditions as may be specified therein, with respect to..the implementation of schemes for economic development and social justice as may be entrusted to them including those in relation to the matters listed in the Eleventh Schedule, . It appears from the description of the work that it improves the navigability of the riverbed and channels - an activity toward development of irrigation and waterways. It is, therefore, an activity in relation to the function listed under Sl No. 5 of the Eleventh Schedule, as entrusted to a Panchayat under Article 243G of the Constitution of India. Exemption under Sl No. 3A of the Exemption Notification is, therefore, applicable to the Applicant s supply of the above works contract service.

Summary

Issues:
1. Admissibility of the application
2. Submissions of the Applicant
3. Submission of the concerned officer from the Revenue
4. Observations and findings of the Bench

Admissibility of the application:
The Applicant sought a ruling on the taxability of a contract awarded by a government entity. The application was admitted as it fell under section 97(2)(b) of the GST Act and was not objected to by the Revenue officer.

Submissions of the Applicant:
The Applicant argued that the recipient was a government entity based on supporting documents. They also highlighted the nature of the work being part of an irrigation project under the Department of Water Resources, Government of Odisha.

Submission of the concerned officer from the Revenue:
The Revenue officer did not comment on the merit of the issue raised by the Applicant.

Observations and findings of the Bench:
The Bench analyzed the contract details and determined that the work was predominantly earthwork, making it taxable at 5%. They found that the recipient was indeed a government entity. The Bench also discussed the applicability of the Exemption Notification and its amendment, providing a detailed explanation based on relevant legal provisions and circulars.

The ruling concluded that the recipient was a government entity, and the taxability of the Applicant's supply varied based on the timeline and relevant notifications. The ruling's validity was subject to the provisions under Section 103 of the GST Act unless declared void under Section 104(1).

Overall, the judgment provided a comprehensive analysis of the issues raised by the Applicant, the Revenue officer's stance, and the Bench's observations, leading to a detailed ruling based on the applicable legal framework and notifications.