2018 (11) TMI 57 - AAR - GST

Levy of GST - Work contract services received from vendors for supply and erection work under various projects - 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 services received by it? Held that - The Government of Madhya Pradesh is having full control over the applicant M/s. M.P. Poorv Kshetra Vidyut Vitran Co. Ltd. and the applicant is covered under the definition of Government Entity - The projects are undertaken for construction of electricity distribution lines, sub-stations and other infrastructure which are meant predominately for sell of electricity in urban and/or rural area. 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 for 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-Central Tax (Rate) dated 21.09.2017 read with Notification No.31/2017-Central 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 clause (vi)(a) of Sr. No. 3 of table of Notification No. 11/2017-Central Tax(Rate) dated the 28th June, 2017 on works contract services received.
2. Determination of liability to pay Tax.

Analysis:
1. The applicant sought clarification on the applicability of clause (vi)(a) of Sr. No. 3 of the notification on works contract services received. The department argued that the nature of works contract undertaken did not fall under the category attracting a 12% tax rate but rather an 18% tax rate.

2. The discussions revolved around whether the applicant qualified as a government entity. It was established that the applicant, a subsidiary of M.P. Power Management Co. Ltd., was wholly owned by the Government of Madhya Pradesh, making it a government entity. The nature of work undertaken by the applicant for various government projects was analyzed, indicating that the projects were for business purposes and did not qualify for the concessional 12% tax rate. The works contract entered by the applicant fell under the category attracting an 18% tax rate.

3. The ruling concluded that the applicant was not entitled to the concessional 12% tax rate but was liable to pay tax at the rate of 18% (9% under Central tax and 9% State tax) for the projects in question. The ruling's validity was subject to the provisions under the GST Act until declared void.

This detailed analysis of the judgment provides insights into the issues raised, the arguments presented, and the final ruling delivered by the Authority for Advance Ruling in Madhya Pradesh.