2021 (6) TMI 829 - AAR - GST

Classification of supply of goods/services - rate of GST applicable - composite works contract - construction of ISPAT Post Graduate Medical Institute and Super Specialty Hospital - clinical establishment or not - Government Entity or not - concessional rate of tax in terms of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 - HELD THAT - The work order has been issued by M/s NBCC in their own capacity and the applicant has signed agreement with M/s NBCC for construction of Ispat Post Graduate Medical Institute and Super Specialty Hospital at Rourkela Steel Plant for SAIL. When the contract is made between M/s NBCC and M/s URC Construction (P) Ltd (the applicant), it is necessary to see the legal status of M/s NBCC. From the contract/agreement deed, it is obvious that M/s NBCC is a public limited company incorporated and registered under the Companies Act, 1956 and having its registered office at NBCC Bhawan, Lodhi Road, New Delhi-110003. Thus M/s NBCC is a company and not State Government/Central Government or Union Territory or any Government Entity. The status of M/s NBCC is therefore not disputed. As per the Contract, the Supply is being made to M/s NBCC which is a body corporate and not to any Government or Government Entity. Admittedly, M/s SAIL, RSP, Rourkela is the ultimate service beneficiary but Entry at SI No.3 (vi) of the notification No. 11/2017 is very specific and it cannot be stretched or construed otherwise. Thus, the commercial Supply by the applicant is not to Government/Government Entity but to M/s NBCC, a separate distinct entity and thereby the second pre-requisite is not fu-filled to merit classification under serial no. 3(vi) (a) or (b) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended from time to time. Whether M/s SAIL, RSP is a Government Entity in terms of explanation 4(x) to the notification? - HELD THAT - It is clear that SAIL was formed in 1973 pursuant to approval of the parliament to manage 5 integrated steel plants. Thereafter, the SAIL was restructured as an Operating Company by way of Act passed by the Parliament namely 'The Public Sector Iron and Steel Companies (Restructuring) And Miscellaneous Provisions Act, 1978' for carry out function entrusted by the Central Government. Further, Serial No. 3(ix) of Notification No. 11/2017 as amended by Notification No. 1/2018 provides a concessional rate of GST @ 12% subject to condition provided under Column (5) of the said table, which reads as under; 'Provided that where the services are supplied to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union Territory or local Authority, as the case may be'.

Summary

Issues Involved:
1. Applicable rate of Goods and Service Tax (GST) on the contract awarded by NBCC for construction of ISPAT Post Graduate Medical Institute and Super Specialty Hospital for SAIL in Odisha.

Issue-Wise Detailed Analysis:

1. Applicable Rate of GST on the Contract:

Submission of the Applicant:
- The applicant, a national contractor, was awarded a contract by NBCC for the construction of ISPAT Post Graduate Medical Institute and Super Specialty Hospital at Rourkela Steel Plant for SAIL in Odisha on a Design, Engineering, Procurement, and Construction (EPC) basis.
- The contract value is ?259,60,13,257.00, inclusive of all taxes, with adjustments for any changes in GST rates.
- The applicant argued that the GST rate on Works Contract Service is governed by various amendments to Notification No. 11/2017-Central Tax (Rate), which specifies a 6% CGST rate (i.e., 12% GST) for services provided to a Government Entity for a clinical establishment.
- The applicant contended that SAIL qualifies as a "Government Entity" as it was set up by an Act of Parliament and has significant government participation.

Discussion and Findings:
- The Authority for Advance Ruling (AAR) examined the relevant entries of Notification No. 11/2017-Central Tax (Rate) and its amendments.
- The AAR identified three pre-requisites for the concessional GST rate:
1. The supply must be a composite supply of works contract service.
2. The services must be provided to the Central Government, State Government, Union Territory, local authority, Governmental Authority, or Government Entity.
3. If provided to a Government Entity, the services must be procured in relation to a work entrusted by the government.

Analysis of Pre-requisites:
- Composite Supply of Works Contract Service: The contract involves the construction of a medical institute and hospital, which qualifies as a clinical establishment. The scope includes the supply of all goods and services required for completion, falling within the definition of works contract under Section 2(119) of the CGST Act, 2017.
- Provision to a Government Entity: The applicant argued that the services are provided to SAIL, a Government Entity, with NBCC acting merely as an executing agency. The AAR noted that NBCC is a public limited company and not a government entity, but accepted the applicant's contention that the ultimate service beneficiary, SAIL, is a Government Entity.
- Entrusted Work by Government: The AAR confirmed that SAIL was established by an Act of Parliament and carries out functions entrusted by the Central Government. The construction of the hospital is part of a central government-funded project, fulfilling the condition of being a work entrusted by the government.

Conclusion:
- The AAR concluded that the supply of works contract service for the construction of ISPAT Post Graduate Medical Institute and Super Specialty Hospital for SAIL qualifies for the concessional GST rate of 12% (CGST @ 6% + SGST @ 6%) as per Notification No. 11/2017-Central Tax (Rate) and its amendments.

Ruling:
- The applicable rate of GST on the contract awarded by NBCC for the construction of ISPAT Post Graduate Medical Institute and Super Specialty Hospital for SAIL is 12% (CGST @ 6% + SGST @ 6%).

Validity and Appeal:
- The ruling is valid under Section 103(2) of the GST Act until declared void under Section 104(1).
- The applicant or jurisdictional officer may appeal to the Odisha State Appellate Authority for advance ruling within 30 days from the date of receipt of the ruling.