In re Kerala State Electricity Board Ltd (GST AAR Kerala)
The rulings provided by the GST Authority for Advance Ruling (GST AAR) Kerala are examined to understand the taxability of services provided by contractors to KSEBL. The analysis also covers the applicability of reverse charge on rent a cab services and the timing of supply of deposit works services.
Question 1: The ruling states that no ruling can be given since the question is not directly related to the supply of goods or services being undertaken or proposed by the applicant. This implies that the issue of exemption from GST for pure services or composite supply services with material value less than 25% cannot be addressed in this ruling.
Question 2: The ruling states that this question is not relevant in view of the answer to Question 1. Since no ruling was given for Question 1, it follows that the refund of taxes collected by the contractor cannot be addressed either.
Question 3: The ruling confirms that KSEBL is eligible to avail direct input tax credit on deposit works in the provided scenarios. This eligibility is subject to the conditions and restrictions prescribed in Sections 16 and 17 of the CGST Act, 2017, along with Rules 42 and 43 of the CGST Rules, 2017.
Question 4: The ruling states that this question is not relevant in view of the answer to Question 3. As a result, the proportionate credit for the taxable services based on data in GSTR2A cannot be addressed in this ruling.
Question 5: The ruling determines that KSEBL is liable to pay GST under reverse charge for rent a cab services received from unregistered suppliers. The liability exists irrespective of the supplier’s registration status, as per the specific entry in Notification No. 13/2017 CT (Rate) dated 28.06.2017.
Question 6: The ruling clarifies that tax invoices for deposit works should be issued within 30 days from the date of supply of the service, as prescribed by sub-section (2) of Section 31 of the CGST Act, 2017 and Rule 47 of the CGST Rules, 2017. It further mentions that the applicable GST for advance payments received should be discharged according to the provided guidelines.
Conclusion: The analysis of the rulings shows that certain questions were deemed irrelevant or not within the scope of the ruling. However, it confirms that KSEBL is eligible for availing direct input tax credit on deposit works, subject to the conditions and restrictions outlined in the CGST Act, 2017 and CGST Rules, 2017. It also establishes the liability of KSEBL to pay GST under reverse charge for rent a cab services received from unregistered suppliers. Additionally, the ruling provides guidance on the timing of issuing tax invoices for deposit works and the discharge of GST for advance payments received.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, KERALA
1. The Kerala State Electricity Board Limited (hereinafter referred to as the applicant) is carrying out the business of generation, transmission, and distribution of electricity in the State of Kerala.
2. At the outset, it is clarified that the provisions of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act) and the Kerala State Goods and Services Tax Act, 2017 (hereinafter referred to as KSGST Act) are the same except for certain provisions. Accordingly, a reference hereinafter to the provisions of the CGST Act, Rules and the notifications issued there under shall include a reference to the corresponding provisions of the KSGST Act, Rules and the notifications issued there under.
3. The applicant requested an advance ruling on the following:
3.1. whether Pure Services or composite supply services with a material value less than 25% of the total value provided by the contractors to KSEBL (being a Government Entity) are exempt from GST [Notification No. 12/2017-Central Tax (Rate) – SI. No 3,3A]?
3.2. If the answer to the above is Yes, whether the taxes already collected by the contractor from KSEBL and remitted to the department can be refunded to KSEBL?
3.3. Whether KSEBL can avail direct input tax credit on Deposit works in the following cases;
a) KSEBL is collecting GST on Work Deposits from the consumers and remits the same. The subject work is wholly outsourced by KSEBL to a third-party contractor and GST is paid to the contractor. Whether KSEBL can avail of Input Tax Credit on GST paid to the contractor?
b) KSEBL is collecting GST on Work Deposits from the consumers and remits the same, KSEBL purchases the specific material separately and uses it in the work. Only labour is outsourced. GST is paid on material purchased and to the labour contractor. Whether KSEBL can avail of Input Tax Credit on GST paid on materials and on labour contract?
c) KSEBL is collecting GST on Work Deposits from the consumers and remits the same. KSEBL has utilized the materials from the pool of materials in stock which is centrally procured earlier paying GST. Only labour is outsourced. GST is paid on materials at the time of purchase and to the labour contractor. Whether KSEBL can avail of Input Tax Credit on GST paid on materials and on labour contracts?
3.4 If direct credit cannot be availed by KSEBL, whether proportionate credit can be availed by KSEBL for the quantum of taxable services provided based on the data available in GSTR 2A of KSEBL.
3.5. Whether Reverse Charge is applicable on Rent a Cab from Unregistered Suppliers and if not applicable, how KSEBL can get the refund of GST (RCM) paid on the services received from unregistered rent a cab service provider?
3.6. Whether the practice of raising GST Invoice for Deposit works, after the completion of service and settlement of dues is in the line with the legal interpretations of the Law.
4. Contentions of the applicant:
4.1. Regarding pure services received by the applicant, they submit that as per SI. No, 3 of Notification No. 12/2017-CT (Rate) dated 28.06.2017 as amended by Notification No. 32/2017-CT (Rate) dated 13.10.2017 pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government Entity by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution, is exempt. As per SL No. 3A of Notification No. 12/2017-CT (Rate) dated 28.06.2017 inserted by Notification No. 02/2018-CT (Rate) dated 25.01.2018; Composite supply of goods and services in which the value of supply of goods constitutes not more than 25% of the value of the said composite supply provided to the Central Government, State Government or Union territory or local authority or a Governmental Authority or a Government Entity by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243 W of the Constitution, is exempt
4.2. The various clauses under Article 243G/W of the Constitution related to the activities of the applicant are:
1. Clause 5 of Article 243W; Water supply for domestic, industrial, and commercial purposes.
2. Clause 17 of Article 243W: Public amenities including street lighting, parking lots, bus stops and public conveniences.
3. Clause 14 of Article 243G: Rural electrification, including distribution of electricity.
4. Clause 15 of Article 243G: non-conventional energy sources.
4.3. The applicant is receiving many services from contractors / others which are in the nature of pure-services/in the nature of composite service where value of supply of goods constitutes not more than 25% of the value of the said composite supply. At present, many contractors who are registered under GST providing pure services to the applicant in relation to the distribution of electricity are collecting GST from them, even if the services they provide are falling in the above category of services.
4.4 Regarding input tax credit on Deposit Works undertaken by them, they submit that as per Section 16(1) of CGST Act 2017; every registered person shall, subject to such conditions and restrictions as may be prescribed and, in the manner specified in Section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of Such person As per Section 17(2) of the CGST Act 2017; where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies and partly for effecting exempt supplies, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.
4.5. The applicant in addition to the routine activity of transmission and distribution of power, also undertake to do those works in relation to transmission and distribution of electricity as per the request of the Consumers Such works are commonly termed Deposit Works as the work is undertaken after accepting the cost of work as a deposit from the consumer .In such situations, they prepare an estimate and collect the amount from the beneficiary on whose request the work is processed. They have furnished the Sample Estimate of Deposit work when only labour is outsourced as follows: –
