School building used by State Government for education cannot be considered a commercial building
Facts and Issue of the Case
The applicant M/s. Tirupati Construction, have been awarded a works contract for Construction of New Adarsh Nivashi Shala (Kumar) / School Hostel (324 Bed ) / Staff Quarters and Kumar Chhatralay (300 Bed) at Village : Baben , Taluka : Bardoli, District : Surat, by the Road and Building Department in the Government of Gujarat vide Work Order Number : AB/TC/B-2/3/1181 dated : 01.06.2020. The said construction contract is labour plus material. The “Construction of said New Adarsh Nivashi Shala (Kumar) / School Hostel (324 Bed ) / Staff Quarters and Kumar Chhatralay (300 Bed) involves the following stages such as: (a) School Student Hostel ( Ground + 5 Floors ) having capacity of 324 beds (b) College Student Hostel (Ground + 4 Floors) having capacity of 300 beds (c) School Building (d) C-Type Staff Quarters ( Seven Floors ) and Principal Bungalow. The applicant submits that this is an ongoing activity as on the date of filing this advance ruling application.
The applicant has submitted that in their opinion, the said service of ‘Construction of Construction of New Adarsh Nivashi Shala (Kumar) / School Hostel (324 Bed ) / Staff Quarters and Kumar Chhatralay (300 Bed) at Village : Baben , Taluka : Bardoli, District : Surat ” , merits classification under the said Entry at Serial Number : 3 (vi)(a) as well as 3 (vi)(b) of the said Notification and the applicable rate is 12% (6% CGST+ 6 % SGST).
Question on which Advance Ruling sought:
Whether the activity of composite supply of works contract service by way of construction of “ “Construction of New Adarsh Nivashi Shala (Kumar) / School Hostel (324 Bed ) / Staff Quarters and Kumar Chhatralay (300 Bed) at Village : Baben , Taluka : Bardoli, District : Surat ”, for the Road and Building Department in the Government of Gujarat and as detailed in Work Order Number : AB/TC/B-2/3/1181 dated : 01.06.2020 entered in to by the applicant supplier and the said State Government, merits classification at Serial Number 3(vi)(a) and (b) of Notification Number 11/2017 – Central Tax(Rate) dated : 28.06.2017 , as amended from time to time and last amended by Notification Number : 21/2012-Central Tax(Rate) dated : 31.12.2021 w.e.f. 01.01.2022?
Observation of the court
At the outset we would like to make it clear that the provisions of CGST Act, 2017 and GGST Act, 2017 are in pari materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the GGST Act.
Court has carefully considered all the submissions. Court holds that for subject supply to find entry at Sr. No. 3(vi) of said NT, the following criteria is to be satisfied:
- Supply shall be Composite supply of Works Contract.
- Service Recipient shall be Central/State Government, the Union Territory, a local authority, a Government Authority or a Government Entity.
- The Civil Structure/ Original Works must be predominantly meant for use other than for commerce, industry or any other business or profession, or,
- a structure meant predominantly for use as an educational establishment, or,
- a residential complex predominantly meant for self use or use of their employees.
Court finds 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 Works Contract Service. The Supply comprises supply of school building, school hostel, college hostel, Principal’s bungalow and staff quarters. We hold subject supply is a composite supply of works contract service. We find that the service recipient is Government of Gujarat (GoG).
Courts notes that vide Explanation to Serial No 3(vi) of said NT, ‘business’ shall not include any activity or transaction undertaken by the State Government in which they are engaged as public authorities. Thereby we find this activity undertaken by GoG out of the purview of business, as described at sr no 3(vi)(a) of Said NT. Also, School building is a structure meant for use as an educational establishment as described at entry at Sr no 3(vi)(b)(i) of said NT; and supply of Staff Quarters is covered at 3(vi)(c) of said NT. Court notes that Revenue submits that said civil structure may be used for commerce or business.
Court held that a School building will be used by State Government for education and cannot be considered a commercial building.In-re-Tirupati-Construction-GST-AAR-Gujarat-1-1