Concessional GST rate of 12% on composite supply of works contract to be applied prospectively

In re Dee Vee Projects limited (GST AAR Chhattisgarh)

The AAR, Chhattisgarh in the matter of M/s Dee Vee Projects Limited [Advance Ruling No. STC/AAR/03/2020/41 dated October 8, 2020] has ruled that the Notification amending the tax rate from 18% to 12% on Composite Supply of Works Contract can only be applied prospectively, if an enactment does not expressly provides that it should be deemed to have come into effect form a past date.

Facts:

M/s Dee Vee Projects Limited (“the Applicant”) is in the business of works contract by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration.

Subsequently, the Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017 (“the Services Rate Notification”) was amended by the Notification No. 20/2017 dated August 22, 2017 and Notification No. 24/2017 dated September 21, 2017 (“the Impugned Amendment Notifications”) and based on these amendments the Applicant charged and paid Goods and Services Tax (“GST”) at the rate of 12% on the services provided in between July to September 2017.

The Applicant contended that the date of effectiveness of the amendments was nowhere mentioned in the Impugned Amendment Notifications. So, it is presumed, that the intention of the GST Council was only to reduce the rate of tax from 18% to 12% from very beginning.

Issue:

Whether the Impugned Amendment Notifications to the Services Rate Notification effective prospectively or retrospectively?

Held

The AAR, Chhattisgarh in Advance Ruling No. STC/AAR/03/2020/41 held as under:

• Stated that, as per the rules of interpretation, unless it is explicitly stated, a piece of legislation is presumed not to be intended to have a retrospective operation.
• Observed that, if an enactment expressly provides that it should be deemed to have come into effect form a past date, it is retrospective in nature. If an enactment is intended to be retrospective in operation, and also in effect, the legislature expresses it in clear and unequivocal language in the enactment itself.
• Noted that, in case of a notification the effective date is not written, the effect of the amending notification thus shall be the date on which the amending notification is published in the Official Gazette.
• Held that, the GST rate on composite supply of works contract as defined in clause 119 of Section 2 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) is 18% till August 21, 2017 as stipulated under Serial No. 3 of Heading 9954 of the Services Rate Notification and 12% after that.
• Further held that, the Applicant has wrongly interpreted the tax liability at 12% from July 1, 2017 whereas the effective date of the Impugned Amendment Notifications is the date of Notification only.

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

M/s Dee Vee Projects limited, Korba Chhattisgarh (GSTIN-22AAECD46198219) (hereinafter also referred to as the applicant) has filed an applicOtion U/s 97 of the Chhattisgarh Goods & Services Tax Act, 2017 seeking advance ruling on :-

1. What is rote of lax applicable to the composite supply of works contract as defined in clause (.119) of Section 2 of Central Goods and Services Act, 2017 (The Act), undertaken by the supplier (applicant) i.e., whether the GST rate 18% or 12% is to be charged by the supplier?

2. If the GST rate 18% (9%CGST+ SGST) as prescribed in serial no.3, against heading (Construction servic.es), specified in Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017, is the rate applicable to the nature of works contract ;ken by the applicant, kindly clarify the following related aspects also:

The Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017 has been amended by:-

a. Notification No. 20/2017 dated August 22, 2017

b. Notification No. 24/2017 dated September 21, 2017

Wherein the GST rate of 12% (6% CGST + 6% SGST) has been notified in respect of works contract as defined in clause (119) of Section 2 of The Act.

If so, whether the amendment through Notification No. 20/2017 dated August 22, 2017 and Notification No. 24/2017 dated September 21, 2017 will he effective from the date of Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017 and whether it would be in order for the applicant (supplier) to charge GST at the rate of 12% (6% CGST+6% SGST) or is the GST rate 18%(9% CGST+ 9% SGST) applicable to the nature of works contract undertaken by the applicant?

2. Facts of the case:-

2.1.1 The applicant is engaged in works contract by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –

a) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or(iii) an art or cultural establishment.

b) a road, bridge, tunnel, or terminal for road transportation for use by general public;

c) a civil structure or any other original works pertaining to the “Beneficiary led individual house construction / enhancement” under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana

d) railways, excluding monorail and metro;

e) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Services Tax Act, 2017.

2.1.2. Subsequently, the Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017 was amended by the following notifications:

i) Notification No. 20/2017 dated August 22, 2017

ii) Notification No. 24/2017 dated September 21, 2017

Based on aforesaid notification the applicant has charged and paid CGST at the rate of six percent. Similarly the SGST was also charged at the rate of six percent on the services provided in between July to September,2017.

2.2 Question is what will be the date of effectiveness of Notification No. 20/2017 dated August 22, 2017 and Notification No. 24/2017 dated September 21, 2017 reducing the tax rate to 12% instead of 18%. As it mentioned in both the notifications that “In the said notification, in the Table, against serial number 3, for item (vi) in column (3) and the entries relating thereto columns (3),(4) and (5), the following shall be Substituted, namely……. “

3. Contentions of the Applicant:- The applicant’s contention is as under :-

3.1 The serial number 3 of Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017 relating to Construction Services was amended by Central government on recommendation of Council in public interest through Notification No. 20/2017 dated August 22, 2017 and Notification No. 24/2017 dated September 21, 2017

3.2 Through this amendment notification the rate of tax for Works contract supplied to Central Government, Stale Government , Governmental authority , Local Authority was reduced from 18% (CGST 9% and SGST 9%) to 12% (CGST 6% and SGST 6%).However as per the wording of the amended notification (i.e. Notification No. 20/2017 dated August 22, 2017 and Notification No. 24/2017 dated September 21, 2017)11 substitutes Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017 substituting rate of tax from 18% to 12%, so it is interpreted that the rate of GST is 12% w.e.f.1s’ July,2017.

3.3 Based on the said notifications, the applicant has charged the tax Component and collected and discharged GST Liability at Rate 12%(CGST 6% and SGST 6%) on invoices issued from 01st July.2017 itself, and with the presumption, that the rate of GST has been amended w.e.f. 1 July 2017, as the intention of the Honourable GST Council.

3.4 As it is no where mentioned in the notifications itself the date of changes in Rate of GST or effectiveness of the Notification and the rate of GST be applicable, but with the conclusion of the 20¹h GST Council meeting on 5th August 2017 (a copy of the Details of Decision taken is being enclosed) and it was announced that the Tax Rate of GST on the above services is being reduced from 18% to 12%.

3.5 Again the 21 GST Council Meeting held on 9th September 2017 and corrected a lacuna left in the 20th GST Council Meeting regarding Works Contract Services as defined in Clause 119 of Section 2 of the GST Act.

3.6 In summary, it is the presumption and interpretation taken from the above episode that the Intention of the Honourable GST Council was only to reduce the Tax rate from very beginning from 18% to 12%.

4. Personal Hearing:-

Keeping with the established principles of natural justice, personal hearing in the matter was extended to the applicant and accordingly their authorized representative Shri Prakash Chand Agrawal, C.A. and Shri Vikash Agrawal Advocate appeared before the authority for hearing on 17/07/2020 arid reiterated their contention. They also furnished a written submission dated 17/07/2020 which has been taken on record.

5. The legal position, Analysis and Discussion:-

5.1 At the very outset, we would like to make it clear that the provisions for implementing the CGST Act and the Chhattisgarh GST Act, 2017 [hereinafter referred to as “the CGST Act arid the CGST Act”) are similar and thus, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions’ under the CGST Act, 2017. Now we sequentially proceed to discuss the issues involved in the ruling so sought by the applicant and the law as applicable in the present case.

5.2 For ease of reference, the text of all the three Notifications under question is reproduced as under:-

5.2 (i) Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017

G.S.R…………… (E).- In exercise of the powers conferred by sub-section (1) of section 9, sub- section (1) of section 11, sub-section (5) of section 15 and sub-section (1) of section 16 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, and on being satisfied that it is necessary in the public interest so to do, hereby notifies that the central tax, on the intro-State supply of services of description as specified in column (3) of the Table below, falling under Chapter, Section or Heading of scheme of classification of services as specified in column (2), shall be levied at the rate as specified in the corresponding entry in column (A), subject to the conditions as specified in the corresponding entry in column (5) of the said Table:-

Table

5.2 (ii) Serial number 3 of Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017 relating to Construction Services was amended by Central I  government on recommendation of Council in public interest through Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017 as under:-

G.S.R. …….(E).- In exercise of the powers conferred by sub-section (1) of section 9, sub-section (1) of section 11, sub-section (5) of section 15 and sub-section (1) of section 16 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, and on being satisfied that it is necessary in the public interest so to do, hereby makes the following amendments in the notification of the Government of India, in the Ministry of Finance (Department of Revenue), Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 690(E), dated the 28th June, 2017, namely:-

In the said notification, in the Table,-

(a) against serial number 3, for item (iii) in column (3) and the entries relating thereto in columns (3), (4) and (5), the following shall be substituted, namely:-

5.2 (i) Notification No. 24/2017 dated September 21, 2017

G.S.R……. (E).- In exercise of the powers conferred by sub-section (1) of section 9, sub‑section (1) of section 11, sub-section (5) of section 15 and sub-section (1) of section 16 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, and on being satisfied that it is necessary in the public interest so to do, hereby makes the following amendments in the notification of the Government of India, in the Ministry of Finance (Department of Revenue), Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 690(E), dated the 28th June, 2017, namely:-

(a) In the said notification, in the Table, against serial number 3, for item (vi) in column (3) and the entries relating thereto, in columns (3), (4) and (5), the following shall be substituted, namely:-

5.2(v) Thus the GST Rate on composite supply of works contract as defined in clause (119) of Section 2 of the Central Goods and Services tax Act, 2017 as per Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017 under serial no. 3, Heading 9954 is 18% (9% CGST+9% SGST).

5.2(vi) Further as per Notification No. 20/2017 dated August 22, 2017 and Notification No. 24/2017 dated September 21, 2017, the GST Rate on composite supply of works contract as defined in clause (119) of Section 2 of the Central Goods and Services tax Act, 2017 is 12% (6% CGST+6%SGST).

One of the established rules of interpretation was that unless explicitly stated, a piece of legislation is presumed not to be intended to have a retrospective operation. The principle of lex prospicit non respicit, which means that ‘The Law looks forward and not backward’, has been upheld in many judicial pronouncements. Normally, an enactment is prospective in nature. It does not affect that which has gone, or completed and closed up already. Ordinarily, the presumption with respect to an enactment is that, unless there is something in it to show that it means otherwise, it deals with future contingencies, and does not annul or affect existing rights and liabilities or vested rights, or obligations already acquired under some provisions of law although its effect is that it does not affect an existing right as well. If an enactment expressly provides that it should be deemed to have come into effect form a past date, it is retrospective in nature. If an enactment is intended to be retrospective in operation, and also in effect, the legislature expresses it in clear and unequivocal language in the enactment itself.

5.2 (vii) Thus the GST Rate on composite supply of works contract as defined in clause (119) of Section ^.2 of the Central Goods and Services tax Act, 2017 is 18% (9% CGST+9, SGST) till 21/08./2017 as stipulated under serial no. 3, Heading 9954 ofNotification No. 11/2017- Central Tax (Rate) dated June 28, 2017. Thereafter, the GST Rate on composite supply of works contract as defined in clause (119) of Section 2 of the Central Goods and Services tax Act, 2017 is 12% (6% CGST+6% SGST) from 22/08/2017 as per serial no. 3, Heading 9954 of Notification No. 20/2017 dated August 22, 2017

5.2(viii) The applicant has wrongly interpreted that the tax liability is @ 12% (CGST and SGST 6%) from 01st July, 2017 itself whereas the effective date of the said Notification is the Notification date itself. Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017 is applicable with effect from the notification date viz. 28/06/2017. Similarly Notification No. 20/2017 dated August 22, 2017 is applicable with effect from the notification date viz. 22/08/2017 and Notification No. 24/2017 dated September 21, 2017 is applicable with effect from 21/09/2017.

6. Having regard to the facts and circumstances of the case and discussions as above, we pass the following order:-

ORDER

(Under section 98 of the Chhattisgarh Goods and Services Tax Act, 2017)

No.STC/AAR/03/2020/42

Raipur Dated 08 /10/2020

The ruling so sought by the Applicant is accordingly answered as under:

RULING

The rate of tax applicable to the composite supply of works contract as defined in clause (119) of Section 2 of Central Goods and Services Act, 2017 is 18% (9% CGST+9% CGST) till 21/08/2017 as stipulated under Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017 and is 12% (CGST 6% and SGST 6%) thereafter, with effect from 22/08/2017.

ii. The amendment to Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017, made vide Notification No. 20/2017 dated August 22, 2017 and Notification No. 24/2017 dated September 21, 2017 is effective with effect from 22/08/2017 and 21/09/2017 respectively and not from the date of Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017.

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