GST Rates for Government Works Contracts: 12% till 31/12/2021, 18% from 01/01/2022

In re Ray Constructions Limited (GST AAR Kerala)

Introduction: The Authority for Advance Ruling, Kerala, has issued a detailed order concerning the GST rate applicable to works contract services awarded by Kerala State Film Development Corporation to Ray Constructions Limited. This analysis explores the contentions of the applicant, the officer’s comments, personal hearing details, and the authority’s discussion leading to the conclusion.

Detailed Analysis:

1. Applicant’s Contentions:

• Ray Constructions Limited, a GST-registered taxpayer, sought clarification on the tax rate for a works contract with Kerala State Film Development Corporation.
• The applicant argued that the agreement falls under a specific notification, justifying a 12% GST rate.

2. Jurisdictional Officer’s Comments: The officer did not provide specific remarks, indicating no pending issues or objections.

3. Personal Hearing: The applicant presented their case during a virtual hearing, reiterating the contentions made in the application.

4. Discussion and Conclusion:

• The ruling delves into the definition of works contract services under GST and analyzes whether the specific contract qualifies as such.
• Key considerations include the nature of the construction project and the categorization of the awarder (Kerala State Film Development Corporation) as a governmental authority.

5. GST Rate Determination: The ruling concludes that the works contract services supplied between 21.09.2017 and 31.12.2021 attract a GST rate of 12%. However, for services supplied on or after 01.01.2022, the applicable rate shifts to 18%.

Conclusion: The Authority for Advance Ruling establishes a clear understanding of the GST rate applicable to works contract services involving Kerala State Film Development Corporation. This detailed analysis provides insights into the legal provisions, definitions, and specific notifications guiding the tax implications for such contracts.

FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, KERALA

Ray Constructions Limited, First Floor, 52/3328, Ray Bhavan, N.H Byepass, Thykoodam Vyttila, Emakulam (hereinafter referred to as “the applicant”) is a taxpayer registered under GST Act, engaged in providing Construction services.

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 same except for certain provisions. Accordingly a refer­ence herein after to the provisions of the CGST Act, Rules and Notifica­tions issued thereunder shall include a reference to the corresponding provisions of the KSGST Act, Rules and the Notifications issued thereun­der.

3. The applicant requested advance ruling on the following:

3.1. The rate of tax applicable for works contract awarded by M/S. Kera­la State Film Development Corporation Ltd. (promoted by Government of Kerala) for the development and construction of Sree Narayana Gum Cul­tural Complex at Kollam.

4. Contentions of the Applicant:

4.1. The applicant is registered under the GST Act and is engaged in providing construction services including supply of materials (Composite contract) and labour contract. The applicant filed this advance ruling ap­plication for clarifying the applicable rate of tax in connection with a works contract awarded by M/s Kerala State Film Development Corpora­tion Ltd.

4.2. The applicant submitted that they entered into an agreement with M/S. Kerala State Film Development Corporation Ltd vide agreement No. KSFDC/K1IFB/2019/Agreement 2, Dated.18.12.2019 for development and construction of Sree Narayana Guru Cultural Complex at Kollam. The contract includes construction service along with supply of materials. The applicant contended that the said work is falling under service to the State Government category.

4.3. The applicant further submitted that, as per Notification No. 24/2017- Central Tax (Rate) Dated 21.09.2017, service provided by a tractor to the Central Government, State Government or Local Authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of a civil struc­ture or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession will attract @ 12% GST. A similar Notification was also issued in Integrated Tax (Rate) as per No.08/2017, dated 28.06.2017.

4 4 Finally, the applicant concluded that the work awarded as per the said agreement falls under the ambit of the above Notification beyond any doubt or controversy, and therefore they are eligible to remit tax at 12%.

5. Comments of the Jurisdictional Officer:

The application was forwarded to the jurisdictional officer as per provi­sions of section 98 (1) of the CGST Act. The Jurisdictional officer has not submitted any remarks and hence it is presumed that the jurisdictional officer has no specific comments to offer. It is also construed that no pro­ceedings are pending on the issue against the applicant.

6. Personal Hearing:

The applicant was granted opportunity for personal hearing on 19.04.2023. Shri. Praveen Kumar, Senior Manager (Accounts) repre­sented the applicant for personal hearing, which was conducted virtually. The representative reiterated the contentions made in the application and requested to issue the ruling on the basis of the submissions made in the application.

7. Discussion and Conclusion:

7.1. We have carefully examined the application, statement of facts, and considered the oral submissions made at the time of virtual hearing. The advance ruling to be issued is on the clarification of the rate of tax for the construction service provided by the applicant to M/S. Kerala State Film Development Corporation Ltd in the light of Notification No. 24/2017- Central Tax (Rate) Dated 21.09.2017. The questions on which advance rul­ing sought by the applicant falls under the purview of section 97 (2) (b) of the CGST/KSGST Act, 2017, “applicability of a notification issued under the provisions of this Act ” and hence admitted.