2022 (4) TMI 1133 - AAR - GST

Classification of services - rate of GST - execution of works contract service at Kudankulam Nuclear Power Project - applicability of S.No vi (or) vii of Notification No.24/2017 dated 21.09.2017 - requirement of payment of differential tax through debit note under GSTR 1 or not - Government entity or not - HELD THAT - The applicant is a Joint Venture between M/s. SOM Projects Private Ltd and M/s. Varindera Constructions Limited solely for carrying out the works contract service for Kudankulam Nuclear Power Project (KKNPP) a unit of Nuclear Power Corporation of India Ltd (NPCIL) at their site namely Anuvijay Township Kudankulam Radhapuram Taluk Tirunelveli Tamilnadu. From the submissions made by the applicant it is observed that they have been awarded the project of constructing 360 nos of (D-type Nos. D-special-80 Nos and E-type-40 nos) residential quarters (9 blocks of G 10 floors) for residential usage of their employees at Anuvijay Township Kudankulam. It has been stated by the applicant that this work order has been received directly from M/s. Nuclear Power Corporation of India Ltd which is a Government entity and there is no intermediary involved in the whole scheme of transactions. Nuclear Power Corporation India Limited (NPCIL) is a Public Sector Enterprise under the Department of Atomic Energy (DAE) Government of India incorporated on September 17 1987 as a Public Limited Company under the Companies Act 1956 with the objective of operating the atomic power stations and implementing the atomic power projects for the generation of electricity in pursuance of the schemes and programs of Government of India under the Atomic Energy Act and the entire shares are held by the Central Government. Thus NPCIL is a PSE established under Department of Atomic Energy (Central Government Department) with 100 percent equity held by the Central Government to implement atomic projects for the generation of Electricity as entrusted by the Central Government and therefore is a Government Entity . Now that it is established that the service recipient is a Government entity the condition in clause c of SI. No. vi which stipulates that the supplies should be procured by the said Government 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 is taken up for consideration. In the instant case the work of construction of residential quarters has been awarded to the applicant by NPCIL - the Works contract service rendered by the applicant in construction of residential quarters fails to satisfy the condition stipulated in Sl.Nos vi of Notification no. 11/17. Thus it is clear that the service rendered by the applicant is not covered by the said Sl.no. vi of the Notification cited supra and shall attract GST at 18%. The services rendered by the applicant i.e. construction of residential quarters for the employees of KKNPP under the contract awarded by NPCIL is not a service procured by NPCIL the Government entity in relation to a work entrusted to it by the Central Government and hence rate prescribed in entry at Sl.No. 3(vi) is not applicable to the applicant and the question on modality of payment of differential tax to be paid is not answered as it is questioning the procedural aspect of law which is not within the purview of Section 97(2).

Summary

Issues Involved:
1. Applicability of GST rate (12% or 18%) on the execution of works contract service at Kudankulam Nuclear Power Project.
2. Procedure for payment of differential tax if the GST rate is determined to be 18% instead of 12%.

Issue-wise Detailed Analysis:

1. Applicability of GST Rate on Works Contract Service:
The applicant sought clarity on whether the execution of works contract service at Kudankulam Nuclear Power Project (KKNPP) would attract GST at 12% or 18%. The applicant argued that their service should attract 12% GST under S.No. vi of Notification No. 24/2017-CT (Rate), as they are constructing residential quarters for the employees of NPCIL, a Government entity.

The Authority examined the conditions under S.No. vi of Notification No. 24/2017-CT (Rate), which requires:
- The service must be a works contract as defined in Section 2(119) of the CGST Act, 2017.
- The service must be provided to the Central Government, State Government, Union Territory, local authority, Governmental Authority, or Government Entity.
- The service must be procured by the said Government entity in relation to a work entrusted to it by the Central Government, State Government, Union Territory, or local authority.

The applicant demonstrated that NPCIL is a Government entity with 100% shareholding by the President of India and is established under the Department of Atomic Energy. However, the Authority found that the construction of residential quarters for NPCIL employees does not satisfy the condition of being "in relation to" the work entrusted to NPCIL by the Central Government, which is to implement atomic power projects for electricity generation. The Authority concluded that the service is a welfare measure for NPCIL employees and not directly related to the work entrusted to NPCIL.

Therefore, the service does not qualify for the concessional rate of 12% GST under S.No. vi of Notification No. 24/2017-CT (Rate). Instead, it falls under the residual entry S.No. xii of the same notification, attracting 18% GST.

2. Procedure for Payment of Differential Tax:
The applicant also sought guidance on the procedure for paying the differential tax if the GST rate is determined to be 18% instead of 12%. The Authority noted that this question pertains to the procedural aspect of the law, which is not covered under Section 97(2) of the CGST Act, 2017. Consequently, the Authority did not provide a ruling on this question.

Conclusion:
The Authority ruled that the execution of works contract service for the construction of residential quarters for the employees of Kudankulam Nuclear Power Project is not covered under S.No. vi of Notification No. 24/2017-CT (Rate) and attracts GST at 18% as per S.No. xii of Notification No. 11/2017-CT (Rate). The question on the procedure for paying the differential tax was not addressed as it falls outside the purview of Section 97(2) of the CGST Act, 2017.