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TMI Blog2019 (10) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... th point 6 Schedule II of the CGST Act, 2017 read with the Karnataka GST Act, 2017 and the IGST Act, 2017? b) Whether Bangalore Development Authority is a Government Authority as per the provisions of GST Law? c) Whether the transaction covered under point 3(ii) of the Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 as amended? d) Whether the transaction covered under point 3(iv) of the Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 as amended? e) Whether transaction covered under point 3(v) of the Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 as amended? f) Whether transaction covered under point 3(vi) of the Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 as amended? 3. The applicant furnishes some facts relevant to the stated activity: a. The applicant states that he is engaged in the business of Civil Construction and Works Contract Services. The applicant has applied for the civil construction work tender with Bangalore Development Authority (BDA) with respect to construction of residential complexes / row of residential houses in the following location: Sl.No. Location Address Nature of Work Minim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, when more than one supply of goods or services or both are involved one of such supply of goods or services or both may act as an ancillary activity. In such cases, the provision of GST considers such activity as 'composite supply' and tax liability will be discharged based on the nature of the principal activity of such composite supply. 4.1 The applicant highlights that in the given case, the activity of construction of residential complex / residential houses undertaking on behalf of BDA, which is 'Government Authority'. The Bangalore Development Authority was established by the BDA Act, 1976, which was passed by Government of Karnataka with effect from 6th January 1976. In the given case, the recipient of service is "Government Authority" as per the para 4 of the Notification No. 11/2017 - Central Tax (Rate) as amended. 4.2 On combined reading of Section 2(119), Section 2(90), Section 7 and 8 and Point 6 of Schedule II of the CGST Act, 2017, it is submitted by the applicant that their activity of construction of residential house and residential complex with respect to following BDA projects (to Government Authority) are squarely covered under the definition of Works Cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nature of Activities Recipient of Supply 1 2 3 4 1. 9% (covered in 3(ii) of Notification Composite supply of works contract as defined in clause (119) of section 2 of the CGST Act, 2017 Any Person 2. 6% (covered in 3(iv) of Notification Works Contract of - Construction - Erection - Commissioning - Installation - Renovation - Completion - Fitting out - Repair - maintenance - Alternation Concessional GST Rate is restricted to: * A road, bridge, tunnel, or terminal for road transportation for use by general public; * A civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awas Yojana; * A civil structure or any other original works pertaining to the "in-situ redevelopment of existing slums using land as a resource, under the housing for All (Urban) Mission/ Pradhan Mantri Awas Yojana (Urban) * A civil structure or any other original works pertaining to the "Beneficiary led individual house construction / enhancement" under the Housing for All (Urban) Mission / Pradhan Mantri Awas Yojana; * A civil structure or any other original works pertaining to the "Economically Weake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages; Any Person 4. 6% (covered in 3(vi) of Notification Works Contract of - Construction - Erection - Commissioning - Installation -Renovation - Completion - Fitting out - Repair - maintenance - Alteration Concessional GST Rate is restricted * Civil Structure/ Original Works meant predominantly for use other than for commerce, industry or any other business or profession; * A structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an or cultural establishment; * a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Services Tax Act, 2017 i.e., MPs, MLAs, etc. Central Government, State Government, Union Territory, Local Authority, Government Authority and Government Entity 7. The applicant submits that as per the above analysis of Notification No. 11/2017 - Central Tax (Rate), it is submitted that the activity undertaken by the applicant to BDA i.e., Government Authority is l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to the general or special orders of the Government, in payment of the charges incidental to the carrying out of the purposes of this Act including the cost of maintaining, keeping in repair, lighting and cleansing of streets and the cost of maintaining drainage and sanitary arrangement and water supply, under section 28A." 8. The applicant states that in the back drop of the above submissions, and in the absence of profit motive in the transaction undertaken by BDA, the sale of construction of residential complexes and residential houses are not meant for commerce, industry, or any other business or profession but it is a sovereign function, Therefore, the activity of construction of residential complexes and residential houses are liable for GST at 12% (CGST @ 6% and SGST @ 6%) as per entry 3(vi) of the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 (as amended). PERSONAL HEARING: / PROCEEDINGS HELD ON 21.05.2018 9. Sri Rajesh Kumar and Kiran Kumar, CA and authorised representatives of the applicant appeared for personal hearing proceedings held on 21.05.2018 & reiterated the facts narrated in their application. 10. FINDINGS & DISCUSSION: 10.1 We have consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union Territory or local authority, as the case may be." 10.5 The Government Entity is defined in clause (zfa) of paragraph 2 of the Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 (as amended) and the same is as under: "(zfa) "Government Entity" means an authority or a board or any other body including a society, trust, corporation, (i) set up by an Act of Parliament or State Legislature; or (ii) established by any Government, with 90 per cent. or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Territory or a local authority." 10.6 For a works contract to be covered under this entry, the following conditions needs to be satisfied: (a) The recipient of services must be a Government Entity and in this case, Bangalore Development Authority; (b) The works contract services supplied by the applicant must be in relation to the works covered under (a), (b) or (c); (c) The recipient of such services must have procured these services in relation to a work entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l over the entity rests with the Government of Karnataka and hence the Bangalore Development Authority satisfies both the conditions and hence is considered as a Government Entity within the meaning of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. 10.9 Regarding the second question, whether the services provided by the applicant are covered under clauses (a), (b) or (c) of the entry no.3(vi) of the said Notification, the following are noticed: 10.9.1 The applicant is constructing a Housing Project at two places in and around Bangalore. The Bangalore Development Authority in its tender has stated that it has taken up construction of housing in and around Bangalore City as designed by the Government of Karnataka. Since this is a residential project for general public, the same is not covered under clause (b) or (c). 10.9.2 Conjoint reading of the entry with reference to the applicability of clause (a) of the said entry reads as under: "Composite supply of works contract as defined in clause (119) of section 2 of the CGST Act provided to the Government Entity by way of construction, erection, commissioning, installation, completion, fitting out, repair, mainte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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