2024 (3) TMI 258 - AAR - GST

Classification of service - rate of tax applicable for works contract awarded by M/S. Kerala State Film Development Corporation Ltd. (promoted by Government of Kerala) for the development and construction of Sree Narayana Guru Cultural Complex at Kollam - Government Authority of Government Entity - HELD THAT - From the description of the works submitted by the applicant it is revealed that the following works are awarded to the applicant; Supply of all labour, equipment, materials, plant and machinery, tools, transportation, form work, scaffolding and everything else necessary for the proper execution and construction of a complex predominantly for the use of cultural activities named Sree Narayana Guru Cultural Complex at Kollam - Therefore, the works rendered by the applicant to M/s. Kerala State Film Development Corporation Ltd squarely falls under the definition of works contract in Section 2 (119) of the CGST Act, 2017 and the same will be treated as supply of service. Whether the recipient of service i.e, the awarder M/s. Kerala State Film Development Corporation Ltd falls within the definition of 'Governmental Authority' in Para 2 (zf) or 'Government Entity in Para 2 (zfa) of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017? - HELD THAT - The works contract services performed by the applicant as per the above-mentioned contracts awarded by M/s. Kerala State Film Development Corporation, a Governmental Authority to construct Sree Narayana Guru Cultural Complex at Kollam is in the nature of construction of a structure meant predominantly for use as a cultural establishment and hence the same is liable to GST at the rate of 12% 6% CGST 6% SGST as per entry at SI No. 3 (vi)(b) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended from time to time. If the time of supply of the works contract services as determined in accordance with Section 14 of the CGST Act, 2017 falls on any date prior to 01.01.2022, the aforementioned service will be taxable at the rate of 12% and if the time of supply falls on any date on or after 01.01.2022, the said service will be taxable at the rate of 18%.

Issues Involved:
1. The rate of tax applicable for works contract services awarded by M/S. Kerala State Film Development Corporation Ltd. for the development and construction of Sree Narayana Guru Cultural Complex at Kollam.

Summary of Judgment:

Issue 1: Rate of Tax Applicable for Works Contract Services

Contentions of the Applicant:
The applicant, registered under the GST Act, engaged in providing construction services including supply of materials and labor, sought clarification on the applicable rate of tax for a works contract awarded by M/S. Kerala State Film Development Corporation Ltd. They argued that the work falls under the service to the State Government category and should attract 12% GST as per Notification No. 24/2017-Central Tax (Rate) dated 21.09.2017.

Comments of the Jurisdictional Officer:
No specific comments were provided by the jurisdictional officer, and it was assumed that no proceedings were pending against the applicant on this issue.

Discussion and Conclusion:
The authority examined the application, facts, and submissions. The primary issue was the clarification of the tax rate for the construction service provided by the applicant to M/S. Kerala State Film Development Corporation Ltd. The works contract services provided by the applicant fall under the definition of works contract in Section 2(119) of the CGST Act, 2017, and are treated as supply of service.

Classification and Tax Rate:
The works contract services rendered to M/S. Kerala State Film Development Corporation Ltd., a Governmental Authority, for constructing Sree Narayana Guru Cultural Complex, fall under the definition of works contract services and are liable to GST at 12% [6% CGST + 6% SGST] as per entry at SI No. 3(vi)(b) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended.

Change in Tax Rate Effective from 01.01.2022:
From 01.01.2022, the terms "Governmental Authority" and "Government Entity" were omitted from SI. No. 3(vi) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. Consequently, the concessional rate of 12% is not applicable from this date, and the tax rate for the construction service is 18% [9% CGST + 9% SGST] as per SI. No. 3(xii) of the Notification.

Time of Supply and Applicable Tax Rate:
The liability to pay tax on services arises at the time of supply as determined under Section 13 of the CGST Act, 2017. Section 14 of the CGST Act, 2017, specifies the determination of the time of supply when there is a change in the tax rate. If the time of supply falls before 01.01.2022, the tax rate is 12%. If it falls on or after 01.01.2022, the tax rate is 18%.

Ruling:
The applicable GST rate for the works contract services supplied by the applicant is 12% [6% CGST + 6% SGST] if the time of supply falls between 21.09.2017 and 31.12.2021, and 18% [9% CGST + 9% SGST] if the time of supply falls on or after 01.01.2022.

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