2019 (11) TMI 283 - AAR - GST

Rate of GST - execution of the civil works of Pazhassi Sagar Small Hydro Electric project awarded by Kerala State Electricity Board Ltd - Sl.No.3 (iii) (b) or 3(vi) of Notification No.11/2017 Central Tax (Rate) dated 28.06.2017 - GST taxable at the rate of 12%? - Government Entity - HELD THAT - The concessional rate of GST of 12% under Sl No. 3 (vi) (a) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 is applicable only for composite supply of works contracts as defined in clause (119) of Section 2 of the CGST Act, 2017 supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,- (a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession. Whether Kerala State Electricity Board Ltd will fall under any of the categories namely; Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity? - HELD THAT - Kerala State Electricity Board Ltd; is a Government Company incorporated under the Companies Act, 1956 with 90 per cent or more participation by way of equity or control of the Government of Kerala to carry out the business of generation, transmission and distribution of electricity in the State of Kerala and is a State Transmission Utility within the meaning of Section 2 (67) of the Electricity Act, 2003. Hence, Kerala State Electricity Board Ltd could not be considered as constituted/established by the Government of Kerala to carry out any function entrusted to a municipality under article 243W or a panchayat under article 243G of the Constitution. Therefore, Kerala State Electricity Board Ltd will not come under the definition of Governmental Authority under Para 2(zf) of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. However, Kerala State Electricity Board Ltd squarely falls under the definition of Government Entity under Para 2 (zfa) of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017.

Summary

Issues:
1. Whether the execution of the civil works of Pazhassi Sagar Small Hydro Electric Project falls under Sl.No.3 (iii) (b) or 3(vi) of Notification No.11/2017 Central Tax (Rate) dated 28.06.2017 attracting GST at the rate of 12%?
2. Whether Kerala State Electricity Board Ltd qualifies as a Government Entity or Governmental Authority for GST purposes?

Analysis:

Issue 1:
The applicant sought clarification on the GST rate applicable to the civil works of the hydroelectric project. The work order involved various construction activities, and the applicant inquired if it would attract 12% GST under specific provisions of Notification No. 11/2017. The ruling authority examined the nature of the supply, considering the definitions of works contract and the entities involved. It was determined that the conditions for availing the 12% GST rate were met, leading to the conclusion that the works contract with Kerala State Electricity Board Ltd fell under the specified category for concessional tax treatment.

Issue 2:
The analysis delved into whether Kerala State Electricity Board Ltd could be classified as a Government Entity or Governmental Authority based on the definitions provided in the relevant notifications. The Board's establishment, functions, and ownership structure were scrutinized to ascertain its categorization. It was established that while the Board did not fit the definition of Governmental Authority, it unequivocally fell under the definition of a Government Entity. This distinction was crucial in determining the applicability of the concessional GST rate. The ruling clarified that the Board's commercial nature in electricity generation, transmission, and distribution precluded it from qualifying for the lower GST rate intended for non-commercial projects.

Conclusion:
The judgment provided a detailed analysis of the issues raised by the applicant regarding the GST treatment of the civil works contract for the hydroelectric project with Kerala State Electricity Board Ltd. By dissecting the legal provisions, definitions, and the nature of the project, the ruling authority arrived at a comprehensive decision, outlining the inapplicability of the concessional GST rates under the specified entries. The judgment's thorough examination of the facts and legal framework ensured a clear and reasoned outcome for the parties involved.