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2020 (7) TMI 405 - AAR - GSTGovernment authority/ Government Entity or not - contract with APSPDCL, relating to System improvement project works for erection of indoor sub stations at Vijayawada and GIS Indoor Sub-station at Guntur and their connected lines on semi turkey basis under IPDS Scheme - applicable rate of GST - Valuation - RA bills issued on cost recovery basis - HELD THAT - The Applicant Contractees i.e. APSPDCL and AEPDCL are Government Companies i.e. wholly owned by the Government of Andhra Pradesh. When a copy of Audited Annual Accounts of M/s APSPDCL and APEPDCL are examined, it is evident from the schedule of Equity Share Capital of the Annual Statement that 100% share capital is held by the Government of Andhra Pradesh in the name of Honourable Governor of Andhra Pradesh. Thus, based on the facts, it is concluded that the Government of Andhra Pradesh is having full control over the APSPDCL and APEPDCL and they are covered under the definition of Government Entities. In the instant case, the contract entered by the applicant 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 APGST Act, 2017, and the applicable rate of tax is 18% - The applicant stated that they are receiving materials such as Power Transformers, loo Sqmm Conductor Station Transformer from the Contractee and the value of such materials is recovered from their RA bills issued on cost recovery basis by the Contractee. Applicability of Reverse Charge Mechanism - HELD THAT - As seen from the said Notification, reverse charge is not applicable to the goods issued by a Contractee. However, the provisions of Section 15(2)(b) of CGST Act, 2017 which as follows, attract in such situations. Since APSPDCL and APEPDCL being the Contractees are recovering the cost of the materials that are used/consumed in the services provided to them by the applicant from the R.A. Bills issued, such cost recovered is to be included in the taxable value of the supply.
Issues:
1. Determination of whether APSPDCL & APEPDCL qualify as a Government authority/entity. 2. Applicable GST rate on work agreements with APSPDCL & APEPDCL. 3. Identification of the relevant notification for discharging GST liability. 4. Tax liability on materials recovered from RA bills issued by APSPDCL & APEPDCL. Issue 1: Government Authority/Entity Status: The judgment analyzed the definition of "Government Entity" under Notification No. 31/2017 - Central Tax (Rate) to conclude that APSPDCL and APEPDCL are Government Companies wholly owned by the Government of Andhra Pradesh. The audited annual accounts confirmed 100% share capital held by the Government, establishing full control over these entities, thus categorizing them as Government Entities. Issue 2: Applicable GST Rate: The judgment referred to various notifications amending the GST rates for construction services. It highlighted that the applicant's works contract services for APSPDCL were not eligible for the concessional rate of 12% and fell under the 18% tax slab as per Notification No. 11/2017 - Central Tax (Rate). Issue 3: Notification for GST Liability: The judgment discussed the nature of works undertaken by the applicant for APSPDCL and APEPDCL, emphasizing that these works were for business purposes and did not qualify for the concessional rate. It determined that the works contract entered by the applicant attracted an 18% tax rate as per the relevant notifications. Issue 4: Tax Liability on Recovered Materials: Regarding the recovery of material costs from RA bills issued by the contractees, the judgment clarified that while reverse charge mechanism did not apply, the cost recovered should be included in the taxable value of supply as per Section 15(2)(b) of the CGST Act, 2017. In conclusion, the judgment ruled that the applicant was not eligible for the concessional GST rate of 12% and that the applicable tax rate for the services provided fell under 18%. It also determined that the value of materials recovered from RA bills should be considered in the taxable value of supply.
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