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2019 (11) TMI 111 - AAR - GSTRate of tax - composite supply of works contract - clause (119) of Section 2 of Central Goods and Services Act, 2017 - whether the GST rate 18% or 12% is to be charged by the supplier? - applicability of N/N. 11/2017-Central Tax (Rate) dated 28th June 2017 as amended by various notifications - HELD THAT - The nature of the contract between the applicant and the main contractor is verified. It is seen that the sub-contracts are covered under the item no. (ix) of SI.No. 3 of the Notification No. 1 1/2017 -Central Tax (Rate) dated 28.06.2017 and this is with effect from 25.01.2018. Earlier to this, the nature of the service provided by the applicant to the main contractor was covered under item no. (ii) of the SI.No. 3 of the Notification No. 11/2017 -Central Tax (Rate) dated 28.06.2017 taxable at 9% under CGST Act and 9% under SGST Act. The contract between the main contractor and the Government entity is for the supply, design, erection, transmission and commissioning of different capacity of transformers of 220 KV, 110 KV, 66 KV, 33 KV, 11 KV lines and industrial electrification works, Networking Automation Apartments /complex, Electrical works and allied services and this supply is neither covered under item (iii) or item (vi) and hence the supply of services by the applicant is not covered under item no. (ix) and hence gets covered only under item (ii) of the SI.No. 3 of the Notification No. 11/2017 -Central Tax (Rate) dated 28.06.2017 taxable at 9% under CGST Act and 9% under SGST Act.
Issues Involved:
1. Determination of the applicable GST rate for the composite supply of works contract as defined in clause (119) of Section 2 of the Central Goods and Services Tax Act, 2017. 2. Clarification on the applicability of various amendments to Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017. Issue-wise Detailed Analysis: 1. Determination of the Applicable GST Rate: The applicant, a proprietary concern engaged in works contract services, sought an advance ruling on the applicable GST rate for their services. The specific services involved include the design, erection, testing, commissioning, and installation of transformers and electrical equipment. The applicant entered into subcontracts with a principal contractor who had been awarded contracts by state government entities such as Krishna Bhagya Jala Nigam Limited, Karnataka Neeravari Nigam Limited, and Karnataka Power Transmission Corporation Limited. The applicant argued that their services fall under entry number 3 of Notification No. 11/2017-Central Tax (Rate) dated 28-06-2017, which specifies a GST rate of 18% (9% CGST + 9% SGST) for construction services under HSN code 9954. However, subsequent amendments to this notification introduced a 12% GST rate (6% CGST + 6% SGST) for certain works contracts supplied to the government or governmental authorities. 2. Clarification on Amendments to Notification No. 11/2017-Central Tax (Rate): The relevant amendments to Notification No. 11/2017-Central Tax (Rate) include: - Notification No. 20/2017-Central Tax (Rate) dated 22nd August 2017: This amendment introduced a 12% GST rate for specific works contracts supplied to the government or governmental authorities. - Notification No. 31/2017-Central Tax (Rate) dated 13th October 2017: Further refined the categories of works contracts eligible for the 12% GST rate. - Notification No. 1/2018-Central Tax (Rate) dated 25th January 2018: Introduced additional categories and conditions for works contracts eligible for the 12% GST rate. The applicant contended that their services should be taxed at 12% based on these amendments. However, the Authority for Advance Ruling (AAR) examined the nature of the contracts between the applicant and the principal contractor. The AAR found that the subcontracts awarded to the applicant did not fall under the specific categories of works contracts eligible for the 12% GST rate as per the amendments. Findings and Ruling: The AAR concluded that the subcontracts awarded to the applicant are covered under item (ii) of Serial No. 3 of Notification No. 11/2017-Central Tax (Rate) dated 28-06-2017, which specifies a GST rate of 18% (9% CGST + 9% SGST). The amendments to the notification did not affect the taxability of the applicant's transactions, as their services did not fall under the newly introduced categories eligible for the 12% GST rate. Ruling: 1. The rate of tax applicable to the composite supply of works contract as defined in clause (119) of Section 2 of the Central Goods and Services Tax Act undertaken by the applicant is to be charged at 9% under the CGST Act and 9% under the KGST Act. 2. The amendments to Notification No. 11/2017-Central Tax (Rate) dated 28-06-2017 have no effect on the taxability of the applicant's transactions, as they are covered under item (ii) of Serial No. 3 of the said notification and not under item (ix).
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