In re Maxwell Electrical Engineers (GST AAR Karnataka)
1. Whether the rate of tax specified in entry Sl No 3 (vi) (a) of notification 11/2017-CGST (Rate) as amended till date is applicable for the aforesaid service as a main contractor or the rate of tax specified in Entry Sl. No. 3 (ix) of 11/2017 –Central Tax (Rate) as amended till date is applicable as a subcontractor
The rate of tax applicable to the composite supply of works contract as defined in clause (119) of Section 2 of the Central Goods and Services Tax Act undertaken by the applicant is to be charged at 9% under the CGST Act and 9% under the KGST Act under item no. (ii) of 81. No. 3 till 28.03.2019 and thereafter at the same rate under item no. (xii) of Sl. No. 3 of Notification No. 11/2017 – Central Tax (Rate) dated 28-06-2017.
2. If the rate of tax specified in Entry Sl No 3 (vi) (a) or Sl No. 3(ix) is not applicable, could you please elaborate on the reasons for non applicability and which is the entry of the notification to determined the applicable rate? If the aforesaid notification itself is not applicable, then under which service the activity has to be taxed and at what rate?
The applicant has been awarded contract works by the Government Entities such as Chamundeshwari Electrical Supply Company Limited, Bengaluru Electrical Supply Company Limited and government sponsored scheme of Ganga Kalyana and water supply installations through turnkey projects for supply, erection, testing, commissioning of transmission of 11 KV HT/ LT lines and also erection of 25 KVA transformer.
A civil structure means a series of connected, interrelated elements that together form a system which can resist a series of external load effects applied to it, which includes its own self weight, and provide adequate rigidity. For example railways, roads, buildings, warehouses, bridges, pipelines, sewers, dams, canals etc.. The applicant is providing supply of service through composite works contracts such as design, erection, testing, commissioning, including pre-commissioning activities in relation to or incidental to installation of transformer of various capacity and providing through electrical infrastructures by extending 11 KV high transmission lines and Low transmission lines.
The submissions made by the applicant in respect of agreement between government entities are verified. It is pertinent to note that the applicant is principal contractor and providing supply of service to government entities as composite works contracts per provision of 2(119) such as design, erection, testing, commissioning, including pre-commissioning activities in relation to or incidental to installation of transformer of various capacity and providing through electrical infrastructures by extending 11 KV high transmission lines and Low transmission lines.
Recipient of supply is actively engaged in commerce, business and trading of Electricity. On this count the composite works carried out by the applicant for the said Corporation are predominantly meant for trade and commerce. Therefore the applicant does not fulfill the conditions as prescribed in item no. (vi)(a) of Serial number 3 of Notification No. 11/2017 – Central Tax (Rate) dated 28-06-2017.
The applicant is therefore not eligible for the concessional rate of 6% CGST and 6% KGST under item no. (vi)(a) of Serial number 3 of Notification No. 11/2017 – Central Tax (Rate) dated 28-06-2017.
The composite supply of works contract provided by the applicant is taxable at the rate of 9% CGST and 9% KGST under item no. (ii) of serial no. 3 till 28.03.2019 and thereafter at the same rate under item no. (xii) of serial number 3 of the amended Notification No. 11/2017 – Central Tax (Rate) dated 28-06-2017.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, KARNATAKA
1. M/s Maxwell Electrical Engineers, No 4, 9th Main, Near Venkateswara Temple, Vasanthnagar, Bengaluru-560052, having GSTIN number 29AARFM1680P1ZC, has filed an application for Advance Ruling under Section 97 of CGST Act, 2017, KGST Act, 2017 read with Rule 104 of CGST Rules 2017 86 KGST Rules 2017, in form GST ARA-01 discharging the fee of Rs.5,000-00 each under the CGST Act and the KGST Act.
2. The Applicant is a Proprietorship concern and is registered under the Goods and Services Act, 2017. The applicant has sought advance ruling in respect of the following question:
1. Whether the rate of tax specified in entry SI No 3 (vi) (a) of notification 11/2017-CGST (Rate) as amended till date is applicable for the aforesaid service as a main contractor or the rate of tax specified in Entry Sl. No. 3 (ix) of 11/2017 -Central Tax (Rate) as amended till date is applicable as a subcontractor
2. If the rate of tax specified in Entry Sl No 3 (vi) (a) or Sl No. 3(bc) is not applicable, could you please elaborate on the reasons for non applicability and which is the entry of the notification to determined the applicable rate?
3. If the aforesaid notification itself is not applicable, then under which service the activity has to be taxed and at what rate?
3. The applicant furnishes some facts relevant to the stated activity:
a. The applicant is engaged in works contract such as design, erection, testing, commissioning, including pre-commissioning activities in relation to or incidental to installation of transformer of various capacity and providing electrical infrastructures by extending 11 KV high transmission lines and Low transmission lines.
b. The applicant undertook turnkey projects for supply, erection, testing, commissioning of transmission of 11 KV HT/LT lines and also engaged in erection of 25 KVA transformers for Chamundeshwari Electrical Supply Company Limited (CESC) / Bengaluru Electrical Supply Company Limited (BESCOM) and Ganga Kalyana scheme.
c. The applicant’s argument is that the said works are mainly awarded to the applicant as a principal contractor by State Government entities such as Chamundeshwari Electrical Supply Company Limited or Bengaluru Electrical Supply Company Limited and Ganga kalyana scheme.
d. Further stated that the supply of Services by the applicant were as per entry no 3 (vi) (a) notification 11/2017-Central Tax (Rate) dated 28-06-2017 followed by the amended notification no 24 /2017 -Central Tax (Rate ) dated 21-09-2017 to the Central Government, State Government, Union Territory, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –
(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession
Based on the aforesaid notifications the rate of tax shall be at 6 percent under the CGST Act and 6 percent under the KGST Act, hence the applicant has charged the tax component and collected and discharged the same.
e. Subsequently, the Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017 was amended by the following notifications:
i. Notification No. 20/2017-Central Tax (Rate), dated 22nd August, 2017
ii Notification No. 24/2017-Central Tax (Rate), dated 21st September, 2017
ii. Notification No. 31/2017-Central Tax (Rate), dated 13th October, 2017
iii. Notification No. 1/2018-Central Tax (Rate), dated 25th January, 2018
PERSONAL HEARING: / PROCEEDINGS HELD ON 28-06-2018
6. Sri Ganesh S, Advocate, appeared on behalf of the applicant before the Authority for Advance Ruling and was heard.
6.1 The DAR argued that the applicant undertook turnkey projects for supply, erection, testing, commissioning of transmission lines of 11 KV HT/LT lines and also erection of 25 KVA transformer for government entities such as Chamundeshwari Electrical Supply Company Limited or Bengaluru Electrical Supply Company Limited and government sponsored planning schemes such as Ganga Kalyana and water supply installations.
6.2 He further referred to advance ruling orders passed by Authority for Advance Ruling, Rajasthan vide ruling number RAJ/AAR/2018-19/01 dated 27-04-2018. This Ruling is in relation to service provided by M/s TPL to Jaipur Development Authority. The Ruling adjudged that JDA is a government entity. The contract works was related to correction and strengthening of the channel for better performance and also for the construction of sewage treatment plant. Therefore it attracts CGST tax rate 6 percent and SGST tax rate 6 percent each, based on the entry no 3 (vi) (a) Notification No. 11/2017-Central Tax (Rate) dated 28-06-2017 as amended by the Notification No. 24/2017 -Central Tax (Rate) dated 21-09-2017.
7. FINDINGS & DISCUSSION:
7.1 We have considered the submissions made by the applicant in their application for advance ruling as well as the submissions made by the duly authorized representative during the personal hearing. We have also considered the issues involved on which advance ruling is sought by the applicant and relevant facts.
7.2 At the outset, we would like to state that the provisions of both the CGST Act and the KGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the KGST Act.
7.3 Td In view of the foregoing nature of supply the provisions of Notification No. 11/2017-CGST dated 28-06-2017 are examined as under.
7.5 Entry at serial number 3 of the Notification No. 11/2017-CGST dated 28-06-2017, as amended from time to time, reads as under (as on 31.12.2018):
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