2018 (9) TMI 1645 - AAR - GST

Works Contract - rate of tax - Applicability of clause(vi)(a) of Sr. No. 3 of table of Notification No. 11/2017-Central Tax (Rate) dated the 28th June, 2017 - liability to pay tax - whether clause(vi)(a) of Sr. No. 3 of table of Notification No. 11/2017-Central Tax (Rate) dated the 28th June, 2017 is applicable on the works contract undertaken by it? - Government entity or not? Whether the Applicant is a government entity or not? - Held that - The Government of Madhya Pradesh is having full control over the applicant M/S M.P. Paschim Kshetra Vidyut Vitran Co. Ltd. and the applicant is covered under the definition of Government Entity. Nature of work undertaken by the applicant - Held that - As per the Memorandum of Association of the Company, Main objects to be pursued by the Company on its incorporation is to carry on the business of purchasing, selling, importing, exporting, selling, trading of electrical energy, including formulation of tariff, billing and collection thereof; to execute Power Purchase Agreements with the Bulk supplies, generating companies, Central and State generating stations, regional Electricity Board/neighboring States/utilities and other entities; to execute agreements for sale of power to other distribution companies and other persons and to coordinate, aid and advise on the activities of other companies and concerns. including subsidiaries, associates and affiliates, engaged in generation, transmission, distribution, supply and wheeling of electrical energy. The projects under DDUGY, IPDS, ADB, SSTD, Saubhagya Yojna, FSP and all other schemes of governments are carried out for business purpose and the benefit of Concessional Rate of 12% (6% under Central tax and 6% State tax) as per notification under is not available to the applicant on works pertaining to construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration, which are carried out in respect of projects under DDUGY, IPDS, ADB, SSTD, Saubhagya Yojna, FSP and all other schemes of governments as the same is undertaken for the business purpose - The composite supply of works contract as defined at Section 2 of CGST Act 2017 and MPGST Act, 2017 is treated as supply of service in terms of serial no.6, Schedule II of CGST Act 2017 and MPGST Act, 2017. In the instant case, the applicant had awarded work to the successful bidder tor Supply of Materials and Erection respectively. Therefore, the contract entered by the applicant is squarely falls under the works contract and falls under entry no. (ii) of S. No. 3 of the table of notification no. 11/2017 - Central Tax (Rate), Dated - 28th June 2017 as amended from time to time and corresponding notifications under and MPGST Act, 2017, the applicable rate of tax is 18% (9% under Central tax and 9% State tax). Ruling - The Applicant is not entitled for the benefit of concessional rate of GST @12% (6% under Central tax and 6% State tax) for the said projects in terms of Notification No.24/2017-CentraI Tax (Rate) dated 21.09.2017 read with Notification No.31/2017-CentraI Tax (Rate) dated 13.10.2017. The applicable rate of tax is 18% (9% under Central tax and 9% State tax).

Summary

Issues:
1. Applicability of Notification No. 11/2017-Central Tax (Rate) on works contract.
2. Determination of liability to pay Tax.

Analysis:
1. Applicability of Notification No. 11/2017-Central Tax (Rate) on works contract:
The applicant, a power distribution company, sought clarification on the applicability of clause(vi)(a) of Sr. No. 3 of table of Notification No. 11/2017-Central Tax (Rate) on their works contract. The department contended that the works contract undertaken did not fall under the category attracting a 12% tax rate but rather an 18% tax rate. The applicant argued that they qualified as a Government Entity, citing various notifications and their relationship with the Government of Madhya Pradesh. The ruling authority examined the definition of Government Entity and concluded that the applicant met the criteria, being wholly owned by the Government of Madhya Pradesh. However, based on the nature of work undertaken by the applicant for various government projects, it was determined that the concessional rate of 12% did not apply, and the applicable tax rate was 18% under the works contract category.

2. Determination of liability to pay Tax:
The ruling clarified that the applicant was not entitled to the concessional rate of 12% under Notification No. 24/2017-Central Tax (Rate) and Notification No. 31/2017-Central Tax (Rate). Instead, the applicable tax rate for their projects was 18% (9% under Central tax and 9% State tax). The ruling was declared valid subject to the provisions under section 103(2) until and unless declared void under Section 104(1) of the GST Act. The decision was based on the specific nature of the projects undertaken by the applicant and the relevant provisions of the GST Act regarding works contracts and tax rates.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the authority's decision based on the facts presented and the legal provisions applicable to the case.