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September 20, 2022

GST of 18% is payable when performing services for a governmental entity or authority

by CA Shivam Jaiswal in GST

GST of 18% is payable when performing services for a governmental entity or authority

Facts and issues of the case

M/s. KPC Projects Limited 1-2-339/1, Street No. 6, Gagan Mahal, Domalaguda, Hyderabad Telangana – 500029 (36AACCK7073N1Z1) has filed an application in FORM GST ARA-01 under Section 97(1) of TGST Act, 2017 read with Rule 104 of CGST/TGST Rules. At the outset, it is made clear that the provisions of both the CGST Act and the TGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the TGST Act. Further, for the purposes of this Advance Ruling, the expression ‘GST Act’ would be a common reference to both CGST Act and TGST Act. It is observed that the queries raised by the applicant fall within the ambit of Section 97 of the GST ACT.

The Applicant enclosed copies of challans as proof of payment of Rs. 5,000/- for SGST and Rs. 5,000/- for CGST towards the fee for Advance Ruling. The concerned jurisdictional officer also raised no objection to the admission of the application. The application is therefore, admitted M/s.KPC Projects limited are executing works to Telangana State Tourism Development Corporation limited and desirous of ascertaining the rate of tax under CGST & SGST on their supplies. Hence this application. In view of the services provided by the applicant to TSTDC., is the applicant eligible to avail the concessional rate of GST at 12% as prescribed in of S. No. 3 (vi) of the Notification No. 11/2017-Central Tax(Rate) dated 28.06.2017, as amended by?

Observation by the court

The Authorized representatives of the unit namely Sri Makarandh, Advocate attended the personal hearing held on 06.04.2022. The authorized representatives reiterated their averments in the application submitted and averred as follows:

The authorized representatives reiterated their averments in the application submitted and averred as Whether the works done TSTDC qualify to be taxed at a concessional rate of 12% after 01.01.2022? or Should they be taxed at a higher rate of 18%.The terms ‘Government Authority’ & ‘Government entity’ were inserted as definition in notification No. 31/2017 – Central Tax (Rate) dt 13.10.2017 in Notification No. 11/2017 as clauses (ix) & (x) to explanation at Para 4 as follows:

Governmental Authority means an authority or a board or any other body, –

  • Set up by an Act of Parliament or a State Legislature; or
  • Established by any Government, with 90 percent. or more participation by way of equity or control, to carry out any function entrusted to a Municipality under article 243 W of the Constitution or to a Panchayat under article 243 G of the Constitution.

Government Entity means an authority or a board or any other body including a society, trust, corporation,-

  • Set up by an Act of Parliament or State Legislature; or
  • Established by any Government, with 90per 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.

In view of the above definitions Telangana State Tourism development corporation limited is a Government entity. The contracts executed by the applicant to this organizations therefore fall under at S.No. 3(vi) of Notification No. 11/2017 taxable @6% under CGST & SGST respectively and which reads as follows:

“(vi) [Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, {other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above provided to the Central Government, State Government, Union Territory, a local authority, a Governmental Authority or a Government Entity by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –

(ii) a clinical, or (iii) an art or cultural establishment; or 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. 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.

For the purposes of this item, the term 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.” As seen from the Entry, this service is taxable @6% CGST & SGST each.

However this entry was amended in Nov’ 2021 vide Notification No. 15/2021 dt. 18.11.2021 and the phrases ‘Government Entity’ & ‘Governmental Authority’ were deleted from the Entry at S.No. 3(vi) of Notification No. 11/2017 with effect from 01.01.2022. Thus the works executed for ‘Governmental Entity or ‘Government Authority’ from 01.01.2022 are taxable @9% CGST & SGST each.

Conclusion

In view of the above discussion, the questions raised by the applicant are clarified as below:

QuestionsRuling
1. In view of the services provided by the applicant to TSTDC., is the applicant eligible to avail the concessional rate of GST at 12% as prescribed in of S. No. 3 (vi) of the Notification No. 11/2017- Central Tax(Rate) dated 28.06.2017, as amended by?For works contract including material & services the rate of tax applicable upto 31.12.2021 is 6% of CGST & 6% of SGST, and from 01.01.2022 the rate of tax is 9% of CGST & 9% of SGST for the reasons discussed above
2. If not, what is the appropriate rate and classification of GST to be charged by the applicant?Same as above
In-re-KPC-Projects-Limited-GST-AAR-Telangana.

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