In re Indian Hume Pipe Company Limited (AAR Karnataka)
Q1. Whether the supply of services by the Applicant to M/s. BANGALORE WATER SUPPLY & SEWERAGE BOARD is covered by Notification No. 15/2021- Central Tax (Rate), dated 18th November, 2021 r/w. Notification No. 22/2021 – Central Tax (Rate), dated 31st December, 2021?
A1. The supply of Services by the Applicant to M/s. Bangalore Water Supply and Sewerage Board is covered by Notification No. 15/2021- Central Tax (Rate), dated 18th November, 2021 r/w. Notification No. 22/2021 – Central Tax (Rate), dated 31st December, 2021.
Q2. If the supplies as per Question 1 are covered by Notification No. 15/2021- Central Tax (Rate), dated 18th November, 2021 r/w. Notification No. 22/2021 – Central Tax (Rate), dated 31st December, 2021, then what is the applicable rate of Tax under the Goods and Services Tax Act, 2017 on such Supplies made w.e.f 01-01-2022; and
A2. The applicable rate of tax under the Goods and Services Tax Act, 2017 on the supplies made by the Applicant to the BWSSB as per the instant application is 18% w.e.f 01.01.2022 as per entry 3 (xii) of No.11/ 2017-Central Tax (Rate) dated 28.06.2017.
Q3. In case if the supplies as per Question 1 are not covered by the Notification supra then what is the applicable rate of tax on such supplies under the Goods and Services Tax Act, made w.e.f. 01-01-2022;
A3. In view of the ruling given at question (1), this question becomes redundant.
Read AAAR Order: Appellant cannot be treated as Local Authority merely for registration as Local Authority with Income Tax & GST Department
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, KARNATAKA
M/s. The Indian Hume Pipe Company Limited, (hereinafter referred to as The applicant’), 58/1, Bellary Road, Venkatala Village, Yelahanka, Bangalore-560 064 GSTIN 29AAACT4063D1ZI have filed an application for Advance Ruling under 7 of CGST Act, 2017 read with Rule 104 of CGST Rules, 2017 and Section 97 of KGST Act, 2017 read with Rule 104 of KGST Rules, 2017, in FORM GST ARA-01 discharge the fee of Rs.5,000/- each under the CGST Act and the KGST Act.
2. The Applicant is a Public Limited Company registered under the Indian Companies Act and also under the provisions of Central Goods and Services Tax Act, 2017 as well as Karnataka Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act and KGST/SGST Act respectively). The Applicant undertakes contract for construction of Head Works, Sumps, Pump Rooms, laying, jointing of pipe line and commissioning and maintenance of the entire work for water supply projects/ sewerage projects / facilities.
3. The applicant has sought advance ruling in respect of the following questions:
i. Whether the supply of Services by the Applicant to M/s. Bangalore Water Supply and Sewerage Board is covered by Notification No. 15/2021- Central Tax (Rate), dated 18th November, 2021 r/w. Notification No. 22/2021 – Central Tax (Rate), dated 31st December, 2021?
ii. If the supplies as per Question 1 are covered by Notification No. 15/2021- Central Tax (Rate), dated 18th November, 2021 r/w. Notification No. 22/2021 – Central Tax (Rate), dated 31st December, 2021, then what is the applicable rate of tax under the Goods and Services Tax Act, 2017 on such supplies made w. e.f., 01-01-2022;
iii. In case if the supplies as per Question 1 are not covered by the Notification supra then what is the applicable rate of tax on such supplies under the Goods and Services Tax Act, made w. e.f, 01-01-2022?
4. Admissibility of the application: The question is about the “applicability of a notification issued under the provisions of the Act” and “determination of the liability to pay tax on any goods or services or both” and hence is admissible under Section 97(2) (b) and (e) of the CGST Act 2017.
5. BRIEF FACTS OF THE CASE: The applicant furnishes some facts relevant to the issue:
5.1 The applicant states that they undertake contract for construction of Head Works, Sumps, Pump Rooms, laying, jointing of pipe line and commissioning and maintenance of the entire work for Water Supply Projects / Sewerage Projects / Facilities. Their major customers include Government Bodies / Entities / Authorities / Local Bodies/ Municipalities.
5.2 The applicant states that they have been awarded a contract by M/s. Bangalore Water Supply and Sewerage Board (BWSSB for brevity) vide LOA NO-BWSSB/CE (WWM) /ACE(WWM) /TA-2/ 1747/2017-18 dated 21-12-2017 to execute the work of Rehabilitation/Remodeling/Replacement of 400-1000 mm dia sewer line in V-Valley. BWSSB, holds TDS registration No. 29BLRA06245B1DJ under the Goods and Services Tax Act, 2017
5.3 Bangalore Water Supply and Sewerage Board is an autonomous body formed by the State Legislature under Bangalore Water Supply and Sewerage Board Act on 10.09.1964 for Water Supply and Sewage disposal. It is one of the first Water Supply and Sanitation Utilities in India with jurisdiction of entire Bruhat Bengaluru Mahanagar Palike Area of 800 Sq.km., (Bengaluru Core area of 245 Sq.Kms., 8 Urban Local Bodies of 330 Sq. kms. (7 City Municipal Corporation and 1 Town Municipal Corporation and 110 villages of 225 Sq. kms.)
5.4 The Applicant states that, BWSSB has the following mandates: Adequate water supply to meet demand; creation of sewerage network 86 safe disposal of sewage; preparation, implementation of plans and schemes for augmenting water supply 86 safe disposal of sewage; levy and collection of water charges on for sustainability of the system.
5.5 Since its inception in the year 1964, BWSSB has executed several water supply and sewage schemes for the city, including the prestigious Cauvery Water Supply Scheme (CWSS) Stages-I,II,III 86 Stage IV Phase-I, Phase-II and sewerage system improvement projects concentrating on sewage collection, conveyance and treatment works. The existing sewerage system covers an area of 265 Sq.kms. of core area of the city, in which three major Sewage Treatment Plants (STP) are constructed at Vrishabhavathi, K 86 C and Hebbal Valleys (major and minor). The sewerage system for newly added areas mainly the erstwhile CMC’s is nearing completion.
5.6 The applicant states that Notification No. 15/2021- Central Tax (Rate), dated 18th November, 2021 seeks to amend parent Notification No.11/2017-Central Tax (Rate) dated 28th June, 2017. This Notification prescribed rate of tax on construction services at Serial No.3 of the table therein, viz-“(ii) composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Services Tax Act, 2017” at 9% under CGST Act; thereby implying total GST at 18% (CGST-9% + SGST-9%); Notification No.11/2017-Central Tax (Rate) dated 28th June, 2017 was subsequently amended vide Notification No.20/2017-Central Tax (Rate) dated 22nd August, 2017; whereby in Serial No.3 of the Table therein item (iii) was inserted viz-“(iii) Composite supply of works contract as defined in clause (119) of Section 2 of the Central Goods and Services Tax Act, 2017, supplied to the Government, a local authority or a Governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,-(a)………….. ,(b) canal, dam or other irrigation works; (c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal” to be taxed at 6% under CGST Act; thereby implying total GST at 12% (CGST-6% + SGST-6%); Subsequently Notification No.31/2017 dated 13th October, 2017 was issued to amend Serial No.3(iii) viz-“Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity”; Further this Notification also clarified the meaning of the term Governmental Authority and Government Entity to mean as under-
“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 percent or more participation by way of equity or control, to carry out any trusted to a Municipality under article 243 W of the Constitution or to a panchayat under article 243G of the Constitution.”
“Government 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 State Legislature; or
ii) established by any Government,
with 90per cent. or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Territory or a local authority.”.
The functions entrusted to a Municipality under the Twelfth Schedule to Article 243W of the Constitution are as under:
(a) Urban planning including town planning.
(b) Regulation of land-use and construction of buildings.
(c) Planning for economic and social development.
(d) Roads and bridges.
(e) Water supply for domestic, industrial and commercial purposes.
(f) Public health, sanitation conservancy and solid waste management.
(g) Fire services.
(h) Urban forestry, protection of the environment and promotion of ecological aspects.
(i) Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded.
(j) Slum improvement and upgradation.
(k) Urban poverty alleviation.
(l) Provision of urban amenities and facilities such as parks, gardens, playgrounds.
(m) Promotion of cultural, educational and aesthetic aspects.
(n) Burials and burial grounds; cremations, cremation grounds; and electric crematoriums.
(o) Cattle pounds; prevention of cruelty to animals.
(p) Vital statistics including registration of births and deaths.
(q) Public amenities including street lighting, parking lots, bus stops and public conveniences.
(r) Regulation of slaughter houses and tanneries.
Notification No. 15/2021- Central Tax (Rate), dated 18th November, 2021 r/w. Notification No. 22/2021 – Central Tax (Rate), dated 31st December, 2021 issued seeks at Sr.No.3(iii) as -“Union territory or a local authority” thereby deleting the governmental Authority or a Government Entity.
5.7 The applicant further submits that M/s. BWSSB is holder of PAN-AAALB0015G. The 4th character of PAN as highlighted is “L”. PAN under Income Tax is designed in a Unique manner whereby the 4th character in the PAN classifies its Constitution / Status. “L” in this case denotes Local Authority. The GST Department while issuing GST REG-06 has stated as “Constitution of Business-Local Authority”.
5.8 The applicant submit that the Constitution of the Business cannot change depending on different provisions under the same Act; i.e., for limited purposes under the Act the Constitution of the person is different and for another purposes under the same Act the Constitution is different.
5.9 The applicant states that as per Section 2(69) “local authority” means-
(a) a “Panchayat” as defined in clause (d) of article 243 of the Constitution;
(b) a “Municipality” as defined in clause (e) of article 243P of the Constitution;
(c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund;
(d) a Cantonment Board as defined in Section 3 of the Cantonments Act, 2006;
(e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution;
(f) a Development Board constituted under article 371 and article 371J of the Constitution; or
(g) a Regional Council constituted under article 371J of the Constitution;
Article 243P of Indian Constitution
In this Part, unless the context otherwise requires,-
(e) “Municipality” means an institution of self government constituted under article 243Q;
Article 2430 of Indian Constitution
Constitution of Municipalities.
(1) There shall be constituted in every State,-
(a) a Nagar Panchayat (by whatever name called) for a transitional area, that is to say, an area in transition from a rural area to an urban area;
(b) a Municipal Council for a smaller urban area; and
(c) a Municipal Corporation for a larger urban area, in accordance with the visions of this part: provided that a Municipality under this clause may not be tituted in such urban area or part thereof as the Governor may, having to the size of the area and the municipal services being provided or sed to be provided by an industrial establishment in that area and such other factors as he may deem fit, by public notification, specify to be an industrial township.
6. Applicant’s Interpretation of Law:
6.1 The applicant states that the contractee of the applicant (BWSSB) in question are holding GST TDS Registration No 29BLRA06245B1DJ issued by the GST Department classifies the Contractee under Local Authority.
6.2 The applicant submits that as the Contractee of the applicant are classified as Local Authority as per the GST Authorities, they are of the opinion that –
a. the said transaction is covered by Notification No. 15/2021- Central Tax (Rate), dated 18th November, 2021 r/w. Notification No. 22/2021 – Central Tax (Rate), dated 31st December, 2021; which after amendment now reads as “(iii) composite supply of works contract as defined in clause (119) of Section 2 of the Central Goods and Services Tax Act, 2017, supplied to Central Government, State Government, Union Territory or a local authority”;
b. the said transaction is liable to tax under the GST Act @ 12%; and
c. Not applicable
PERSONAL HEARING / PROCEEDINGS HELD ON 07-07-2022
7. Shri Manish Goel, Chartered Accountant and Duly Authorised Representative appeared for personal hearing proceedings held on 07-07-2022 and reiterated the facts narrated in their application.
FINDINGS & DISCUSSION
8. At the outset we would like to make it clear that the provisions of CGST Act, 2017 and the KGST 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 KGST Act.
9. We have considered the submissions made by the applicant in their application for advance ruling. We have also considered the issues involved on which advance ruling is sought by the applicant and the relevant facts along with the arguments made by the applicant and also their submissions made during the time of hearing.
10. The Applicant has been awarded a contract by BWSSB to execute the work of Rehabilitation/Remodeling/Replacement of 400-1000 mm dia sewer line in V-Valley and wants to know the applicable rate of GST on the same.
11. Bangalore Water Supply and Sewerage Board was set up by The Bangalore Water Sewerage Act 1964 to supply water in Bangalore Metropolitan area and to ate provision for the sewerage and disposal of sewage in the Bangalore Metropolitan area.
12. Now we have to find out the applicable GST rate on the work assigned by BWSSB to the Applicant. For this we invite reference of Entry No. iii of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017 further amended vide Notification No. 20/2017-Central Tax (Rate) dated: 22.08.2017 and Notification No. 31/2017-Central Tax (Rate) dated: 13.10.2017 which is as below:
