In re Shreeji Earth Movers (GST AAAR Gujarat)
a) At what rate of tax the liability should be determined on services provided by appellant (sub-contractors) to the main contractor pertaining to the irrigation, construction and maintenance works to the irrigation department, State of Gujarat?
b) Under which head we should classify our services to execute irrigation, construction and maintenance work supplied to the irrigation department, State of Gujarat?
c) Whether to charge a tax rate of 12% GST or 18% GST?
AAR not agree with the contention of the appellant that they are eligible for the concessional rate of GST @12% in terms of Notification No. 20/2017-CT (R) dated 22.08.2017 and Notification No. 01/2018-CT(Rate) dated 25.01.2018 as the activity undertaken by the appellant is not covered under st. No. 3(iii) or under 3(ix) of the Notification No. 11/2017-CT(R) dated 28.06.2017 as amended and agree with the findings of the Gujarat Authority for Advance Ruling that the supply made by the appellant is not covered under entry No. 3(iii) or 3(ix) of Notification No. 11/2017-CT(R) dated 28.06.2017, as amended. The appellant is liable to discharge tax rate CGST @9% and GGST@9% under Entry No 3(ii) of Notification No. 11/2017-CT(R) dated 28.06.2017 further amended vide Entry No.3(xii) of Notification ibid
Read AAR Order: GST @18% payable on services provided by sub-sub-contractor to sub-contractor to main contractor pertaining to irrigation, construction
FULL TEXT OF THE ORDER OF APPELLATE AUTHORITY FOR ADVANCE RULING, GUJARAT
At the outset we would like to make it clear that the provisions of the Central Goods and Services Tax Act, 2017 and Gujarat Goods and Services Tax Act, 2017 (hereinafter referred to as the `CGST Act, 2017′ and the `GGST Act, 2017′ are in parimateria 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, 2017 would also mean reference to the corresponding similar provisions in the GGST Act, 2017.
2. The present appeal has been filed under Section 100 of the CGST Act, 2017 and the GGST Act, 2017 by M/s Shreeji Earth Movers, Village-Kolithad, Taluka-Gondal, Rajkot- 360311 against the Advance Ruling No. GUPGAAR/R/43/2021 dated 11.08.2021.
Brief facts of the case:
3. M/s Shreeji Earth Movers (hereinafter referred to as ‘the appellant’) is a registered firm having GST No. 24BBTPS3402D1ZR with place of business at Kolithad, Taluka-Gondal, Dist. Rajkot (Gujarat).
3.1 The appellant is engaged in providing works contract service directly to subcontractors who execute the contract with the main contractor for original contract work with the irrigation department (State of Gujarat). M/s. JSIW Infrastructure Pvt. Ltd., received the original contract from the irrigation department (State of Gujarat) for the construction of pumping station and supplying and laying MS pipeline with all field … etc. and maintenance of the commissioned project for 10 years. M/s. JSIW Infrastructure executed the same contract with M/s. Radhe Construction. Further, M/s. Radhe Construction executed the same contract with the appellant.
3.2 The appellant had filed application with the Authority for Advance Ruling. Gujarat seeking ruling on the following:
a) At what rate of tax the liability should be determined on services provided by appellant (sub-contractors) to the main contractor pertaining to the irrigation, construction and maintenance works to the irrigation department, State of Gujarat?
b) Under which head we should classify our services to execute irrigation, construction and maintenance work supplied to the irrigation department, State of Gujarat?
c) Whether to charge a tax rate of 12% GST or 18% GST?
3.3 Gujarat Authority for Advance Ruling, Ahmedabad (herein after referred to as `GAAR’) vide Advance Ruling No. GUPGAAR/R/43/2021 dated 11.08.2021. gave the following ruling:
“GST rate on subject supply is 18% for services supplied by the sub-sub-contractor to sub-contractor M/s Radhe and supply merits entry at Heading 9954, Entry No. 3(ii) of Notification No. 11/2017-CT(R) dated 28.06.2017“.
4. Aggrieved by the above decision of the GAAR, the appellant has filed this appeal on the following grounds:
4.1 The appellant is works contractor and executes and undertake composite supply of works contract as defined in clause 119 of Section 2 of CGST, 2017 and was awarded a sub-contract by another works contractor to execute the original work of civil construction works supply to the Irrigation department of Gujarat.
4.2 As per Notification No. 20/2017-CT (R) dated 22.08.2017, rate of GST is 12% for composite supply of works contracts supplied by way of construction, erection commission or installation of original works pertaining to the irrigation and construction works supply to the Irrigation Department, State of Gujarat.
4.3 As per Sr. No 12 in press release of 25th meeting of GST council held at New Delhi on 18.01.2018, the rate of GST applicable to the main contractor should be levied by sub-contractors.
4.4 As per Notification No. 01/2018-CT(Rate) dated 25.01.2018, the service provided by sub-contractors to the main contractor for irrigation and construction works supply to the state government is not specified in the Notification.
4.5 As per Item No. (iii) of Notification No. 20/2017-CT (R) dated 22.08.2017, the composite value of works contract is classified @ 12%. The sub-contractors providing services to the main contractor is further classified only under two categories i.e item No. (ix) and (x) of the subject Notification.
4.6 Though they are sub-contractors providing civil construction services to the main contractor, which may not be covered in the aforesaid entry, it is their belief that the rate applicable to them is 12% which is the rate applicable for composite supply of works contract as defined in clause (119) of Section 2 of CGST Act,2017 supplied by way of construction, erection, commissioning ,or installation of original works pertaining to civil construction irrigation and construction work supply to the irrigation department of Gujarat.
4.7 As per Section 2(119) of the CGST Act, 2017, “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”; as per Section 2(5) of CGST Act, 2017, “Agent” means a person including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another;
4.8 Contractor and sub-contractor are not defined under the CGST Act, 2017 but as per the general definition Contractor means-a person or firm that undertakes a contract from the employer to provide materials or labour to perform a service or do job at a specified price and a sub-contractor means a person who is hired by a general contractor (or prime contractor, or main contractor) to perform a specific task as part of the overall project or the total project at a specified price for services provided to the project by the originating employer.
4.9 When the contractor awards either wholly or partially the contractual obligation to a subcontractors, the contract remains the same and the work to be performed by the contractor as well as sub-contractors remains same and identical to what is specified in the contract between the main contractor and the employer. It can be seen from this definition that the subcontractor is not doing anything other than what is specified in the contract between the main contractor and the employer.
4.10 As per the definition of agent, an agent is a person who carries on the same business of supply and /or receipt of goods or services or both on behalf of another. Thus sub-contractors can be called as an agent who is also undertaking the same supply of service for the main contractor. It can also be said that the sub-contractor is only an agent of the contractor and the works undertaken by him passes directly from the subcontractors to the employer.
4.11 As the work get transferred directly to the employer by the sub-contractor, the works contract remains the same and therefore leads to the conclusion that there is only one contract which is undertaken by the contractor as well as sub-contractors.
4.12 Since the appellant is only an agent of the contractor and the property in goods passes directly from him to the employer, it can be concluded that there is only one contract between the irrigation department and contractor as well as sub-contractor.
4.13 The intent of the Government is to bring the rates of main contractor and sub-contractor at par while they are providing their services to Central Government, State Government, Union Territory, a local authority, a Governmental Authority or a Government Entity. Irrigation department being a Governmental Authority/Entity is already covered under clause (x) of heading 9954 of Section 5 of classification of services even though not specified separately. Thus the rate applicable for civil works contract carried out for railways in para (v) of heading 9954 of Section 5 of classification of services should be applicable to sub-contractors also.
4.14 Vide letter dated 04.10.2021. copies of the following judgments were submitted:
A) S. P. Singla Construction Pvt Ltd.{(2019) 111 Taxmann.com 356 (AAR-PUNJAB)}
B) M/s Shree Construction .1(2019) 103 Taxmann.com 448 (AAAR-Mah)}
C) NHPC Ltd .1(2019) 104 Taxmann.com 365 (AAR-Uttarakhand)}
D) ST Engineering Electronics Ltd .{(2019) Taxmann.com 367 (AAR-Mah)}
E) Yash Nirman Engineers & Contractors.{(2019) 109 Taxmann.com 367 (AAR Mah)}
F) State of Andhra Pradesh & Ohters V Larsen & Turbo Ltd & Other —Supreme Court of India —Civil appeal No. 5239 of 2008.
5. During the course of virtual personal hearing held on 06.01.2023, the authorized representative of the appellant, Shri. Ramesh Rakholiya, Advocate reiterated the grounds made in the written submissions.
5.1 In pursuance to transfer of Member (SGST), the appellant was informed regarding the same for fresh personal hearing in the matter. Shri Ramesh Rakholia, Advocate, vide his letter/mail dated 13.03.2023 requested to decide the appeal on the basis of material already on record, written submission and earlier representation/hearing.
DISCUSSION & FINDINGS
6. Time limit for filling, appeal:
6.1 The impugned Ruling has been passed by the GAAR on 11.08.2021. In the Form GST ARA-02 regarding Appeal to the Appellate Authority for Advance Ruling, at Sr.No.2. the appellant has shown the date of communication of the Advance Ruling as ‘17.08.2021’. We observe that the present appeal filed on 08.10.2021 has been filed after the prescribed time limit of 30 days from the date of communication of Ruling, which expired on 16/09/2021, as prescribed under Section 100(2) of the CGST Act, 2017. There has been a delay of 22 days. As per Order dated 10.01.2022 of Hon’ble Supreme Court in Misc. Application No.21 of 2022 in Misc. Application No.665 of 2021 in Suo Moto Writ Petition (C) No.3 of 2020, the period from 15.03.2020 till 28.02.2022 shall stand excluded in computing the period of limitation and all persons shall have a limitation period of 90 days from 01.03.2022. In view of the above, we consider the appeal to be filed within prescribed time limit as per Section 100 of the CGST Act, 2017 and proceed to decide the appeal on its merits.
7. We have gone through the facts of the case as submitted in the Appeal papers. the decision of Gujarat Authority for Advance Ruling, documents on record and oral as well as written submissions made by the appellant.
7.1 We find that M/s JSIW Infrastructure Pvt Ltd. Ahmedabad (hereinafter referred to as `the main contractor’) was awarded the Engineering, Procurement and Construction contract by the Irrigation Department of State of Gujarat vide Work Order dated 08.03.2019.
The main contractor appointed M/s Radhe Constructions, Rajkot as a sub-contractor and as per agreement dated 02.09.2019 between the main contractor and the sub-contractor, the scope of work included “crop compensation, unloading, excavation, laying, jointing, testing, backfilling, disposal of surplus earth and commissioning of MS Pipeline, Erection of butterfly, scour & Air valves of various diameter and associated civil works including supply of all consumable materials’. Further, the sub-contractor i.e M/s Radhe Constructions issued a work order dated 15.09.2019 in the name of the appellant where the scope of work included ‘Liasioning of Crop composition, Excavation of all strata including hard rock, Laying of water pipes including pipes, sand bedding, Lowering, Laying, jointing of pipes, RT of each joint, inner & outer joint coating, back filling, removal of surplus earth, restoration & NOC from farmer, testing etc’. Thus, the above facts make it clear that in the instant case, the original contract was awarded to the main contractor by the Irrigation Department of State of Gujarat and the appellant has been awarded the work order by a sub-contractor of the main contractor.
7.2 In the instant case the appellant has referred to Sr. No (iii) of Notification No. 20/2017-CT (R) dated 22.08.2017 to submit that the rate applicable to them is 12%. We find that the entry No. 3(iii) of the subject Notification provides for rate of tax @12% if any taxable person is providing composite supply of works contract as defined in cause (119) of Section 2 of the CGST Act, 2017 to Central Government, State Government, Union Territory, a local authority or 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 historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);
(b) canal, dam or other irrigation works;
(c) pipeline, conduit or plant for N water supply (h) water treatment, or (iii) sewerage treatment or disposal.
It is not the case of the appellant that they have received any work order from any of the Governmental authorities mentioned above. They don’t have any work order issued in their favour by any of the aforesaid Governmental authorities.
7.3 The appellant has further submitted that the sub-contractors providing services to the main contractor is further classified only under two categories mentioned at item No.(ix) and (x) of Notification No. 01/2018-CT(Rate) dated 25.01.2018 amending the original Notification No. 11/2017-CT(R) dated 28.06.2017
For the sake of convenience, the provisions relating to entry No. 3(ix) and (x) of Notification No. 01/2018-CT(Rate) dated 25.01.2018 is reproduced herein under:
