2020 (12) TMI 1087 - AAAR - GST

Exemption from GST - supply of, services viz. execution of the civil works of Pazhassi small hydro electric project - Whether Kerala State electricity Board Ltd would fall under any of the categories viz. Central Government, State Government, Union territory, a local authority, a Government authority or a Government entity for the purpose of the said exemption - whether the said services shall attract concessional rate of SGST also @6% in terms of notification No. SRO 370/2017 dated 30.06.2017 since the CGST statutory provisions are pari materia With State GST provisions? - HELD THAT - Kerala State Electricity Board Ltd is a company incorporated under the Companies Act, 1956 by the Government of Kerala for carrying out the business of Generation, Transmission and Distribution of electricity in the State of Kerala. It is the successor entity of the Kerala State Electricity Board which was constituted by the Government of Kerala by Order no. EL1- 6475/56/PW dated 07.03.1957 under the Electricity (Supply) Act, 1948 for carrying out the business of Generation, Transmission and Distribution of electricity in the State of Kerala - It is evident that the Kerala State Electricity Board Ltd is 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. Kerala State Electricity Board Ltd cannot be considered as that 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 does not fall under the definition of Government Authority as defined in Para 2(zf)of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 as amended. However, Kerala State Electricity Board Ltd is also a Board constituted by the State Government with share of 90% or more of the State Government. Hence, 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 as amended. Thus the condition of the 'said notification as stated in para 8.1 (b) of this order is also satisfied - The Kerala State Electricity Board Ltd is undisputedly procuring the services from the appellant in relation to a work entrusted to it by the State Government i.e. in connection with the generation, distribution and supply of electricity to consumers. KSEB Ltd is also a board constituted by the State Government with share of 90% or more of the State Government. Hence, 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 as amended. Hence, the mandatory condition specified in para 8.1(c) is satisfied. Whether the supply of works contract services provided to KSEB by the appellant could be classified as works undertaken predominantly for use other than for commerce, industry or any other business or profession? - HELD THAT - The concessional rate of CGST @6% 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 GST Act, 2017 supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works meant pre-dominantly for use other than for commerce, industry, or any other business or profession - The Kerala State Electricity Board as authorized by the Government vide the Electricity Act 2003 is involved in the selling of electricity to the consumers and are collecting charges for the same. The predominant activity of the KSEB is to supply electricity and works executed by the appellant is ancillary to this predominant activity. Kerala State Electricity Board Ltd. has been established for carrying out the business of generation, transmission and distribution of electricity in the State of Kerala on commercial principles as is evident from the provisions of Sections 61 and 62 of the Electricity Act, 2003 regarding tariff regulation and determination of tariff - the supply of works contract services as per the above work order cannot be considered as that meant predominantly for use other than for commerce, industry, or any other business or profession. Thereby, the condition mentioned in para 8.3 is not fulfilled. The Kerala State Electricity Board Ltd falls under the category of a Government entity for the purpose of the said exemption - The supply of services viz. execution of the civil works of Pazhassi small hydro electric project covered under Work order No. 06/CEECCN/ 2017-18 dated 06.10.2017 made by the appellant to the Kerala State Electricity Board Ltd are not eligible to concessional rate of CGST @6%provided by the said notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The said services shall not be eligible for concessional rate of SGST @6% also in terms of notification No. SRO 370/2017 dated 30.06.2017 since the CGST statutory provisions are pari materia with State GST provisions. The ruling of authority upheld.

Summary

Issues Involved:
1. Classification of Kerala State Electricity Board Ltd. (KSEB) under the categories of Central Government, State Government, Union Territory, local authority, Governmental Authority, or Government Entity.
2. Eligibility of concessional GST rate for the civil works of Pazhassi Sagar Small Hydro Electric Project.
3. Applicability of concessional SGST rate in line with CGST provisions.

Issue-wise Detailed Analysis:

1. Classification of Kerala State Electricity Board Ltd. (KSEB):

The appellant argued that KSEB qualifies as a Governmental Authority, which would make it eligible for a concessional GST rate. However, the judgment clarified that KSEB, being a company incorporated under the Companies Act, 1956, with more than 90% participation by the Government of Kerala, does not fall under the definition of "Governmental Authority" as per Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. Instead, KSEB qualifies as a "Government Entity" under Para 2(zfa) of the same notification, as it is set up by the State Government to carry out functions entrusted to it.

2. Eligibility of Concessional GST Rate for Civil Works:

The appellant sought a concessional GST rate of 6% for the civil works of the Pazhassi Sagar Small Hydro Electric Project under Sl. No. 3(iii)(b) or 3(vi) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The judgment examined whether the works contract services provided to KSEB could be classified as works predominantly for use other than commerce, industry, or any other business or profession. It was determined that KSEB's primary function is the commercial activity of generating, transmitting, and distributing electricity, as evidenced by the Electricity Act, 2003, and the Memorandum of Association of KSEB. Therefore, the civil works do not meet the criteria for the concessional rate under Sl. No. 3(vi)(a).

Additionally, the work order for the civil works of the small hydroelectric project was not considered as civil work for a canal, dam, or other irrigation works, which would have qualified for the concessional rate under Sl. No. 3(iii)(b).

3. Applicability of Concessional SGST Rate:

Given that the conditions for the concessional CGST rate were not met, the judgment concluded that the appellant is also not eligible for the concessional SGST rate of 6% under Notification SRO 370/2017 dated 30.06.2017. The State GST provisions are pari materia with the CGST statutory provisions.

Conclusion:

The appellate authority upheld the Advance Ruling Authority's decision, confirming that the concessional rate of 6% CGST and SGST under Sl. No. 3(iii) or 3(vi) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and SRO 370/2017 respectively, is not applicable for the works contract services supplied by the appellant to KSEB as per the specified work order. The appeal was dismissed, and the original ruling was maintained.