2020 (7) TMI 377 - AAR - GST

Classification of services - Rate of GST - Works Contract Service - construction of Millennium tower at Madhurawada, Visakhapatnam for information Technology and Communication Department, Government of Andhra Pradesh and through Nodal Agency APIIC - whether refund to be submitted in RFD-01? - Government Entity or otherwise. Whether M/s. APIIC is a Government Authority / Entity or otherwise? - HELD THAT - Andhra Pradesh Industrial Infrastructure Corporation Ltd. (APIIC) was formed in 1973 by the GO No 831 dated lo-SEP-1973 issued by Government of Andhra Pradesh. As seen from the share holding ratios of the 41 st Annual Reports for the years 2013-14 as made available by APIIC website, the Government of Andhra Pradesh including its nominees is having 100% of share holding and thus it is covered under the definition of 'Government Entity' under the above said provisions. Therefore, M/s APIIC is a Government Entity for the purpose of GST matters. Classification of Service and rate of tax - HELD THAT - As seen from the Agreement, the applicant agreed for construction of Millennium tower at Madhurawada, Visakhapatnam for information Technology and Communication Department, Government of Andhra Pradesh and through Nodal Agency APIIC, which includes procurement and supply of goods and services, for agreed consideration. The activity of construction includes both supply of goods and also services - The composite supply of works contract under Section 2 (119) of CGST Act, 2017 / APGST Act, 2017 is treated as supply of service in terms of Serial No.6 (a) of Schedule II of CGST Act '2017 / APGST Act, 2017 - The Government of India, vide notification No. 11/2017 - Central Tax (Rate), dated -28th June 2017 notified the rate of GST applicable on supply of services. Under this notification for heading 9954 the applicable rate of GST is 9%. The applicant is engaged in Construction work for Millennium Tower at Plot No.16 17 (in 4.00 Acres) at Hill No.3. Madhurawada, Visakhapatnam District through Nodal agency APIIC, which is meant for undertaking development of EMC's/IT Parks/IT SEZs/ IT Layouts, for coordinating with necessary Government agencies and provide basic infrastructure like power, water, sewerage, access roads to the doorsteps of the proposed EMCs/IT Parks/ IT SEZs/ IT Campuses. APIIC has also been nominated as Industrial Area Local Authority (IALA) in Madhurawada IT layout for undertaking provision maintenance of Infrastructure facilities. Whether the construction work in which the applicant is engaged in is meant for any business or otherwise? - HELD THAT - The activities of M/s AMC are business activities and not otherwise. The applicant informed that the said construction is for accommodating Small and Medium Enterprises (SMEs) and Startups. Moreover, the applicant did not provide any information or documentary proof evidencing that the construction/ building is for use other than for commerce, industry, or any other business or profession to be eligible for concessional rate of 12% (6% CGST 6% SGST) available under Notification No.24/2017 - CT (Rate) dated 21.09.2017. The contract entered by the applicant is classifiable under SAC heading No. 9954 under construction services, and it falls under entry no (ii) of serial No.3 of notification no. 11/2017 Central Tax (Rate) dated 28.06.2017 i.e., Composite Supply of Works Contract as defined in clause 119 of Section 2 of Central Goods and Services Act, 2017 and the applicable rate of tax is 18%.

Issues Involved:
1. Whether M/s APIIC qualifies as a Government Entity.
2. Classification of the service provided by the applicant.
3. Applicable GST rate for the construction of Millennium Tower.
4. Eligibility for concessional GST rate and refund claim under RFD-01.

Detailed Analysis:

1. Whether M/s APIIC qualifies as a Government Entity:
The judgment examines if Andhra Pradesh Industrial Infrastructure Corporation Ltd. (APIIC) is a "Government Entity" under GST law. According to Notification No. 11/2017 - CT (Rate) dated 28.06.2017, as amended by Notification No. 31/2017 - CT (Rate) dated 13.10.2017, a "Government Entity" is defined as an authority or a board set up by an Act of Parliament or State Legislature, or established by any Government with 90% or more participation by way of equity or control. APIIC, formed by GO No: 831 dated 10-SEP-1973, with 100% shareholding by the Government of Andhra Pradesh, qualifies as a "Government Entity."

2. Classification of the Service Provided by the Applicant:
The applicant's activity involves the construction of Millennium Tower at Madhurawada, Visakhapatnam, which includes both supply of goods and services. This activity falls under the definition of "works contract" as per Section 2(119) of the CGST Act, 2017, which is treated as a supply of service under Serial No. 6(a) of Schedule II of the CGST Act, 2017.

3. Applicable GST Rate for the Construction of Millennium Tower:
The applicable GST rate for the construction services under heading 9954 is 9% as per Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017. The applicant's contract with APIIC for the construction of Millennium Tower is classified under SAC heading No. 9954 under construction services, falling under entry no (ii) of serial No. 3 of the said notification. Therefore, the applicable rate of tax is 18% (9% Central Tax and 9% State Tax).

4. Eligibility for Concessional GST Rate and Refund Claim under RFD-01:
The applicant contends that the construction should be taxed at a concessional rate of 12% under Notification No. 24/2017 - Central Tax (Rate) dated 21.09.2017, as amended. However, the judgment notes that the construction is meant for accommodating Small and Medium Enterprises (SMEs) and Startups, which are commercial activities. Therefore, the concessional rate of 12% is not applicable. The activities are classified under SAC heading No. 9954 under construction services, with the applicable rate being 18%.

Ruling:
1. The activity of the applicant under the agreement with APIIC is a Composite Supply of Works Contract as defined in clause 119 of Section 2 of the CGST Act, 2017.
2. M/s APIIC is a Government Entity within the meaning of para 4 of clause (x) of Notification No. 11/2017 - CT (Rate) dated 28.06.2017, as amended.
3. The construction is meant for commercial purposes, thus, the concessional rate of 12% is not available.
4. The activities under the agreement are classifiable under SAC heading No. 9954 under construction services, with the applicable rate of tax being 18% (9% Central Tax and 9% State Tax).

This comprehensive analysis covers all relevant issues and preserves the legal terminology and significant phrases from the original text.

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