Kerala Water Authority Not Local Authority Under GST Act: GSTAT Thiruvananthapuram

Contractor Vs Commissioner of CGST & CE (GSTAT Thiruvananthapuram)

Summary: GSTAT Thiruvananthapuram Bench held that Kerala Water Authority (KWA) is a statutory body and does not qualify as a “local authority” within Section 2(69) of the CGST/KGST Act, 2017. Consequently, works contract services supplied to KWA are taxable at 18% with effect from 01.01.2022 following the amendment to Notification No. 11/2017-Central Tax (Rate) by Notification No. 15/2021-Central Tax (Rate) dated 18.11.2021. The Tribunal, however, granted partial relief on interest, holding that interest was payable only on the portion of differential tax discharged through the Electronic Cash Ledger and not on the portion paid through the Electronic Credit Ledger.

The appellant, a partnership firm providing works contract services including to KWA, was subjected to departmental audit for September 2019 to March 2022. The department alleged short-payment of GST of Rs.45,26,398 due to the rate changing from 12% to 18%. Two transactions having an aggregate taxable value of Rs.7,54,39,945 were involved, including one relating to work completed on 16.12.2021 but billed in January 2022. A show cause notice dated 19.10.2023 proposed recovery of the differential tax under Section 73(1), interest under Section 50(1) and penalty.

The Assistant Commissioner confirmed the demand, interest and 10% penalty. The Joint Commissioner (Appeals) subsequently held that KWA was not a “local authority” under Section 2(69). It noted that the concessional 12% rate available for specified works contract services to Governmental Authorities or Government Entities had been withdrawn from 01.01.2022, resulting in recovery of the differential GST. Before GSTAT, the appellant disputed the classification of KWA and contested interest, while also referring to the fact that the tax and penalty had already been paid after receipt of the differential amount from KWA.