In re M/s NHPC Limited (GST AAR Uttarakhand)
Whether the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (as amended from time to time) is applicable to the contractors/sub-contractors involved in the construction of Indo-Nepal Border Road or otherwise?
We have different views on the applicability of GST on the sub-contractors as discussed supra. Since we have different views on that particular issue, we are making a reference to the Appellate Authority for hearing and decision on said issue in terms of Section 98(5) of the Act. which provide that where the members of the Authority, differ on any question which the advance ruling is sought, they shall state the point or points on which they differ and make a reference to the Appellate Authority for hearing and decision on such question.
Read AAAR Order : GST exemption available to NHPC Ltd cannot be extended to sub contractor providing Works contract services for road construction
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING,
Note:- Under Section 100(1) of the Uttarakhand Goods and Services Tax Act, 2017, an appeal against this ruling lies before the appellate authority for advance ruling constituted under section 99 of the Uttarakhand Goods and Services Tax Act, 2017, within a period of 30 days from the date of service of this order.
1. This is an application under Sub-Section (1) of Section 97 of the CGST/SGST Act, 2017 (herein after referred to as Act) and the rules made thereunder filed by M/s NHPC, Admin Building, Tanakpur Power Station, Banbasa, Uttrakhand seeking an advance ruling on the issue:
(a) Whether they are required to pay GST under reverse charge in terms of Notification No. 13/2017 dated 28.06.2017 while making payment to PWD, Uttrakhand for construction of road;
(b) What is the time of supply when advance payment is released to PWD, Uttrakhand;
(c) Whether the amount deposited with Central Fund i.e. Uttranchal CAMPA and reimbursed by MEA considering as part cost of the road is liable for GST.
2. Advance Ruling under GST means a decision provided by the authority or the appellate authority to an applicant on matters or on questions specified in sub section (2) of section 97 or sub section (1) of section 100 in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.
3. As per the said subsection (2) of Section 97 of the Act, advance ruling can be sought by an applicant in respect of:
(a) Classification of any goods or services or both
(b) Applicability of a notification issued under the provisions of this Act,
(c) Determination of time and value of supply of goods or services or both,
(d) Admissibility of input tax credit of tax paid or deemed to have been paid
(e) Determination of the liability to pay tax on any goods or services or both
(f) Whether the applicant is required to be registered
(g) Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both within the meaning of that term
4. In the present case applicant has sought advance ruling on applicability of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 on their activity of construction of road and whether the said notification is also applicable to the other contractors involved in the said activity of construction of road. Therefore, in terms of said Section 97(2)(b) of Act, the present application is hereby admitted.
5. Accordingly opportunity of personal hearing was granted to the applicant on 11.01.2019. Shri N K Gupta (DGM-Finance) and Shri J C Pant (Senior Manager- Law) of the applicant appeared for personal hearing on said date and submitted documents during the proceedings. No body appeared from the side of Revenue for the hearing.
6. From the documents submitted by the applicant we find that applicant is registered in Uttarakhand with GSTIN bearing no. 05AAACN0149C4Z2. On going through the ‘Office Memorandum’ dated 02.05.2018, We find that 1.2 Km long link canal is to be constructed by India from Tanakpur Barrage to the Indo-Nepal border under Mahakali Treaty signed between India & Nepal in 1996. Besides construction of canal, 1.3 Km road is also to be constructed which is the issue in hand to be discussed later on. DPR of the project has been prepared by NHPC. The construction of 1.2 Km long link canal from Tanakpur Barrage to the Indo-Nepal border including the construction of 1.3 Km link road will be financed out of the budgetary outlays of MEA under the budget head “Aid to Nepal”. Initially NHPC can spend the money, if required, subsequently the same can be recouped from the budget of MEA to NHPC directly. Budget releases will be made by MEA to NHPC which is executing the project as a turnkey agency of MEA based on the recommendation of the Ministry of Power.
7. The applicant further submitted the MOU dated 03.10.2018 signed between General Manager, NHPC Ltd, Tanakpur Power Station, Champawat, Uttarakhand (herein after referred as client/department) and Superintendent Engineer, PWD, Champawat, Uttarakhand (herein after referred as construction agency). The relevant portions of the same are summarized as under:
i. On the proposal of client, construction agency has agreed to do construction and related works of construction of 1.3 km motor road from Tanakpur Barrage to Brahmdev in District Champawat
ii. Total cost of the project is Rs. 6.72 cr including GST & contingencies as indicated in the administrative and financial sanction issued as informed by General Manager, NHPC, Tanakpur Power Station vide letter dated 02.07.2018.
iii. The construction agency shall commence & complete the work as per the schedule. In case the construction agency fails to complete the work within schedule, liquidated damages @ 0.035% per day of delay subject to the maximum of 10% of total cost of the project shall be deducted from the bill of the construction agency.
iv. Security deposit/Retention money shall be deducted by the construction agency from the interim bills of the contractor of the construction agency engaged for the execution of work @ 5% of the total value of each bill of the work done. The security deposit less any amount due shall, on demand, be released to the contractor by the construction agency after obtaining ‘no defect certificate from the client/department’ after 30 days of expiry of defects liability period.
v. At the time of making payment to construction agency by the client/department, GST as applicable shall be deposited by the client/department under RCM in terms of section 9(3) of the Act read with Notification no. 13/2017. The contractor shall be paid on work invoice/running/final bill by adding GST as applicable at the time of payment by the construction agency. Further the outcome of advance ruling to have clarification for avoidance double GST shall be treated as integral part of MOU.
vi. The construction agency shall refund all the balance money to the client/department after completion of project excluding contingency charges.
vii. The construction agency shall be responsible for ensuring the quality standards of all the material & works of the project
viii. The project shall be handed over to the authorized representative ot client / department.
8. In the present case we are restricting our conclusion to the facts and circumstances which was filed for our consideration in the application. Now we proceed to decide the issue in hand:
8.1 Whether the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (as amended from time to time) is applicable to the contractors/sub-contractors involved in the construction of Indo-Nepal Border Road or otherwise.
8.2 In the instant case we find that the work is allotted to the applicant by MEA is related to “construction of road”. The applicant sub-contracted the said work to PWD, Govt. of Uttarakhand who further sub-contracted to a contractor.
8.3 From the record we find that NHPC Ltd has been entrusted the work of construction of road by Ministry of External Affairs, Govt. of India ( in short “MEA”) wherein the funds will be provided by MEA from its head “Aid to Nepal” to M/s NHPC Ltd. It means that the funds provided by MEA to M/s NHPC Ltd are in the form of grants. The function of M/s NHPC Ltd in the said work has been defined as “turnkey agency”. The issue of GST liability on the applicant on this matter has already been decided by us vide Ruling No.10/2018-19 dated 22-10-2018 wherein the activity of the applicant was held exempted from GST in terms of Notification No. 12/2017-Central Tax (Rate) dated 28th June, 2017 (as amended from time to time).
8.4 The applicant in their present application has sought advance ruling on the applicability of GST on sub-letting of work entrusted to PWD, Uttarakhand and contractor hire by PWD, Uttarakhand for completion of said work. On this issue we have different views and are discuss as under:
(a) [Ruling per: Vipin Chandra, Member]— In the background of the issue in hand, the applicant has earlier sought the advance ruling on the applicability of GST on the activity being carried out by them and vide Advance Ruling No. 10/2018-19 dated 22-10-2018, it was held by the authority that their activity is exempted from GST in terms of Notification No. 12/2017-CT (Rate) dated 28.06.2017. Now the applicant has sought the advance ruling whether the same work allotted to sub-contractor is also exempted or otherwise
In this context, I find that there is no entry in the exemption Notification No 12/2017-CT (Rate) dated 28.06.2017 which exempts the supply in question being earned out by the sub-contractors rather entry (iv) of serial no 3 of Notification No.. 11/2017-CT (Rate) dated 28.06.2017 prescribed GST Rate @
12% [CGST 6% + SGST 6%] for supply in question i.e ‘construction of road’ The relevant portion of Notification No. 11/2017-CT (Rate) dated 28.06.2017 is reproduced as under:
