2022 (12) TMI 514 - AAR - GST

Classification of services - rate of tax - works contract service provided to the Telangana State Tourism Development Corporation Limited by way of construction of building on their land - Whether it is 12% as the Telangana State Tourism Development Corporation Limited is wholly owned by the Government of Telangana or 18% as the Telangana State Tourism Development Corporation Limited is a business entity and collecting fee from its customers? HELD THAT - Telangana State Tourism development corporation limited is a Government entity and falls under the Entry at S.No. 3(vi) of Notification No. 11/2017 and therefore attract a concessional rate of tax in the capacity of contracts made to Government entity @6% CGST SGST upto 31.12.2021 as this entry was amended to exclude Government Entity Government authority vide Notification No. 15/2021 dt 18.11.2021 so that now the rate of tax for works executed from 01.01.2022 is 9% CGST SGST each. The structures constructed by the applicant will be used for the purpose of business and therefore these contracts are not qualified for concessional rate of tax made to Government Entity. Hence the rate of tax applicable on supply of these contract services is 9% CGST SGST each from the inception of the contracts.

Summary

Issues involved:
1. Determination of the applicable tax rate for works contract services provided to a Government entity by a construction company.

Analysis:
1. Facts of the Case: The applicant, a construction company, sought an advance ruling on the tax rate applicable to works contract services provided to Telangana State Tourism Development Corporation Limited (TSTDCL), a Government entity.

2. Legal Interpretation: The applicant argued that a previous ruling mandated collecting GST at 18% for similar services. The applicant contended that TSTDCL being a Government entity should attract a lower tax rate.

3. Discussion & Findings: The Authority analyzed the nature of contracts executed by the applicant for TSTDCL. Contracts involving public structures attracted a concessional tax rate of 6% CGST & SGST till 31.12.2021, later revised to 9% each. Contracts for commercial structures attracted the standard rate of 9% CGST & SGST from the beginning.

4. Ruling: The Authority clarified that the tax rate for works contract services provided to TSTDCL varied based on the nature of the contract. Contracts for public structures were taxed at 6% or 9%, while contracts for commercial structures attracted the standard rate of 9% CGST & SGST.

5. Conclusion: The ruling provided a detailed breakdown of the applicable tax rates for each specific contract executed by the applicant for TSTDCL, based on the nature of the works and the entity's classification.