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2022 (4) TMI 914 - AAR - GSTBenefit of exemption notification - Composite supply - Government Entity or not - If the tax rate of M/s. Mahalaxmi B T Patil Honai Constructions JV (Referred to as JV) is NIL as per SI No 3A- Chapter No. 9954 as per Notification No. 12/2017 C.T. (Rate) dated 28.06.2017, as amended by Notification No. 2/2018-C.T. (Rate) dated 25.01.2018, whether the benefit of the same tax rate i.e. NIL can be availed ro not? - benefit of SI No 3 (x) - Chapter No. 9954 as per Notification No. 01/2018-C.T. (Rate) dated 25.01.2018 (amendments in the Notification No 11/2017- Central Tax (Rate) dated 18th June 2017) available or not - HELD THAT - The impugned Contract/Work Order, involves activities consisting of Earth Work such as Excavation for Tunnel, removing of excavated stuff, fabrication, transporting, providing steel support, rock bolting, reinforcement, fixing of chain link, cement concerting, providing drainage arrangement etc. wherein, the total earth work is approximately 91% and construction work is around 9% wherein transfer of property is involved and held that the activity of the Principal Contractor, part of which is outsourced to the applicant, is a Composite supply of works contract as defined in clause (119) of Section 2 of the CGST Act, 2017, where such supply is to a Governmental Entity, i.e. GMIDC. Further we also held that, the Principal Contractor s supply is to a Government Entity, i.e. GMIDC and the said work has been procured by GMIDC in relation to work entrusted to it by the State Government of Maharashtra. Since it is already held that the activity of the Principal Contractor is not covered under Sr. No 3A- Chapter No. 9954 as per Notification No. 12/2017-C.T. (Rate) dated 28.06.2017, as amended from time to time, in the subject case also relying on the same ratio we are of the opinion that the applicant cannot avail the benefit of Sr. No 3A- Chapter No. 9954 as per Notification No. 12/2017-C.T. (Rate) dated 28.06.2017, as amended. Composite supply of works contract as defined in clause (119) of section 2 of the CGST Act, 2017 provided by a sub-contractor (in this case, the applicant) to the main contractor (Principal Contractor) providing services specified in item (vii) of Sr No 3 of Notification No. 11/2017-CTR to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity is covered under Section 3 (x) of Notification No. 11/2017 - CTR dated 20.06.2017 as amended - The Composite supply of works contract is provided by the applicant sub-contractor to the main contractor who is further providing services specified in item (vii) to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity. The impugned supply of the applicant is covered under Sr.No. 3(x) of Notification No. 11/2017-CTR dated 20.06.2017 as amended from time to time - Notification No.11/2017-CT (Rate) dated 28/6/2017 as amended, was amended vide Notification No. 15/2021-Central Tax (Rate) dated 18.11.2021 (with effect from 01.01.2022) and in Sr. No 3, in column (3), in the heading Description of Services , in item (x) for the words Union territory, a local authority, a Governmental Authority or a Government Entity the words Union territory or a local authority shall be substituted. That means words a Governmental authority or a Government Entity are omitted. Therefore, with effect from 01.01.2022, the impugned services supplied by the applicant will not be covered under Sr. No. 3 (x) of Notification No. 11/2021- CTR dated 28.06.2017 as amended from time to time.
Issues Involved:
1. Applicability of NIL tax rate under SI No 3A- Chapter No. 9954 as per Notification No. 12/2017 C.T. (Rate) dated 28.06.2017, as amended by Notification No. 2/2018-C.T. (Rate) dated 25.01.2018. 2. Applicability of the tax rate under SI No 3(x) - Chapter No. 9954 as per Notification No. 01/2018-C.T. (Rate) dated 25.01.2018 (amendments in Notification No 11/2017- Central Tax (Rate) dated 18th June 2017). Detailed Analysis: Issue 1: Applicability of NIL Tax Rate under SI No 3A- Chapter No. 9954 The applicant sought to determine whether the tax rate for the JV, as per SI No 3A- Chapter No. 9954, could be NIL. The work order involved a composite supply of works contract, predominantly earthwork (91%) and construction work (9%), provided to a Government Entity (GMIDC). The ruling referred to a previous decision in the case of Soma Mohite Joint Venture, where it was held that similar works were covered under Entry 3(vii) of Notification No. 11/2017-CTR. However, the jurisdictional officer opined that the impugned contract is not covered under Sr. No. 3A of Notification No. 12/2017-CTR. Upon review, it was found that the Principal Contractor’s activity does not fall under Sr. No. 3A of Notification No. 12/2017-C.T. (Rate). Thus, the applicant cannot avail the benefit of NIL tax rate under the said notification. Issue 2: Applicability of Tax Rate under SI No 3(x) - Chapter No. 9954 The applicant also queried whether they could avail the benefit under SI No 3(x) - Chapter No. 9954 as per Notification No. 01/2018-C.T. (Rate). The jurisdictional officer confirmed that the work order, predominantly earthwork (91%), falls under Sr.No. 3(x) of Notification No. 11/2017-CTR, given that GMIDC is a Government Entity and the work was procured by the principal contractor in relation to work entrusted by the State Government. The ruling referenced the decision in the case of Soma Mohite Joint Venture, where it was held that the work carried out by the JV was covered by Entry 3(vii) of Notification No. 11/2017-CTR. Applying this ratio, it was concluded that the applicant’s supply is covered under Sr. No. 3(x) of Notification No. 11/2017-CTR. However, it was noted that Notification No. 11/2017-CT (Rate) was amended by Notification No. 15/2021-Central Tax (Rate) dated 18.11.2021, effective from 01.01.2022, which omitted the words “a Governmental authority or a Government Entity.” Therefore, from 01.01.2022, the impugned services supplied by the applicant will not be covered under Sr. No. 3(x) of Notification No. 11/2021-CTR. Conclusion: 1. The applicant cannot avail the benefit of NIL tax rate under SI No 3A- Chapter No. 9954 as per Notification No. 12/2017-C.T. (Rate). 2. The applicant can avail the benefit of the tax rate under SI No 3(x) - Chapter No. 9954 as per Notification No. 01/2018-C.T. (Rate) until 31.12.2021.
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