2019 (10) TMI 1017 - AAR - GST

Rate of GST - sub-contract (works contract) for construction of independent residential units for weaker sections of society under Pradhan Mantri Awas Yojana - serial no. 3 of Notification No. 1/2018- Central Tax (Rate) dated 25.01.2018 - HELD THAT - The contract of the applicant is examined and seen that the applicant has entered into the contract for construction of houses pertaining to the main contract allotted to the main contractor back to back and hence the same is also covered by sub-item (c) of item (iv) of serial no.3 of Notification No.11/2017- Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 1/2018- Central Tax (Rate) dated 25.01.2018. The sub-contract of construction of independent houses by the applicant under the main contract of construction of houses pertaining to the Pradhan Mantri Awas Yojana is covered under sub-item (c) of item (iv) of serial number 3 of Notification No. 11 /2017 - Central Tax (Rate) dated 28.06.2017 as amended by Notification No. 1/2018 -Central Tax (Rate) dated 25.01.2018 and is liable to CGST at 6%. Similarly, the same is also liable to KGST at 6% under the Karnataka Goods and Services Tax Act, 2017.

Summary

Issues:
1. Determination of GST rate applicable for sub-contract (works contract) for construction of independent residential units under "Pradhan Mantri Awas Yojana" under specific notifications.
2. Interpretation of relevant provisions and notifications under the CGST Act and KGST Act for the said sub-contract.

Analysis:
1. The applicant, a Partnership firm, sought an advance ruling on the GST rate for a sub-contract (works contract) for constructing residential units under "Pradhan Mantri Awas Yojana." The applicant referred to Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018, which specified a 12% tax rate for works contracts under the mentioned scheme. However, ambiguity arose regarding the tax rate for sub-contracts under subsequent amendments to the notification.

2. The applicant presented relevant facts, stating their business involves executing civil works contracts and that they had received a work order for constructing houses under the scheme, which was subcontracted. They argued that as per Schedule II and clause (119) of section 2 of the CGST Act, the tax rate should be 18%, but they provided supporting documents claiming a 12% tax rate for the transaction.

3. The Authority examined the transaction and found that the applicant's sub-contract agreement for constructing houses under the scheme fell under specific categories of works contracts as per the notifications. The main contract was linked to the Pradhan Mantri Awas Yojana, and the work order indicated the project's scope, aligning with the relevant notification's provisions.

4. The sub-items of the notification were scrutinized to determine if the applicant's contract met the criteria for the 12% tax rate. It was established that the applicant's contract for constructing houses under the main contract was covered under the specific sub-item of the notification, warranting a 6% tax rate for both CGST and KGST.

5. Consequently, the ruling declared that the sub-contract for constructing independent houses under the Pradhan Mantri Awas Yojana, linked to the main contract, fell under the specified sub-item of the notification, attracting a 6% tax rate for both CGST and KGST.