In re SOM VCL(JV) (GST AAR Tamil Nadu)
Q1. Whether the execution of works contract service at Kudankulam Nuclear Power Project would be covered under S.No vi (or) vii of Notification No.24/2017 dated 21.09.2017 attracting GST@12% or 18%
A1. The execution of works contract service for construction of residential quarters to the employees of Kudankulam Nuclear Power Project is not covered under SI. No. 3(vi) of Notification 11/2017-CT-Rate dt. 28.06.2017 for the reasons stated in Para 7 above. The applicable rate is @18% GST as per SI. No 3(xii) of Notification 11/2017-CT-Rate dt. 28.06.2017(as amended) read with the corresponding TNGST Notification.
Q2.The assessee had already charged GST @12% on its invoices for the works contract service provided. In case the rate of GST is determined to be 18% instead of 12% should we pay the differential tax through debit note under GSTR 1?
A2. The question on how the differential tax is to be paid is found to be on the procedural aspects of payment and is out of the purview of Section 97(2) and hence is not answered.
Read AAAR Order: GST on works contract service for construction of residential quarters for employees of NPCIL
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, TAMILNADU
Note: Any appeal against the Advance Ruling order shall be filed before the Tamil Nadu State Appellate Authority for Advance Ruling, Chennai under Sub-section (1) of Section 100 of CGST ACT/TNGST Act 2017 within 30 days from the date on which the ruling sought to be appealed against is communicated.
At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.
SOM VCL(JV), 11/F Second Floor, Main Road, Sri Renga Narayana Puram, Tirunelvali-627120 (hereinafter called the Applicant) are registered under GST with GSTIN 33ABIAS3460L1Z8. The applicant has sought Advance Ruling on the following questions:-
1 . Whether the execution of works contract service at Kudankulam Nuclear Power Project would be covered under S.No vi (or) vii of Notification No.24/2017 dated 21.09.2017 attracting GST@12% or 18%
2 .The assessee had already charged GST @12% on its invoices for the works contract service provided. In case the rate of GST is determined to be 18% instead of 12% should we pay the differential tax through debit note under GSTR 1?
The Applicant has submitted the copy of application in Form GST ARA – 01 and also submitted a copy of Challan evidencing payment of application fees of Rs.5,000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017.
2.1 The applicant has stated that they are engaged in execution of civil engineering and other general construction contracts for various Government departments and organizations. The parties SOM Projects private limited and M/s Varin dera Constructions Limited have entered in to joint venture under the name “SOM VCL(JV) ” solely for carrying out the works contract service for Kudankulam Nuclear Power project, a unit of Nuclear Power Corporation of India Ltd (NPCIL) at their site “Anuvijay Township, Kudankulam, Radhapuram Taluk, Tirunelveli, Tamilnadu. The applicant has stated that they have been awarded a project by NPCIL,’ a Government entity for carrying construction of 360 nos (D-type 240Nos, D-special 80 Nos and E-type 40 Nos) residential quarters (9 blocks of G+10 floors) for residential usage of their employees at Anuvijay Township.
2.2 On, interpretation of law, the applicant has referred to Notification 24/2017 CT(rate) dated 21.09.2017 and the subsequent amendments made to SI.No.3 against entry (vi). The applicant has refereed to the definition of Composite Supply and works contract under section 2(30) and 2(119) of the CGST Act, 2017 and stated that they have executed works contract service, wherein there will be combined supply of goods and services in construction of 360 nos of residential quarters at Kudankulam Nuclear Power Project at Anuvijay Township for the residential use of employees of NPCIL.
2.3 The applicant has also referred to Notification 31/2017CT(Rate) dated 13.10.2017, wherein under Paragraph 4, clause ix and x has been inserted to define Government Authority and Government Entity which is extracted below:-
“(ix) “Governmental Authority’ means an authority or a board or any other body, –
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government, with 90per cent, or more participation by way of equity or control, to carry out any function entrusted to a Municipality under article 243 W of the. Constitution or to a Panchayat under article 243 G of the Constitution.
(x) “Government Entity” means an authority or a board or any other body including a society, trust, corporation,-
i) set up by an Act of Parliament or State Legislature; or
ii) established by any Government, with 90per cent, or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Territory or a local authority.”.
The applicant has stated that they are carrying out the construction activity of residential quarters and are mainly engaged in execution of civil engineering and general contracts for various Government departments and organizations. Further, they have stated that NPCIL whose 100% shareholding is held by Parliament of India has awarded the works contract service to the applicant for construction of residential complex only and there is no commercial activity involved which has been confirmed by NPCIL vide their letter dated 22.01.2021. They have also stated that as per column v to item vii of the Notification 31/2017CT(Rate) when the services are supplied to a Government Entity , they should have been procured by the said entity in relation to work entrusted to it by the Central Government, State Government, Union territory or local authority. The applicant has stated that in their case the project has been awarded by the Government entity “NPCIL” and there is no intermediary involved in the whole scheme of transactions. The works contract service as per the work order has been procured wholly for the construction of residential quarters of Anuvijay township in Kudankulam Tirunelveli. In the light of above facts, the applicant is of the view that their services of construction of residential quarters to NPCIL will attract GST at 12%.
3.1 Due to the prevailing PANDEMIC situation and in order not to delay the proceedings, the applicant was addressed through the Email Address mentioned in the application to seek their willingness to participate in a virtual Personal Hearing in Digital media. The applicant consented and the hearing was held on 05.10.2021. The Authorised Representative Shri Jugal Dughar, Chartered Accountant appeared for the hearing and reiterated the submissions. He stressed on the applicability of Notification 24/2017 CT(rate). He stated that they have been directly allocated the work order by the Government undertaking and they have filed returns. They were asked to furnish the Joint Venture Agreement; work order from Kudankulam Nuclear Power Project; bills raised; copy of returns filed.
3.2 The applicant vide their letter dated 06.10.2021 (received on 21.10.2021) submitted the following documents:-
> JV agreement between SOM and VCL
> Work order copy of receipt of order from the customer to SOM VCL(JV)
> Invoice No.RA Bill: 10 dated 09.06.2021, GSTR 3B June 2021, GSTR1 June 2021
> Invoice No.RA Bill: 11 dated 07.07.2021, GSTR 3B July 2021, GSTR1 July 2021
> Invoice No.RA Bill: 12 dated 23.08.2021, GSTR 3B August 2021, GSTR1 August 2021
3.3 They were issued with a letter dated 01.11.2021 requiring to provide clarifications for the below queries:-
i. Whether the service recipient is a Government entity or a Government authority
ii. In case they are a Government entity, how do they satisfy the condition prescribed under Sl.No.(vi) or (vii) of Notification 24/2017
iii. Documentary proof for the constitution of the service recipient being a Government Entity/authority
In respect of Q.No.2, the applicant was informed that the question is seeking clarification on the procedural aspect of the law, hence it is found that the question is not covered under Section97(2) of the GST Act, 2017 and does not merit admission. The applicant was asked to clarify as to how the question merits consideration under the Section 97(2) of the act.
3.4 The applicant vide their letter dated 08.11.2021 (received on 22.11.2021) submitted the following facts:-
> In ‘terms of definition of Government Authority & Government Entity in Notification 31/2017CT(Rate), the applicant believes that their recipient NPCIL – A Government of India Enterprise shall qualify as a Government entity based on below facts:-
i. As part of the annual report of NPCIL it has been stated in its significant accounting policies that the 100% shareholding of the company is held by the “President of India” on behalf of the Government of India’.
ii. In the table relating to “shareholding pattern of top 10 shareholders” the tabulation clearly states and indicates the Hon’ble President of India to hold 100% of the shareholding of the company with 12,69,36,627 shares being held as at year ending 31.03.2020.
iii. In the annual return form, Form No. MGT-7 filed by NPCIL, copy of which is available in its website has stated and declared itself to be a “Union Government Company”
> In terms of Notification 24/2017 amended by Notification 46/2017 CT(rate), Clause c covers “construction of residential quarters for usage by the employees” As they have received the work order directly from NPCIL, the same is applicable to their service. Hence, they are eligible to adopt the tax rate as stated in Sl.No.(vi) of the said notification attracting GST at 12%.
> In respect of the clarification pertaining to Q.No.2, they have stated that Section 97(2) of the Act, prescribes certain cases in which advance ruling application can be filed. They have applied for advance ruling to determine the tax rate applicability to their transaction, which is an allowable stand for Advance Ruling under sub-section 97(2) (e). They have also stated that they have sought ruling on the mechanism of tax payment if the tax is determined at a rate higher than that at which tax has been already paid. Hence, they are of the opinion that question sought relating to mechanism of tax payment is ancillary and directly related to the determination of tax liability.
> They have also submitted the NPCIL extract of text of significant policies, shareholding pattern of top 10 shareholders, extract of MGT 7 for FY 2019-20
4.1 The Centre Jurisdictional authority who has administrative control over the applicant has stated that there are no pending proceedings on the issue raised by the applicant in the Advance Ruling application and has furnished the following comments.-
> It appears that the service rendered by the applicant is a composite supply of works contract and it is provided to Government entity. The condition to be satisfied when supply is provided to Government entity is that it should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union Territory or local authority as the case may be. The word in relation to is an inclusive description. In the instant case NPCIL is essentially work entrusted to them by the Central Government and the construction of quarters for their employees is “in relation to” the work done by them.
> In a similar issue, The Kerala Advance Ruling Authority in the case of M/s Ray Constructions Ltd, Ernakulam has ruled that the services provided by the. applicant to Vikram Sarabhai Space Centre and Trivandrum Medical College will attract GST at 12% as per SI.No.3 (vi) (a) of Notification 11/2017-CT (Rate) dated 28.06.2017. Hence, in the instant case the applicant is eligible for classifying their supply at 12% GST as per the provisions of the notification.
4.2 On perusal of the submissions of the jurisdictional authority, it was observed that they have stated that the conditions specified at Sl.no.3(vi) of the Notification 11/2017-CT (Rate) dt. 28.06.2017 stands satisfied. Hence the following particulars were required to be furnished by the jurisdictional authority vide letter of this office dt. 15.12.2021.-
(i) A letter/statement from M/s. KKNPP regarding the financial approval for the planned township and details of such approval by the Central Government for establishing the township namely Anuvijay Township in reference to the letter No. NPCIL/KKNPP/C&EMG/2021/S/148 dt. 22.01.2021 of M/s. NPCIL.
(ii) Copy of the plan of township with reference to the project- KKNPP and the residential quarters being constructed by the applicant.
4.3 In response reply from the Office of the Joint Commissioner of GST, Tirunelveli vide letter dt.28.02.2022 was received wherein the following particulars were furnished:-
