2022 (4) TMI 863 - AAR - GST

Classification of goods - rate of tax - applicability of SI No 3A- Chapter No. 9954 as per Notification No. 12/2017- C.T. (Rate) dated 28.06.2017, as amended by Notification No. 2/2018-Central Tax (Rate) dated 25th January 2018, w.e.f. 25th January 2018 or SI No 3 (x) - Chapter No. 9954 as per Notification No. 01/2018-C.T. (Rate) dated 25th January 2018 (amendment in the Notification No 11/2017- C.T. (Rate) dated 28th June 2017)? - HELD THAT - The activity of the Principal Contractor is not covered under Sr. No 3A-Chapter No. 9954 as per Notification No. 12/2017- C.T. (Rate) dated 28.06.2017, as amended from time to time, in the subject case also, relying on the same ratio we are of the opinion that the applicant cannot avail the benefit of Sr. No 3A- Chapter No. 9954 as per Notification No. 12/2017- C.T. (Rate) dated 28.06.2017, as amended. Section 3 (x) of Notification No. 11/2017 CTR dated 20.06.2017 as amended, covers Composite supply of works contract as defined in clause (119) of section 2 of the CGST Act, 2017 provided by a sub-contractor to the main contractor providing services specified in item (vii) of Sr No 3 of Notification 11/2017-CTR to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity. The Particulars of various work items to be done by the applicant includes Excavation for Tunnel work in all kind of soft-strata and rock including ventilation arrangement ; Providing and fabrication, transporting and erecting structural supports ; Providing and rock bolting in position (work order in running meter) ; Providing and fixing in position M.S. reinforcement; Providing and applying material component shot crating in two layers ; providing ad fixing chain link ; providing and laying in situ cement concrete in grade M-15 ; Providing and laying in situ cement concrete in grade M-20 ; removing excavated stuff from underground excavation ; providing drainage arrangement and bailing out water, etc. The Composite supply of works contract is provided by the applicant sub-contractor to the main contractor who is further providing services specified in item (vii) above to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or Government Entity - the impugned supply of the applicant is covered under Sr.No. 3(x) f Notification No. 11/2017-CTR dated 20.06.2017 as amended from time to time. Notification No.11/2017-CT (Rate) dated 28/6/2017 as amended, was amended vide Notification No. 15/2021-Central Tax (Rate) dated 18.11.2021 (with effect from 01.01.2022) and in Sr. No 3, in column (3), in the heading Description of Services , the words or a Governmental authority or a Government Entity are omitted. Therefore, with effect from 01.01.2022, the impugned services supplied by the applicant will not be covered under Sr. No. 3 (x) of Notification No. 11/2021-CTR dated 28.06.2017 as amended from time to time.

Issues Involved:
1. Eligibility for NIL tax rate under SI No. 3A of Notification No. 12/2017-CTR as amended.
2. Eligibility for concessional tax rate under SI No. 3(x) of Notification No. 11/2017-CTR as amended by Notification No. 01/2018-CTR.

Issue-wise Detailed Analysis:

1. Eligibility for NIL tax rate under SI No. 3A of Notification No. 12/2017-CTR as amended:

The applicant, a sub-contractor, sought clarity on whether they could avail the benefit of NIL tax rate under SI No. 3A of Notification No. 12/2017-CTR, as amended by Notification No. 2/2018-CTR. The primary contractor, M/s. Mahalaxmi B T Patil Honai Constructions JV, was engaged in constructing the Jeur Tunnel under the Krishna Marathwada Irrigation Project, which involves predominantly earthwork. The applicant argued that since 91% of the work involves earthwork, they should be eligible for the NIL tax rate.

However, the authority observed that the nature of the work involved a composite supply of works contract, which includes both goods and services. The jurisdictional officer contended that the work items were not naturally bundled and were artificially combined for commercial convenience. The officer further argued that the various elements of the work could be availed separately, thus not qualifying as a composite supply under the GST Act.

Based on these observations, the authority concluded that the applicant could not avail the benefit of the NIL tax rate under SI No. 3A of Notification No. 12/2017-CTR, as amended.

2. Eligibility for concessional tax rate under SI No. 3(x) of Notification No. 11/2017-CTR as amended by Notification No. 01/2018-CTR:

The applicant also sought clarity on whether they could avail the benefit of the concessional tax rate under SI No. 3(x) of Notification No. 11/2017-CTR, which provides a 5% tax rate for composite supply of works contract provided by a sub-contractor to the main contractor. The applicant referenced a similar case involving Soma Mohite Joint Venture, where the Maharashtra Appellate Authority for Advance Ruling had ruled in favor of the applicants.

The authority noted that the principal contractor's work was indeed a composite supply of works contract involving predominantly earthwork, provided to a Government Entity. Consequently, the supply by the applicant, as a sub-contractor to the main contractor, fell under the same category.

Thus, the authority confirmed that the applicant could avail the benefit of the concessional tax rate under SI No. 3(x) of Notification No. 11/2017-CTR, as amended, until 31.12.2021. However, it was noted that with effect from 01.01.2022, the relevant notification was amended to exclude services provided to a Governmental Authority or Government Entity, thereby disqualifying the applicant from availing the concessional rate post this date.

Order:

- Question 1: The applicant cannot avail the NIL tax rate benefit under SI No. 3A of Notification No. 12/2017-CTR, as amended.
- Question 2: The applicant can avail the concessional tax rate under SI No. 3(x) of Notification No. 11/2017-CTR, as amended, but only until 31.12.2021.

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