2019 (10) TMI 524 - AAR - GST

Rate of GST - 'Government Authority or not - activity of construction of residential complex / residential houses undertaking on behalf of BDA - recipient of service - applicability of entry 3(vi) of the Notification No. 11/2017 - Central Tax (Rate) as amended. HELD THAT - Bangalore Development Authority is an authority established by the State Government under the Bangalore Development Authority Act, 1976 and it is entrusted with the activity of development of the City of Bangalore and areas adjacent thereto and for matters connected therewith - the control over the entity rests with the Government of Karnataka and hence the Bangalore Development Authority satisfies both the conditions and hence is considered as a Government Entity within the meaning of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. Whether the services provided by the applicant are covered under clauses (a), (b) or (c) of the entry no.3(vi) of the said Notification? - HELD THAT - The applicant is constructing a Housing Project at two places in and around Bangalore. The Bangalore Development Authority in its tender has stated that it has taken up construction of housing in and around Bangalore City as designed by the Government of Karnataka. Since this is a residential project for general public, the same is not covered under clause (b) or (c) - This works contract is for a construction of a civil structure and since it is a residential real estate project, the works is predominantly for use other than commerce, industry or any other business or profession and hence it is covered under clause (a) of the entry 3(vi) of the Notification, subject to the conditions. Whether the recipient has procured the said services in relation to a work entrusted to it by the State Government? - HELD THAT - The Bangalore Development Authority Act, which is passed by the State Legislature, has entrusted the activity of development of the City of Bangalore and areas adjacent thereto and for matters connected therewith to the BDA and the Authority has to obtain the sanction of the Government of Karnataka for every scheme they propose to implement. Hence, the condition is also satisfied - the services provided by the applicant to the Bangalore Development Authority in relation to the construction of two housing complexes referred to in the application are covered under entry no.3(vi)(a) of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 (as amended) and is liable to tax at 6% under the CGST Act, 2017. Similarly, the services provided is covered under entry of Notification (11/2017) No. FD 48 CSL 2017 dated 29.06.2017 (as amended) and is liable to tax at 6% under the Karnataka Goods and Services Tax Act, 2017.

Issues Involved:
1. Whether the activity undertaken by the applicant is covered under section 2(119) of the CGST Act, 2018 read with point 6 Schedule II of the CGST Act, 2017.
2. Whether Bangalore Development Authority (BDA) is a Government Authority as per GST Law.
3. Whether the transaction is covered under point 3(ii) of Notification No. 11/2017 - Central Tax (Rate).
4. Whether the transaction is covered under point 3(iv) of Notification No. 11/2017 - Central Tax (Rate).
5. Whether the transaction is covered under point 3(v) of Notification No. 11/2017 - Central Tax (Rate).
6. Whether the transaction is covered under point 3(vi) of Notification No. 11/2017 - Central Tax (Rate).

Detailed Analysis:
Issue 1: Coverage under Section 2(119) CGST Act, 2018
The applicant is engaged in civil construction and works contract services for BDA. The activity involves constructing residential complexes and houses. As per Section 2(119) of the CGST Act, 2017, the construction activity is considered a "works contract" since it involves both goods and services that cannot be bifurcated. The activity is deemed a "composite supply" and is taxed based on the principal activity.

Issue 2: BDA as a Government Authority
BDA was established under the BDA Act, 1976, by the Government of Karnataka. The BDA Act specifies its structure and functions, indicating that it is controlled by the government. Therefore, BDA qualifies as a "Government Entity" under the GST Law.

Issue 3: Coverage under Point 3(ii) of Notification No. 11/2017
The applicant's activity does not fall under point 3(ii) of Notification No. 11/2017 - Central Tax (Rate), which pertains to "Composite supply of works contract" to any person. The applicant agrees that their activity is not covered under this entry, and the Authority concurs.

Issue 4: Coverage under Point 3(iv) of Notification No. 11/2017
The activity is not covered under point 3(iv) of Notification No. 11/2017, which includes specific works contract activities related to infrastructure projects like roads, bridges, and certain housing schemes. The applicant's construction work for BDA does not fit these categories.

Issue 5: Coverage under Point 3(v) of Notification No. 11/2017
The applicant's construction work is not covered under point 3(v) of Notification No. 11/2017, which pertains to "Original works" for specific projects like railways and low-cost housing. The residential complexes constructed for BDA do not meet these criteria.

Issue 6: Coverage under Point 3(vi) of Notification No. 11/2017
The activity is covered under point 3(vi) of Notification No. 11/2017, which includes works contract services provided to a Government Entity for constructing civil structures predominantly for non-commercial use. BDA's projects to develop residential complexes for public use fit this description. The services are procured by BDA as part of its mandate under the BDA Act, fulfilling the conditions for this entry.

Conclusion:
1. The activity undertaken by the applicant is covered under section 2(119) of the CGST Act, 2017, as a works contract service.
2. BDA qualifies as a Government Entity under the GST Law.
3. The transaction is not covered under points 3(ii), 3(iv), or 3(v) of Notification No. 11/2017 - Central Tax (Rate).
4. The transaction is covered under point 3(vi) of Notification No. 11/2017 - Central Tax (Rate), making it liable for GST at 6% under the CGST Act, 2017, and 6% under the Karnataka GST Act, 2017.

Ruling:
1. The activity is a works contract service under section 2(119) of the CGST Act.
2. BDA is a Government Entity as per GST provisions.
3. The transaction is covered under clause (a) of entry 3(vi) of Notification No. 11/2017 - Central Tax (Rate), and not under entries 3(ii), 3(iv), or 3(v).

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