GST on Drinking Water supply project ( supply of pipes and laying, Goods and Services Tax - GST

[N Balachandran]

We are epc contractor and executing the drinking Water supply project (supply and laying of pipes including other related works). The project started in the month of June 2017 and raised First R A bill on 23rd of July 2017.with GST @ 12%. Now, GST authority asking us to pay the GST @ 18% since the notification was issued vide Notification No 20/2017 dt 22 08 2017. reduced GST rate @ 12 is applicable with effect from 22 08 2017.

Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied to the Government, a local authority or a Governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of, - (c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal - 6% CGST + 6% SGST.

Under these circumstances, is there any notification for GST @ 12% applicable for the above said project prior to 22 08 2017.

Balachandran N

Posts / Replies

[Padmanathan Kollengode]

Who is the recipient of service?

[Padmanathan Kollengode]

Also, what is the Stage of proceedings before the GST authority? what are the allegation in the notice? kindly elaborate

[N Balachandran]

Thanks for your quick response .

1...Service receiver is Municipal City Corporation Bangalore , Karnataka.

2. Contention of the dept is that,, Works contract is liable to tax @ 18% as per serial number 9 of Notification No.11 /2017( rate ) dated 29 06 2017 and it was amended GST @ 12% applicable as per entry (iii) (C) of notification number 20/2017 dt 22 08 2017.. with effect from 22 08 2017.

Hence, GST dept says that the invoices raised during the month of July 2017 is subject to GST @ 18% and not 12%..

Pl clarify

Balachandran

[KASTURI SETHI]

Dear Querist,

(i) Can the activity carried out by your unit be called 'earth work' or 'relating to earth work' ?

(ii) Pl. confirm after studying the terms and conditions of the contract existed during the relevant period.

[Padmanathan Kollengode]

Pls see IN RE: M/S. DEE VEE PROJECTS LIMITED 2021 (1) TMI 694 - AUTHORITY FOR ADVANCE RULING, MADHYA PRADESH on identical issue where the AAR has held that In case of a notification in the body of which the effective date is not written, the effect of the amending notification thus shall be the date on which the amending notification is published in the Official Gazette.

in IN RE: M/S DEE VEE PROJECTS LIMITED 2020 (10) TMI 1351 - AUTHORITY FOR ADVANCE RULING, CHHATTISGARH again it has been held that The amendment to Notification no. No. 11/2017-Central Tax (Rate) dated-28/06/2017, made vide Notification No. 20/2017-Central lax (Rate) dated-22nd August, 2017 and Notification No. 24/2017-Central Tax (Rate) dated 21st September, 2017 is effective with effect from 22/08/2017 and 21/09/2017 respectively and not from the date of Notification No. 11/2017-Central Tax (Rate) dated 28/06/2017.

This is only to bring to your notice the ruling with following qualification:-

1. These rulings are binding only on the applicant

2. Your time of supply, nature of service etc has to be determined separately based on contract

[Shilpi Jain]

Section 14 of CGST Act. If the service is provided and the invoice is issued before the change in rate of tax then the old rate will apply i.e. 18%.

However, one also has to see the GST Council minutes to see what was the recommendation regarding the rate change and whether it is possible to argue that the rate change was contemplated to be retrospective.

[Amit Agrawal]

If you want to defend yourself (& you are okay with risks involved in these kind of litigation) and do not want closure using options provided u/s 73 or 74 (as the case may be), then, please allow me to give some pointers for preparation of legal defence/s:

A. As per Section 142(11)(b), notwithstanding anything contained in section 13, no tax shall be payable on services under this Act to the extent the tax was leviable on the said services under Chapter V of the Finance Act, 1994; (32 of 1994.). This provision needs to be viewed from Section 142(10) which reads as follows:

Save as otherwise provided in this Chapter, the goods or services or both supplied on or after the appointed day in pursuance of a contract entered into prior to the appointed day shall be liable to tax under the provisions of this Act.

A1. As per Section 66B of the Finance Act, 1994 (32 of 1994), service tax was leviable on all services, other than those services specified in the negative list, provided or agreed to be provided.

A2. As subject work was started in June, 2017, it is clear that entire work contract service was agreed to be provided prior to 01.07.20217 and hence, no GST is payable there-against IRRESPECTIVE of the fact that services were actually provided on or after 01.07.2017.

B. Substitution by way of Notification No 20/2017 dt 22 08 2017 was retrospective in nature due to the followings:

I) In said notification, effective date is not mentioned.

II) From 01.07.2017 to 22.08.2017, there is no change in circumstances warranting such huge reduction of tax-rate from 18% to 12% for same type of subject supply.

III) So, said Notification No 20/2017 dt 22 08 2017 should be seen as corrective and being tax-payer friendly measure and hence, having intention to give retrospective effect from 01.07.2017.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.