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2020 (12) TMI 899 - AAR - GSTWorks Contract Service or not - nature of supply made by NBCC Ltd. (Applicant) to IIT, BBSR - Legal status of IIT, Bhubaneswar - Governmental Authority or a Government Entity ? - construction of IIT Bhubaneswar Campus allotted to the Applicant company - construction services related to sewerage project falls under clause (iii) of serial no 3 (classification code 9954) of the table in the Notification No. 11/2017-Central Tax(Rate) dated the 28th June, 2017 - rate of GST. Composite supply or not - HELD THAT - There are number of works entrusted to the applicant under a single contract/agreement made on 02.05.2016. We also find that IIT, Bhubaneswar has engaged the applicant as a Project Management Consultant . In order to execute the project, the applicant has engaged contractors through different competitive tender process. The applicant has awarded different types of works to various agencies/contractors with categorical mention of individual works to be carried out by them with specific remuneration for each such work. Hence, it is a supply having distinctly identifiable components with distinct value attributable to each of the components - Mere fact that a number of tasks have been entrusted to the applicant would not make it entitled to be categorized as composite supply particularly in terms of Section 2(30) of the CGST Act, 2017. Legal status of IIT, Bhubaneswar - Governmental Authority or a Government Entity ? - HELD THAT - Government of India, Ministry of Human Resource Development is exercising full control over the activities of IITs all over the country. Needless to say that in the given circumstances IIT, Bhubaneswar qualifies to be called and termed as a Government Entity for the purpose of GST law, as it fulfils the necessary and sufficient conditions laid down under Notification No. 11/2017-C.T. (R). It therefore leaves no doubt that IIT, Bhubaneswar is a Government Entity for the purpose of provisions of CGST Act, 2017 and OGST Act, 2017. Sr. No. 3(vi) to the Notification No. 11/2017-C.T. (Rate) - HELD THAT - The applicant has been engaged as a PMC to execute the contract for carrying out different specified works for IIT, Bhubaneswar which includes erection, commissioning, installation, etc. We also find that for executing the project, the applicant shall be paid agency charges of 5.5% in addition to the actual cost of work. The agency charges are type of commission or remuneration for rendering consulting service to IIT, Bhubaneswar. We also find it necessary to place on record that there are certain items of supply made to IIT , Bhubaneswar including, but not limited to, supply of consulting services which definitely do not find place in the ambit of Sr. No. 3(vi) to the Notification No. 11/2017-C.T. (Rate).Needless to mention that such supply shall not qualify for exemption as envisaged under Sr. No. 3 (vi) to the Notification No. 11/2017-C.T. (Rate), inasmuch as the said supply is a Pure Service and not in the nature of works contract service - works entrusted to the Applicant namely construction of 800 seater boys hostel, 200 seater girls hostel, Construction of lecture hall complex, Construction of Student Activity Centre, Dispensary, Construction of 1000 capacity Auditorium, Construction of Central Research Instrumentation facilities, Construction of Central Workshop, Play grounds are within the purview of sub-clause (b) of Clause (vi) of S1 No.3 (heading 9954) of Notification No. 11/2017-C.T. (Rate) under CGST Act and corresponding notification under OGST Act, 2017, and hence merit exemption where the applicable tax rate is 12%. Construction of Directors Bungalow and construction of staff/faculty quarters - HELD THAT - The civil construction of residential quarters is not the primary work entrusted to IIT, Bhubaneswar. Accordingly, we fail to understand as to why the benefit of concessional rate @ 12% GST should be available to this particular works contract awarded to the applicant? The intention of the Legislature has been to allow concessional rate to such work which has been entrusted to a Government entity for public interest in general, but extrapolating and extending this concessional rate to any or all activities of IIT, Bhubaneswar will not only be unwarranted but also defeat the very purpose of concessional rate. Hence, we hold that construction of Directors Bungalow and construction of staff/faculty quarters is out of the purview of exemption provided under Notification No. 11/2017-C.T. (Rate), dated 28-6-2017 and would attract GST @ 18%. Thus, the supply of goods and/or services or both which squarely fall within the ambit of scope of work entrusted to IIT, Bhubaneswar by Government of India shall be entitled for concessional rate under Sr. No. 3(vi) to Notification No. 11/2017-C.T. (R). Accordingly, each and every supply under the subject contract shall be treated separately for determining the rate of tax under the CGST Act, 2017 read with the provisions of GST Tariff and respective exemption notifications.
Issues Involved:
1. Classification of the nature of supply made by the Applicant to IIT, Bhubaneswar. 2. Determination of IIT, Bhubaneswar as a 'Governmental Authority' or 'Government Entity'. 3. Applicability of concessional tax rate for works contract service of construction of IIT Bhubaneswar Campus. 4. Applicability of concessional tax rate under entry 3(vi)(a) of Notification No. 11/2017. 5. Classification and tax rate for construction services related to sewerage project. 6. Determination of applicable clause and GST rate if the works contract service is not covered under clause (vi) or clause (iii) of entry 3 of Notification No. 11/2017. Issue-wise Detailed Analysis: 1. Classification of the nature of supply made by the Applicant to IIT, Bhubaneswar: The applicant argued that the supply is a composite supply of works contract service to IIT, Bhubaneswar, a Government Entity, and should be eligible for a concessional GST rate of 12% as per Serial Number 3(vi)(a) & (b) of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017. However, the authority found that the works entrusted under the contract are disjoint in character and cannot be considered as a composite supply. Each task has distinct value and is not naturally bundled, thus not qualifying as a composite supply under Section 2(30) of the CGST Act, 2017. 2. Determination of IIT, Bhubaneswar as a 'Governmental Authority' or 'Government Entity': IIT, Bhubaneswar is established by the Government of India and is controlled by the Ministry of Human Resource Development. It qualifies as a 'Government Entity' as defined in Notification No. 11/2017-Central Tax (Rate) and Notification No. 31/2017-C.T. (Rate), dated 13-10-2017. The definition includes bodies set up by an Act of Parliament or established by the Government with 90% or more participation by way of equity or control. 3. Applicability of concessional tax rate for works contract service of construction of IIT Bhubaneswar Campus: The works contract services such as construction of lecture halls, student activity centers, dispensaries, auditoriums, and central research facilities fall under sub-clause (b) of Clause (vi) of Serial No. 3 (heading 9954) of Notification No. 11/2017-C.T. (Rate) and are eligible for a concessional GST rate of 12%. However, pure consulting services provided by the applicant do not qualify for this concessional rate. 4. Applicability of concessional tax rate under entry 3(vi)(a) of Notification No. 11/2017: The authority held that the construction of Directors Bungalow and staff/faculty quarters does not qualify for the concessional rate under Notification No. 11/2017-C.T. (Rate) as these are not the primary works entrusted to IIT, Bhubaneswar. These works attract a GST rate of 18%. 5. Classification and tax rate for construction services related to sewerage project: The construction of sewerage disposal units and water works falls under Serial No. (iii)(c) of Notification No. 11/2017-C.T. (Rate) and is eligible for a concessional GST rate of 12%. 6. Determination of applicable clause and GST rate if the works contract service is not covered under clause (vi) or clause (iii) of entry 3 of Notification No. 11/2017: The authority concluded that each supply under the contract should be treated separately for determining the applicable GST rate. Only those supplies that fall within the scope of work entrusted to IIT, Bhubaneswar by the Government of India qualify for the concessional rate under Serial No. 3(vi) of Notification No. 11/2017-C.T. (Rate). Ruling: 1. The nature of supply made by the Applicant to IIT, Bhubaneswar is not a composite supply and does not qualify for a concessional GST rate as a whole. 2. IIT, Bhubaneswar is a 'Government Entity'. 3. Specific works contract services related to educational and research facilities qualify for a concessional GST rate of 12%. 4. Construction of Directors Bungalow and staff/faculty quarters attracts a GST rate of 18%. 5. Construction services related to sewerage projects qualify for a concessional GST rate of 12%. 6. Each supply under the contract should be treated separately for determining the applicable GST rate. This ruling is valid subject to provisions under Section 103(2) until declared void under Section 104(1) of the GST Act. Appeals can be made to the Odisha State Appellate Authority for advance ruling within 30 days from the date of receipt of the ruling.
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