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September 16, 2021

Works contract service of construction of fish market for Panchayat shall be covered under GST

Works contract service of construction of fish market for Panchayat shall be covered under GST

Fact and Issue of the case

M/s. Tirupati Construction ( hereinafter referred to as the applicant) have entered into a construction contract i.e. ‘Agreement Number B-1/2 2020-21, Matsya Udhyog Yojna, 2020-21’ with Panchayat Vibhag (Marg and Makan and Road and Building), Valsad, District Panchayat which is for construction of ‘Fish Market Building’ at Village:Maroli, Taluka: Umargam, District:Valsad and the said construction is labour plus material basis and the tender value contracted thereof is Rs.49,39,834.28/-(copy of tender submitted). The construction of the said fish market involves the following stages such as: (i) Excavation (ii) Plain and RCC work (iii) Masonary work (iv) Rubble masonary work (v) Centering and form work (vi) Wood work for doors and windows (vii) Providing and fixing steel shutters, windows and ventilators (viii) Glazing (ix) Paving and floor finishes. (x) Roof covering. (xi) Ceiling and lining. (xii) Plastering and painting (xiii) White washing and distempering. (xiv) Painting and polishing. (xv) Plumbing and sanitary fittings. (xvi) Drainage and sewerage.

The applicant has stated that the principal, after completion of the construction of the said Fish market, shall allot space to the farmers to sell their fish produce in the said market.

Whether the activity of composite supply of works contract service by way of construction of fish market for the Panchayat(Road and Building) Division, Valsad District Panchayat merits classification at Serial Number 3(vi)(a) of Notification No.11/2017-Central Tax(Rate) dated 28-6-17(hereinafter referred to as said NT)?”

Observation of the authority

The Authority hold that for being eligible to be covered vide 3(vi)(a) of said NT, the following criteria is to be satisfied. :

(i) Supply shall be composite supply of works contract.

(iii) Supply to the Central Government, the State Government, the Union Territory, a local authority, a Government Authority or a Government Entity.

(iv) The civil structure or original works must be predominantly meant for use other than for commerce, industry, or any other business or profession.

Authority that the subject contract is for the construction of immovable property wherein transfer of property in goods is involved in the execution of subject contract. We hold that subject supply is a composite supply of works contract service. The service recipient is Panchayat Vibhag-Road and Building, Valsad District. We hold that ‘Panchayat’ is a Local Authority as defined vide Section 2(69)(a) of CGST Act, 2017.

Now in order to be eligible to avail entry 3(vi)(a) of said NT, the Fish Market must predominantly be meant for use other than for commerce, industry, or any other business or profession. The word ‘Business’ has a wide inclusive definition vide section 2(17) of CGST Act including, inter alia, any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit. We note that an explanation is inserted w.e.f. 27-7-18 to Serial No.3(vi) of said NT, said explanation reads as ‘business’ shall not include any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities’.

The applicant submits that the Valsad Panchayat is ‘public authority’. We agree with the applicant that Valsad Panchayat is a Public Authority. [Vide Section 2(h) of the Right to Information Act, Public authority is defined as – “Public authority” means any authority or body or institution of self-government established or constituted— (a) by or under the Constitution; (b) by any other law made by Parliament; (c) by any other law made by State Legislature; (d) by notification issued or order made by the appropriate Government, and includes any— (i) body owned, controlled or substantially financed; (ii) non-Government organisation substantially financed, directly or indirectly by funds provided by the appropriate Government].

The applicant submits that the fish market purpose is covered under the Entry ‘Fisheries’ appearing at Sr.No.5 to the list of functions entrusted to a Panchayat under Article 243G of the Constitution of India. ‘Fisheries’ as per Mirriam Webstar dictionary is defined as ‘the occupation, industry, or season of taking fish or other sea animals (such as sponges, shrimp, or seals). We hold that a ‘Fish market is ‘a market where fish is sold’ and therefore cannot be covered under ‘Fisheries’.

Authority suo moto, draw attention to the Article 243 G of our Constitution and we note that ‘ Markets and Fairs’ is a function entrusted and placed within the purview of the Panchayats. Article 243G in The Constitution of India (Powers authority and responsibilities of Panchayats) reads as follows: “Subject to the provisions of this Constitution, the Legislature of a State may, by law, endow the Panchayats with such powers and authority as may be necessary to enable them to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Panchayats at the appropriate level, subject to such conditions as may be specified therein, with respect to— (a) the preparation of plans for economic development and social justice; (b) the implementation of schemes for economic development and social justice as may be entrusted to them including those in relation to the matters listed in the Eleventh Schedule”. The Eleventh schedule of our Constitution contains the following functional items placed within the purview of the Panchayats:

(entry 5) Fisheries…..
(entry 22) M arkets and Fairs….

Now Authority is of the opinion that Fish Market being a market is covered under said entry 22 of ‘Markets and Fairs’. To further convey our thought process, we state that ‘Markets and Fairs’ can also be read as ‘Markets or Fairs’. To enunciate, we quote the following: Justice G.P.Singh in the principles of Statutory Interpretation (Thirteenth Edition) Chapter 7 page 485 has stated as follows:

“The word ‘or’ is normally disjunctive and ‘and’ is normally conjunctive but at times they are read as vice versa to give effect to the manifest intention of the Legislature as disclosed from the context. As stated by Scrutton L.J. “You do sometimes read ‘or’ as ‘and’ in a statute. But you do not do it unless you are obliged because ‘or’ does not generally mean ‘and’ and ‘and’ does not generally mean ‘or’. Further, as pointed out by Lord Halsbury, the reading of ‘or’ as ‘and’ is not to be resorted to, “unless some other part of the same statute or the clear intention of it requires that to be done”. Where provision is clear and unambiguous the word ‘or’ cannot be read as ‘and’ by applying the principle of reading down. But if the literal reading of the words produces an unintelligible or absurd result ‘and’ may be read for ‘or’ and ‘or’ for ‘and’ even though the result of so modifying the words is less favourable to the subject provided that the intention of the Legislature is otherwise quite clear. Conversely if reading of ‘and’ and ‘or’ produces grammatical distortion and makes no sense of the portion following ‘and’, ‘or’ cannot be read in place of ‘and’. The alternatives joined by ‘or’ need not always be mutually exclusive.”

Thus Authority find merit to classify the subject supply of Fish Market(a composite works contract) to the Valsad Panchayat( a local authority) and this activity is undertaken by the Valsad Panchayat engaged as public authority and the activity squarely falls under the entry no 22- ‘Markets and Fairs’ of the Eleventh Schedule of our Constitution. In light of the explanation inserted w.e.f 27-7-18 to Serial No.3(vi) of said NT, which reads: ‘business’ shall not include any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities’, we hold that subject matter falls within the ambit of ‘predominantly meant for use other than for commerce, industry, or any other business or profession’.


The Authority for advacne ruling ruled that the subject Supply is eligible for 12% GST (6% CGST; 6% SGST) vide Serial Number 3(vi) (a) of said NT (as amended from time to time).

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