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TMI Blog2021 (6) TMI 829X X X X Extracts X X X X X X X X Extracts X X X X ..... eering, Procurement and Construction (EPC) basis. 2.0 At the outset, we would like to make it clear that the provisions of both the CGST Act and the OGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the OGST Act. 3.0 Submission of the Applicant 3.1 The applicant, while filing the application for seeking advance ruling, explained the facts, cited various judicial pronouncements in support of its submission. It was submitted that the applicant, inter alia, is a national contractor and the flagship company of the URC Group, having its registered office situated at 119, Power House Road, Erode - 638001, Tamil Nadu. 3.2 It was submitted that the applicant has been awarded a contract by M/s NBCC vide letter no. NBCC/CGM (CPG)/2019/122 dated 15-01-2019 for Construction of ISPAT Post Graduate Medical Institute and Super Specialty Hospital at Rourkela Steel Plant for SAIL in Odisha on Design, Engineering, Procurement and Construction (EPC) basis at a total contract value of Rs. 259,60,13,257.00 (Rupee Two Hundred Fifty Nin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aptioned service falls within the ambit of Composite supply of Works Contract as defined in Section 2 (119) of the CGST Act, 2017. 3.6 The captioned contract is a composite contract of Design, Engineering, Procurement and Construction (EPC) of Pre-Engineered Building Structure & RCC Framed Structure building of ISPAT Post graduate Medical Institute and Super Specialty Hospital at Rourkela Steel Plant for SAIL in Odisha at a consolidated price, which includes the entire materials as well as services required for completion of the contract within its ambit. In terms of Section 2 (119) of the CGST Act, 2017, the captioned contract containing composite supply of goods and services for construction of immovable property undisputedly would fall within the ambit of works contract as defined under Section 2 (119) of the CGST Act, 2017. 3.7 It was submitted that though the services are provided to the Executing Agency of SAIL i.e. Ms. NBCC, in light of judgment of Hon'ble High Court in the case of Shapoorji Pallonji & Company Pvt. Ltd Vs. C.C., C. Ex. & S.T., Patna [2016 (42) S.T.R. 681 (Pat.)], for the purpose of exemption, the constitution of ultimate Service Recipient has to be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e various entities 'established' by the Government by way of 90% or more participation in equity or control; however, after the 'establishment' of such entities, the Government participation by way of equity or control is usually diluted to less than 90%. It was held that the definition of 'governmental entity' merely contemplates that an entity is required to be 'established' by the Government by way of 90% or more equity or control. The definition does not contemplate continuous fulfillment of such requirement post 'establishment' of the entity. Therefore the intention of the aforesaid notification is to enlarge the scope of the definition to cover Government Companies incorporated under the Companies Act also within the ambit of the definition of "Government entity". Thus, if the criterion is fulfilled, at the time of 'establishment' by way of 90% or more Government participation in the equity or by way of control, the entity would be considered as 'governmental entity', within the meaning assigned under the said amended notification. 3.12 Since, the composite works contract awarded to the applicant is for construction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of- (a) civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; (b) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural, establishment; or (c) ................................... Explanation ................................. 6 Provided that where the services are Supplied to a Government Entity, they should have 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 4.3 On plain reading of the entry, it is clear that following pre-requisites are to be satisfied in order for the supply to qualify for the notified exemption. (i) Supply must be Composite Supply of Works Contract Service provided or to be provided 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as has been defined under Section 2(119) of the CGST Act, 2017. The term "works contract" to mean a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. We examined the relevant documents submitted by the applicant and found that work order has been issued by M/s NBCC (India) Ltd vide their letter ref no. NBCC/CGM(CPG)2019/122 dated 15.01.2019 for 'construction of Ispat Post Graduate Medical Institute and Super Specialty Hospital at Rourkela Steel Plant for SAIL'. The project consists of (i) Hospital Block (Basement+G+4 Floors) 31909 sqm (ii) Service Block (G+4 Floors) 4417 sqm and (iii)Academic-cum Auditorium Block ( G+01 Floor) 4653sqm. We see that the scope of work includes supply of all goods and services required for completion of the contract. Further, the said contract is for construction of immovable property (i.e. construction of building) wherein transfer of property in goods is inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments, we found that work order has been issued by M/s NBCC in their own capacity and the applicant has signed agreement with M/s NBCC for construction of Ispat Post Graduate Medical Institute and Super Specialty Hospital at Rourkela Steel Plant for SAIL. When the contract is made between M/s NBCC and M/s URC Construction (P) Ltd (the applicant), it is necessary for us to see the legal status of M/s NBCC. From the contract/agreement deed, it is obvious that M/s NBCC is a public limited company incorporated and registered under the Companies Act, 1956 and having its registered office at NBCC Bhawan, Lodhi Road, New Delhi-110003. Thus M/s NBCC is a company and not State Government/Central Government or Union Territory or any Government Entity. The status of M/s NBCC is therefore not disputed. Further, we also see that M/s NBCC had invited a tender for construction of Ispat Post Graduate Medical Institute and Super Specialty Hospital at Rourkela Steel Plant for SAIL and the applicant had been selected in the tender and awarded the contract by M/s NBCC. Thus, as per the Contract, the Supply is being made to M/s NBCC which is a body corporate and not to any Government or Government Ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 973 with an authorized capital of Rs. 2000 crore, was made responsible for managing five integrated steel plants at Bhilai, Bokaro, Durgapur, Rourkela and Burnpur, the Alloy Steel Plant and the Salem Steel Plant. In 1978 SAIL was restructured as an operating company". 4.10 From the above, it is clear that SAIL was formed in 1973 pursuant to approval of the parliament to manage 5 integrated steel plants. Thereafter, the SAIL was restructured as an Operating Company by way of Act passed by the Parliament namely 'The Public Sector Iron and Steel Companies (Restructuring) And Miscellaneous Provisions Act, 1978' for carry out function entrusted by the Central Government. Further, Serial No. 3(ix) of Notification No. 11/2017 as amended by Notification No. 1/2018 provides a concessional rate of GST @ 12% subject to condition provided under Column (5) of the said table, which reads as under; 'Provided that where the services are supplied to a Government Entity, they should have 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'. 4.11 With regard to serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Institute and Super Specialty Hospital would merit entitlement for concessional rate of GST @ 12% [CGST @ 6% + SGST @ 6%] in terms of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 (and as amended). 5.0 RULING Question : What is the applicable rate of Goods and Service Tax [GST] on the Contract awarded by Ms. NBCC (INDIA) LIMITED , an Executing Agency of behalf of Ms. SAIL, for construction of ISPAT Post graduate Medical Institute and super specialty Hospital at Rourkela Steel Plant for SAIL in the State of Odisha on Design, Engineering, Procurement and Construction (EPC) basis. Answer:- The rate of GST on supply of works contract service which is being supplied to M/s SAIL, Rkl for construction of ISPAT Post Graduate Medical Institute and Super Specialty Hospital would merit entitlement for concessional rate of GST @ 12% [CGST @ 6% + SGST @ 6%] in terms of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 (and as amended). 6.0 This ruling is valid subject to the provisions under Section 103(2) until and unless declared void under Section 104(1) of the GST Act. 7.0 The applicant or jurisdictional officer, if aggrieved by the ruling given above, may ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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