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2023 (2) TMI 871 - AAR - GSTSupply or not - providing of dredging service which predominantly involves earth work to the Government of Andhra Pradesh - Government of Andhra Pradesh Water Resources Department - comes under the purview of State Government or not - Whether amendment made vide Notification No. 39/2017 dated 13-10-2017 Integrated Tax (Rate) in the table against Serial No. 3 for the item (vii) will be applicable in this case? HELD THAT - It is evident that the applicant undertakes the work of dredging in the foreshore of Prakasam Barrage. Dredging is the process of removing the silt and other materials from the bottom of bodies of water. As per Wikipedia, Dredging is the excavation of material from a water environment. Possible reasons for dredging include improving existing water features; reshaping land and water features to alter drainage, navigability, and commercial use; constructing dams, dikes, and other controls for streams and shorelines; and recovering valuable mineral deposits or marine life having commercial value. In all but a few situations the excavation is undertaken by a specialist floating plant, known as a dredger . On due consideration of the cost of the materials involved in the instant supply, as certified by the Executive Engineer, Krishna Central Division, Vijayawada, we are of the opinion that the work being undertaken by the applicant is a composite supply of works contract which predominantly involves earth work i.e., constituting more than 75 per cent. of the value of the works contract as specified under serial number 3(vii) of Notification No. 39/2017- Integrated Tax (Rate) dated 13.10.2017. Whether the supply being provided by the applicant to the Water Resource Department, Government of Andhra Pradesh would be considered as supply to the State Government so as to cover under serial number 3 (vii) of the Notification No. 39/2017- Integrated Tax (Rate) dated 13.10.2017? - HELD THAT - A department of Central/ State Government shall be regarded as Central/State Government and therefore, supply being provided by the applicant to the Water Resource Department of Government of Andhra Pradesh qualifies as a supply to the State Government.
Issues Involved:
1. Whether the Water Resources Department, Government of Andhra Pradesh comes under the purview of the State Government. 2. Applicability of Notification No. 39/2017 dated 13-10-2017 Integrated Tax (Rate) for the item (vii) in this case. Issue-wise Detailed Analysis: Issue 1: Whether the Water Resources Department, Government of Andhra Pradesh comes under the purview of the State Government. The applicant contends that the Water Resources Department, Government of Andhra Pradesh, qualifies as a State Government entity. The definition of "Government" under clause (53) of section 2 of the CGST Act includes both Central and State Governments. The executive powers of the State are vested in the Governor, exercised through subordinate officers as per Articles 154 and 166 of the Constitution. The Water Resources Department's functions, such as drought proofing, water security, and interlinking rivers, further substantiate its status as a State Government entity. The ruling confirms that the Water Resources Department qualifies as a State Government entity, making the supply to it considered as supply to the State Government. Issue 2: Applicability of Notification No. 39/2017 dated 13-10-2017 Integrated Tax (Rate) for the item (vii) in this case. The applicant argues that the work involves predominantly earthwork, constituting more than 75% of the contract value, thus qualifying for a 5% GST rate under Notification No. 39/2017. The contract includes dredging, mobilization, demobilization, and other related activities, predominantly involving earthwork. The applicant provided a certificate from the Executive Engineer, Krishna Central Division, confirming that the cost of material transferred and consumed is less than 25% of the total agreement value. The ruling agrees that the contract qualifies as a composite supply of works contract involving predominantly earthwork, thus attracting a 5% GST rate up to 17th July 2022, and 12% thereafter as per Notification No. 03/2022 Integrated Tax (Rate) dated 13th July 2022. Observations & Findings: 1. Composite Supply of Works Contract: The contract involves dredging and related activities, qualifying as a composite supply of works contract as per clause (119) of section 2 of the GST Act. 2. Predominantly Earthwork: The work predominantly involves earthwork, constituting more than 75% of the contract value, as confirmed by the Executive Engineer's certificate. 3. Supply to State Government: The supply to the Water Resources Department qualifies as a supply to the State Government, as per the FAQ on Government Services issued by the Central Board of Indirect Taxes & Customs. Ruling: The supply undertaken by the applicant to the Water Resource Department, Government of Andhra Pradesh, for desilting the foreshore of Prakasam Barrage is a composite supply of works contract involving predominantly earthwork and is taxable under entry No. 3 (vii) of Notification No. 39/2017- Integrated Tax (Rate) dated 13.10.2017, as amended.
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