GST rate for construction and irrigation services provided by a subcontractor to a subcontractor

Fact and issue of the case

At the outset we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 and Gujarat Goods and Services Tax Act, 2017 (hereinafter referred to as the `CGST Act, 2017′ and the `GGST Act, 2017′ are in parimateria 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, 2017 would also mean reference to the corresponding similar provisions in the GGST Act, 2017.

The present appeal has been filed under Section 100 of the CGST Act, 2017 and the GGST Act, 2017 by M/s Shreeji Earth Movers, Village-Kolithad, Taluka-Gondal, Rajkot- 360311 against the Advance Ruling No. GUPGAAR/R/43/2021 dated 11.08.2021.

M/s Shreeji Earth Movers (hereinafter referred to as ‘the appellant’) is a registered firm having GST No. 24BBTPS3402D1ZR with place of business at Kolithad, Taluka-Gondal, Dist. Rajkot (Gujarat).

The appellant is engaged in providing works contract service directly to subcontractors who execute the contract with the main contractor for original contract work with the irrigation department (State of Gujarat). M/s. JSIW Infrastructure Pvt. Ltd., received the original contract from the irrigation department (State of Gujarat) for the construction of pumping station and supplying and laying MS pipeline with all field … etc. and maintenance of the commissioned project for 10 years. M/s. JSIW Infrastructure executed the same contract with M/s. Radhe Construction. Further, M/s. Radhe Construction executed the same contract with the appellant.

The appellant had filed application with the Authority for Advance Ruling. Gujarat seeking ruling on the following:

a) At what rate of tax the liability should be determined on services provided by appellant (sub-contractors) to the main contractor pertaining to the irrigation, construction and maintenance works to the irrigation department, State of Gujarat?

b) Under which head we should classify our services to execute irrigation, construction and maintenance work supplied to the irrigation department, State of Gujarat?

c) Whether to charge a tax rate of 12% GST or 18% GST?

Observation of the court

The appellant has further contended that though they are sub-contractors providing civil construction services to the main contractor, which may not be covered in the Serial 3(ix), it is their belief that the rate of GST leviable in their case is 12% which is the rate applicable for composite supply of works contract as defined in clause (119) of Section 2 of CGST Act, 2017. It is observed that the said entry entails benefit of concessional rate only to a sub-contractor of the main contractor for providing the services so specified. No tax can be levied and collected except according to the authority of law. There are plethora of judgments of various authorities where it is held that taxes are to be determined as per the taxing statue and benefit of concessional/Exemption Notifications is available only upon strict compliance of conditions mentioned therein. Reliance is placed on the decision of Hon’ble Supreme Court in the case of CCE Vs M/s Doaba Steel Rolling Mills [2011(269)ELT 298 (SC)] wherein it was held that once it is shown that an assessee falls Within the letter of law. he must be taxed however great the hardship may appear to the judicial niind . Further. in the case of Dilip Kumar and Company (reported at 2018-TIOL- 302-SC-CUS-CB), the Apex Court held that exemption Notification should be interpreted strictly and the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. It is noted here that the appellant themselves have admitted that their case may not be covered under the said entry of the subject Notification.

As regards the reliance placed by the appellant on the Rulings given by AAR, Punjab in the case of M/s S.P Singla Constructions (P) Ltd, the Advance Ruling given by Maharashtra Appellate Authority for Advance Ruling in the case of M/s Shree Construction and the decision of the Apex Court in the case of State of Andhra Pradesh & Others Vs Larsen & Turbo Ltd & Other—Civil appeal No. 5239 of 2008, the same have already been correctly discussed and distinguished by Gujarat Authority for Advance Ruling in the impugned order. The appellant have additionally relied upon the decision of AAR, Tamil Nadu in the case of ST Engineering Electronics Ltd. The issue involved in this case was whether supply by the applicant is a composite supply and if yes whether the rate of tax @6% CGST as per entry No. 3(v) of Notification No. 11/2017-CT(R) dated 28.06.2017 is applicable to a subcontractor. The facts are different in this case and therefore not relevant. Similarly, the facts in the case of Yash Nirman Engineers & Contractors are different since the said case pertains to works contract service by way of construction of houses pertaining to the low cost houses in affordable housing projects. Further in the case of NHPC Ltd, relied upon by the appellant, the issue involved was with regard to subletting the contract to other subcontractors. There was difference of opinion among the members of the advance ruling authority and the matter was referred to appellate authority of advance ruling. The appellate authority held that the works contract services for the road construction provided by the sub-contractor to PWD, Uttarakhand, who in turn is providing works contract services of road construction to M/s.NHPC Ltd., is not exempted from GST. The sub sub-contractor was denied the benefit of the exemption notification. Furthermore, as per Section 103 (1) of CGST Act, 2017, any advance ruling is binding only on the applicant who had sought it and the concerned officer or the jurisdictional officer in respect of applicant.

In view of the above discussions, we do not agree with the contention of the appellant that they are eligible for the concessional rate of GST @12% in terms of Notification No. 20/2017-CT (R) dated 22.08.2017 and Notification No. 01/2018-CT(Rate) dated 25.01.2018 as the activity undertaken by the appellant is not covered under st. No. 3(iii) or under 3(ix) of the Notification No. 11/2017-CT(R) dated 28.06.2017 as amended and agree with the findings of the Gujarat Authority for Advance Ruling that the supply made by the appellant is not covered under entry No. 3(iii) or 3(ix) of Notification No. 11/2017-CT(R) dated 28.06.2017, as amended. The appellant is liable to discharge tax rate CGST @9% and GGST@9% under Entry No 3(ii) of Notification No. 11/2017-CT(R) dated 28.06.2017 further amended vide Entry No.3(xii) of Notification ibid as amended.

In view of the foregoing, we reject the appeal filed by appellant M/s. Shreeji Earth Movers and uphold the Advance Ruling No. GUPGAAR/R/43/2021 dated 11.08.2021. of the Gujarat Authority for Advance Ruling.