2022 (3) TMI 180 - AAR - GST

Availability of concessional rate of GST - works contracts - execution of works for Telangana State Industrial Infrastructure Corporation Limited (TSIIC) - construction for administrative building for the TSIIC - taxable 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 or not - appropriate rate and classification of GST to be charged by the applicant - HELD THAT - TSIIC being wholly owned by Government of Telangana qualifies to be a Government entity under the term Government entity . The Memorandum of Association of TSIIC at clause III(a)(3) clearly states that the company pursues the objectives to implement the schemes of incentives subsidies and the like formulated by the Government of Telangana or Government of India or other authorities or institutions and to administer such schemes of incentives from time to time in the interest of establishments and development of industries. Thus TSIIC organization works to further the policies of the State Government Central Government and Local Government for development of industries in the State of Telangana. The applicant has executed works contracts for TSIIC which is a Government entity - this work is construction of Administrative building. Therefore the civil structure is not meant for commerce/industry or any other business - the Government entity i.e. TSIIC has procured the works contract service in relation to the work entrusted to it by the State Government. Thus the works contract executed by the applicant for construction of Administrative building for TSIIC falls under Sr No. 3(vi) of Notification No. 11/2017-CT (Rate) as amended till date and therefore taxable at the rate of 6% under CGST SGST each. However for works executed from 01-01-2022 the rate shall be 9% under CGST SGST each as the Phrase Governmental authority or Governmental entity is excluded vide notification Number. 15/2021 dated.18.11.2021.

Summary

Issues:
1. Eligibility for concessional GST rate at 12% for services provided to a Government entity.
2. Appropriate rate and classification of GST to be charged if not eligible for the concessional rate.

Eligibility for Concessional GST Rate:
The applicant, engaged in works contracts, sought a ruling on the eligibility for a concessional GST rate of 12% for services provided to a Government entity, specifically Telangana State Industrial Infrastructure Corporation Limited (TSIIC). The applicant argued that since TSIIC is owned by the Government of Telangana with over 90% equity share capital, they qualify for the lower tax rate. The Authority analyzed the definition of a "Government entity" as per relevant notifications and found that TSIIC, being wholly owned by the Government of Telangana, falls under this definition. Consequently, the works contract services provided to TSIIC were deemed eligible for the concessional rate of 12% under Notification No. 11/2017-Central Tax (Rate) until 31.12.2021. However, post-01.01.2022, the tax rate was revised to 18% as per Notification 15/2021.

Appropriate Rate and Classification of GST:
The question regarding the appropriate rate and classification of GST to be charged did not arise in light of the ruling provided on the eligibility for the concessional rate. Since the applicant was deemed eligible for the 12% rate until 31.12.2021 and 18% from 01.01.2022 onwards, there was no need to address an alternative rate or classification. The ruling clarified the tax implications for the applicant's works contracts with TSIIC, providing a clear directive on the applicable GST rates based on the timeline specified in the notifications.

This judgment by the Authority for Advance Ruling, Telangana, addressed the specific queries raised by the applicant regarding the GST rates applicable to their works contracts with TSIIC, a Government entity. By delving into the definitions and notifications under the GST Act, the Authority provided a detailed analysis and ruling, ensuring clarity on the concessional rates and the timeline for their applicability. The ruling not only resolved the immediate concerns of the applicant but also established a clear precedent for similar cases involving works contracts with Government entities, contributing to the overall understanding and application of GST regulations in such scenarios.