Andhra Pradesh Industrial Infrastructure Corporation Ltd. (APIIC) is Govt entity for GST

In re Siddartha Constructions (GST AAR Andhra Pradesh)

Andhra Pradesh Industrial Infrastructure Corporation Ltd. (APIIC) was formed in 1973 by GO No: 831 dated: 10.09.1973 issued by Government of Andhra Pradesh. As seen from the share holding ratios of the 41′ Annual Report for the years 2013-2014 as made available by APIIC website https://www.apiic.in, the Government of Andhra Pradesh including its nominees have 100% of share holding and thus it is covered under the definition of ‘Government Entity’ under the above said provisions. Therefore, we conclude that M/s. APIIC is a “Government Entity” for the purpose of GST matters.

FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, ANDHRA PRADESH

1. At the outset we would like to make it clear that the provisions of CGST Act, 2017 and SGST Act, 2017 are in pari materia 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 would also mean reference to the corresponding similar provisions in the APGST Act.

2. The present application has been filed u/s 97 of the Central Goods & Services Tax Act, 2017 and AP Goods & Services Tax Act, 2017 (hereinafter referred to CGST Act and APGST Act respectively) by M/s. Siddartha Constructions (hereinafter referred to as applicant), registered under the AP Goods & Services Tax Act, 2017.

3. Brief Facts of the case:

• The applicant, M/s. Siddartha Constructions is engaged in construction services and is one of the successful bidders of online global open e-tenders floated by Andhra Pradesh Industrial Infrastructure Corporation Limited (“APIIC”), a Government of Andhra Pradesh undertaking and got selected for the below mentioned work:

“providing interior works, furniture and internal electrification in the area allotted to the Hon’ble Minister for Industries at APIIC Tower in IT park, Mangalagiri, Guntur, Andhra Pradesh”.

• The scope of work order requires the applicant to install internal and external electrification works, furniture, floorings and landscaping for a non-residential / commercial building. They had entered into an agreement in bond no. 41/ENC/APIIC/2020-21 dt:08.04.2021 with the Chief Engineer of APIIC for the above works.
• In view of the above facts, the applicant had filed an application in form GST ARA-01 dated 19.07.2021 by paying required amount of fee for seeking Advance Ruling on the following issues, as mentioned below:

4. Questions raised before the authority:

The applicant seeks advance ruling on the following:

1. In view of the services provided by the applicant to APIIC., is the applicant eligible to avail the concessional rate of GST at 12% as prescribed in S.No.3(vi) of the Notification No.11/2017- Central Tax (Rate) dt: 28.06.2017, as amended by?

2. If not, what is the appropriate rate and classification of GST to be charged by the applicant?

On Verification of basic information of the applicant, it is observed that the applicant falls under Centre jurisdiction, i.e. Superintendent of Central Tax (CT) Yerraguntla Range, Kadapa Division. Accordingly, the application has been forwarded to the jurisdictional officer and a copy marked to the Centre Tax authorities to offer their remarks as per Sec. 98(1) of CGST /APGST Act 2017.

In response, remarks are received from the State tax authorities that no issues stand pending on the subject concerned for which the Advance Ruling sought by the applicant.

5. Applicant’s Interpretation of Law:

• The applicant states that the present work is awarded by APIIC for providing interior works, furniture, and internal electrification in the area proposed for the Hon’ble Minister for Industries, in APIIC Towers in IT Park, Mangalagiri, Guntur. The applicant is providing works contract services in the form as defined under section 2(119) of the CGST Act, 2017.

“(119) “Works contract” means a contract for building, construction, fabrication completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (Whether as goods or in some other form) is involved in the execution of such contract;”

• Further, as per SI.No. 6(a) of Schedule II of the CGST Act, 2017, works contract services shall be treated as a supply of service. Therefore, in the present scenario, there is a supply by the applicant and it is in the form of works contract to APIIC.
• The subject work of the present supply involves works contract services for installation , fitting out, improvement and commissioning of the office of the Hon’ble Minister of Industries, which are nothing but supply of services. Further, APIIC is a wholly owned company by the Government of Andhra Pradesh. In terms of SI.No.3 (vi) of Notification No.11/2017- Central Tax (Rate) dt: 28.06.2017, as amended, composite supply of works contract provided to the Central Government, State Government, Union Territory, Local authority, Governmental Authority or Governmental Entity is eligible for the concessional rate of 6%.

“”[(vi) ³⁶( Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, ⁸⁴[other than that covered by items (i), (ia) (ib) (ic) (id) (ie) and (if) above/ provided] to the Central Government, State Government, Union Territory, ‘³[a local authority, a Governmental Authority or a Government Entity] 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;

b) A structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment; or

c) A residential complex predominantly meant for self- use or the use of their employees or other persons specified in paragraph 3 of the schedule III of the Central Goods and Services Tax Act, 2017

⁵⁹[ Explanation- for the purposes of this item, the term ‘business’ shall not include any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities. “[provided that where the services are supplied to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union territory or local authority as the case may be]”

It is further submitted that APIIC will satisfy the definition of Government Authority. “((ix) “Governmental Authority” means an authority or a board or any other body,-(i) Set up by Act of parliament or a State Legislature; or

(ii) Established by any Government,

With 90per cent or more participation by way of equity or control, to carry out any function entrusted to a Municipality under article 243W of the Constitution or a Panchayat under article 243G of the Constitution.”

• In this regard, it is submitted that APIIC exercises/performs the statutory powers/functions of the local bodies with effect from 01.10.1994 onwards in 287 Nos. Industrial Areas (phase wise)/ housing Complexes/Mini Industrial Estates/Commercial Complexes falling under Municipalities, Municipal Corporations and Gram Panchayats in the State, through its officers nominated as Executive Authority under the relevant Acts (AP Panchayti Raj Act, AP Municipality Act etc.,). Therefore, APIIC can be held as a Government Authority.
• Assuming without admitting that APIIC does not fall under the definition of “Governmental Authority”, it still qualifies as a “Government Entity” as APIIC is formed in 1973 by GO No.831 dated 10.09.1973 by the Government of Andhra Pradesh and the Government of Andhra Pradesh including its nominees wholly owns i.e., 100% of share-holding in AMC. As per the definition of Government Entity, APIIC is established by Government with over 90% of equity and control held by the Andhra Pradesh State Government.

” ‘Government Entity’ means an authority or a board or any other body including a society, trust, Corporation,

(iii) Set up by Act of parliament or a State Legislature; or

(iv) Established by any Government,

With 90 per cent or more participation by way of equity or control, to carry out any function entrusted by the Central Government, State Government, Union Territory or a local authority.”

Further, in it’s ruling in AAR No. 02/AP/GST/2020 dated 17.02.2020, the Advance Ruling Authority of Andhra Pradesh had also held that APIIC will qualify as a Governmental Entity.

In this regard, it is submitted that the reduced rate of 6% CGST under entry 3(vi) would apply only in respect of three types of works mentioned in sub clauses (a) (b) and (c) of clause (vi) of S.No.3, out of which clause (b) is not relevant for the present purpose. Sub clause (a) reads as,

“a civil structure or any other original works meant predominantly for use other than for commerce, industry or any other business or profession”.

The explanation to the SI.No 3 (vi) to Notification No.11/2017- Central Tax (Rate) dt: 28.06.2017 was added vide Notification No.17/2018- Central Tax (Rate) dated 26.07.2018 which is reproduced hereunder:

“Explanation – For the purposes of this item, the term ‘business’ shall not include any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities.”

• In view of the above, it is submitted that the activities undertaken by APIIC for the present projects are not in the form of business, rather, they are offices for functioning of the Hon’ble Minister. The office of the Hon’ble Minister for Industries must be allowed for concessional rate of 12% (CGST+SGST) since they are for the use of officers and not for commercial purposes.
• APIIC is vested with the objective of providing industrial infrastructure through the development of industrial areas and they have developed more than 300 industrial parks spreading over an extent of about 1,21,655 acres (including allotted area). Besides, APIIC is also developing sector focused parks like apparel park/food processing parks/leather parks, special Economic Zones in the state. APIIC has also constructed 3500 industrial sheds, 4800 dormitory units, 466 commercial shops.
• The applicant states that present contract is not a contract to develop industrial park etc., for APIIC but for the offices of the Hon’ble Minister of Industry. Further, as per the explanation provided in SI.No.3 (vi), this particular contract is not for the business interests or transactions of APIIC but for propagating the industry and trade in the State of Andhra Pradesh and formulating the industrial plans of the State. This is not a commercial business but is the duty of the Hon’ble Minister as per their designation. Further, the same cannot be treated as commercial business since they functioning as a Governmental Authority and any activity or transaction entered into by them cannot be held as business. Therefore, there is no commercial activity or business or profession but the present contract is for a governmental authority to run its offices. Therefore, the present contract must be allowed for the concessional rate of 12%.

• In view of the above, the applicant prays that the construction services provided by the applicant to APIIC are eligible for the concessional rate of 6% GST as provided in Sl.no.3(vi) of the Notification No.11/2017- Central Tax (Rate) dt: 28.06.2017.

6. Virtual Hearing:

The proceedings of Hearing were conducted through video conference on 21.10.2021, for which the authorized representative, Sri Sai Makarandh P, Advocate attended and reiterated the submissions already made.

7. Discussion and Findings:

We have examined the issues raised in the application and the submissions made by the authorised representative of the applicant as well, regarding the tax liability of the transaction involved.

As seen from the application, the applicant, M/s. Siddhartha Constructions entered into a contract with Andhra Pradesh Industrial Infrastructure Corporation Ltd., (APIIC) for providing interior works, furniture and internal electrification in the area allotted to the Hon’ble Minister for Industries at APIIC Tower in IT park, Mangalagiri, Guntur, Andhra Pradesh.

The issue to be decided is whether the applicant is eligible to avail the concessional rate of GST at 12% as prescribed in SI.No.3(vi) of the Notification No.11/2017- Central Tax (Rate) dt: 28.06.2017, as amended from time to time

The Government of India, vide Notification No.11/2017- Central Tax (Rate) dt: 28.06.2017notified the rate of GST applicable on supply of services. The said notification has been amended from time to time.

Vide Notification No. 24/2017 – Central Tax (Rate), Dated: 21.09.2017, Government of India by inserting entry No. (vi) notified,

“Concessional GST rate of 6% for the construction services provided to 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.”

This context necessitates the examination of two issues:

a) Primarily, whether APIIC which awarded construction work to the applicant would qualify for a Governmental Authority/entity or not.

b) Consequently whether the construction work taken up by the applicant is meant for business or otherwise.

a) Initially we examine whether M/s. AMC is a Government Authority/Entity or otherwise.

The para 4 of clauses (ix) & (x) of Notification No.11/2017- Central Tax (Rate) dt: 28.06.2017 as amended by Notification No. 31/2017 – CT (Rate) dated 13.10.2017 is as hereunder;

“(ix) “Governmental Authority” means an authority or a board or any other body, –

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government, with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243 W of the Constitution or to a Panchayat under article 243 G of the Constitution.

(x) “Governmental Entity” means an authority or a board or any other body including a society, trust, corporation,

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government,

with 90% or more participation by way of equity or control, to carry out any function entrusted by the Central Government, State Government, Union Territory or a local authority.”

Andhra Pradesh Industrial Infrastructure Corporation Ltd. (APIIC) was formed in 1973 by GO No: 831 dated: 10.09.1973 issued by Government of Andhra Pradesh. As seen from the share holding ratios of the 41′ Annual Report for the years 2013-2014 as made available by APIIC website https://www.apiic.in, the Government of Andhra Pradesh including its nominees have 100% of share holding and thus it is covered under the definition of ‘Government Entity’ under the above said provisions. Therefore, we conclude that M/s. APIIC is a “Government Entity” for the purpose of GST matters.

b) Now we examine whether the construction work in which the applicant is engaged in is meant for any business or otherwise.

The applicant claims that the works involved in the contract are used for the offices of the Hon’ble Minister for Industries and not for the business interests or transactions of APIIC. The point under discussion is whether the work involved, i.e, “providing interior works, furniture and internal electrification of the office space of Hon’ble Minister for Industries” is meant predominantly for use other than for commerce, industry or any other business or profession. The applicant rather emphatically claimed that the work is meant for the use of Minister for Industries, which is essentially meant for promotion of Business and Industry. Moreover, the recipient of the services, APIIC is basically engaged in business activities and even a close observation of the modus operandi of the organisation prove the same. This would be sufficient enough to come to a conclusion that the said construction is for conducting promotional activities, which are essentially business oriented and hence not eligible for concessional rate of 12% ( 6% CGST + 6% SGST) available under Notification No. 24/2017 – CT (Rate) dated 21.09.2017.

Hence, the contract entered by the applicant is classifiable under SAC heading No. 9954 under construction services, with entry no (ii) of serial No.3 of Notification No.11/2017- Central Tax (Rate) dt: 28.06.2017 i.e., Composite Supply of Works Contract as defined in clause 119 of Section 2 of Central Goods and Services Act, 2017 and the applicable rate of tax is 18% (9% under Central Tax and 9% State Tax).

RULING

(Under Section 98 of Central Goods and Services Tax Act, 2017 and the Andhra Pradesh Goods and Services Tax Act, 2017)

Question: In view of the services provided by the applicant to APIIC, is the applicant eligible to avail the concessional rate of GST at 12% as prescribed in S.No.3(vi) of the Notification No.11/2017- Central Tax (Rate) dt: 28.06.2017, as amended by?

Answer: Negative

Question: If not, what is the appropriate rate and classification of GST to be charged by the applicant?

Answer :SAC heading No. 9954 under construction services, with entry no (ii) of serial No.3 of Notification No.11/2017- Central Tax (Rate) dt: 28.06.2017 i.e., Composite Supply of Works Contract as defined in clause 119 of Section 2 of Central Goods and Services Act, 2017 and the applicable rate of tax is 18% (9% under Central Tax and 9% State Tax).