In re Om Prakash Sharma (GST AAR Uttarakhand)
On perusal of aforesaid legal provisions, we find that a works contract is essentially a contract of service which may also involve supply of goods in the execution of the contract. It is basically a composite supply of both services and goods, with the service element being dominant in the contract between parties. On perusal of documents submitted by the applicant we find that the contracts has been awarded by the Forest Department to the applicant for construction as well as for repair & maintenance of immovable property wherein transfer of property in goods is involved in the execution of such contracts. Thus the said contracts are duly covered under the definition of “work contract” service and thus it is a composite service. We further find that as per Para 6 (a) of Schedule II to the CGST Act, 2017, works contracts as defined in section 2(119) of the Act shall be treated as a composite supply of services. Thus, there is a clear demarcation of a works contract as a composite supply of service under the Act.
As regards to the taxability of said service provided to Government department, we find that there is no exemption is available to the said service provided by the applicant to the Forest Department. However the said service is a taxable event in terms of entry no. 3(vi) (a) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (as amended from time to time) in as much as the services provided by the applicant to the Forest Department is not for commerce, industry or any other business or profession and attract GST 12% [ 6% CGST + 6% SGST].
As regards to the question whether the Forest Department is correct in not giving GST to the applicant on the composite supply as the said department classified the same as exempted service, the authority cannot pass the ruling on the same in as much the said question do not qualify for ruling in terms of section 97(2) of the Act.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, UTTARAKHAND
1. This is an application under Sub-Section (1) of Section 97 of the CGST/SGST Act, 2017 (herein after referred to as Act) and the rules made thereunder filed by M/s. Om Prakash Sharma, 890-Sarva Priya Vihar Colony. Haridwar, Uttarakhand (here in after referred to as the applicant*) is registered with the GSTN having Registration No. 05AWTPS6940G1ZY and seeking advance ruling on the following questions:-
a. Whether the composite supply of construction service to the Forest Department is a exempted service under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 or any other exemption notification;
b. If above composite supply of construction service is not included in any exemption notification, then what will be the rate of GST on such supply of service;
c. Whether the Forest Department is correct in not giving GST to the applicant on the composite supply as the said department classified the same as exempted service.
2. Advance Ruling under GST means a decision provided by the authority or the appellate authority to an applicant on matters or on questions specified in sub section (2) of section 97 or sub section (1) of section 100 in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.
3. As per the said subsection (2) of Section 97 of the Act advance ruling can be sought by an applicant in respect of:-
(a) Classification of any goods or services or both
(b) Applicability of a notification issued under the provisions of this Act,
(c) Determination of time and value of supply of goods or services or both,
(d) Admissibility of input tax credit of tax paid or deemed to have been paid
(e) Determination of the liability to pay tax on any goods or services or both
(f) Whether the applicant is required to be registered
(g) Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both within the meaning of that term
Since applicant has sought advance ruling on applicability of notification & determination of tax liability, therefore, in terms of said Section 97(2) (b) & (e) of the Act, the two questions of the application filed by the applicant was admitted. Accordingly hearing was fixed on 07.08.2020 which was attended by the Shri Gaurav Babbar, Advocate on behalf of the applicant and reiterated the submissions given with the application. During the course of hearing Ms. Preeti Manral (DC), concerned officer of SGST-Uttarakhand was also present and stated that composite supply is taxable and pure services supply should be decided as per law.
5. On perusal of application, we find that the applicant is providing composite supply (works contract) like construction of Machan, laying of foundation, construction of pillars etc as well as supply of labour service of clearing paths & areas in forest, loading & unloading of plants etc directly to the Forest Department.
6. In the present case we are not deciding any wider question but restricting our conclusion to the facts and circumstances which were filed for our consideration in the application. In this context, the relevant legal provisions are reproduced as under:
A. Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017
G.S.R….(E).- In exercise of the powers conferred by sub-section (1) of section 9, subsection (1) of section 11, sub-section (5) of section 15 and sub-section (1) of section 16 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, and on being satisfied that it is necessary in the public interest so to do, hereby notifies that the central tax, on the intra-State supply of services of description as specified in column (3) of the Table below, falling under Chapter, Section or Heading of scheme of classification of services as specified in column (2), shall be levied at the rate as specified in the corresponding entry in column (4), subject to the conditions as specified in the corresponding entry in column (5) of the said Table:-
