GST not exempt on Construction of Jetty for Indian Coast Guard

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Case Law Details

Case Name : In re Cochin Port Trust (GST AAR Kerala)

Appeal Number : Advance Ruling No. KER/09/2023

Date of Judgement/Order : 03/04/2023

Related Assessment Year :

Courts : AAR Kerala Advance Rulings

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In re Cochin Port Trust (GST AAR Kerala)

Question 1: Whether having regard to the background and details including the scope of work of the Deposit work contained in the MoU entered into between COPT and Indian Navy, what is the nature of the services rendered by CaPT under the MoU? Whether it would be treated as a “Works Contract” as per Section 2(119) of the CGST Act or as a Composite Supply for services as per Section 2(30) of the CGST Act or a mixed supply as defined in Section 2(74) of the CGST Act?

Ruling: The activity undertaken by the applicant for the Construction of a Jetty for ICG as per MoU dated 03.04.2017 squarely falls within the ambit of ‘Works Contract” as defined in Section 2 (119) of the CGST Act, 2017.

Question 2: Whether, CoPT being a Govt entity, as defined in the Notification No. 32/2017 dated 13.10.2017, avail the benefit of exemption Notification No.12/2017 dated 28.06.2017, as amended and not levy tax on the invoice on Indian Coast Guard?

Ruling: No. The service provided by the applicant to the ICG as per MoU dated 03.04.2017 is not eligible for exemption under the entry at SI. No. 9C of Notification No.12/2017 dated 28.06.2017 as inserted by Notification No. 32/2017 dated 13.10.2017

Question 3: If, for any reason, the benefit of exemption Notification No.12/2017 dated 28.06.2017cannot be availed, whether, having regard to the background and details including the scope of work of the Deposit work contained in the MoU entered into between COPT and ICG whether COPT is eligible to take the benefits of reduced rate of 12 % GST as per Notification No 24/2017- Central Tax (Rate) dated 21.09.2017, in respect of the services provided by it to ‘CO under the MoU?

Ruling: The applicant is eligible for the concessional rate of GST of 12% [6% – CGST + 6% SGST] as per the entry at Item lull of SI No.3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended in respect of the services supplied as per the Moll dated 03.02017 for which the time of supply as determined in terms of sections 13 and 14 of the CGST Act, 2017 falls between 21.09.2017 and 17.07 2022.

Question 4: Whether, having regard to the background and details including the scope of work of the Deposit work contained in the MoU entered into between CoPT and ICG, whether the contractors engaged by CoPT to execute works as envisaged in the Mali, would be eligible to take the benefits of reduced rate of 12% GST as per Notification No 24/2017- Central Tax (Rate) dated 21.09.2017, in respect of the services provided by them to CoPT?

Ruling: No ruling can be given since the question is not in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.

Question 5: If CoPT is eligible to take the benefit of the reduced rate of 12% GST as per Notification No 24/2017- Central Tax (Rate) dated 21.09.2017 or the benefit of exemption Notification No.12/2017 dated 28.06.2017 read with CGST (Rate) Notification No. 32/2017 dated 13.10.2017 from the date of inception of the work, whether it is entitled to claim a refund of the excess remittance of GST (6% if 12 % is the rate applicable) or full amount of tax Of exemption notification is applicable) as the case may be, remitted from the date of applicability of the said notifications?

Ruling: No ruling can be given since the question is not covered by any of the matters enumerated in sub-section (2) of Section 97 of the CGST Act, 2017.

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

1. M/s. Cochin Port Trust thereinafter referred to as the applicant] is an entity formed under the Major Ports Act, 1963 and is engaged in providing ^–Port Services”. The Indian Coast Guard, having its office at District Head Quarters No.4, Indian Coast Guard, Kalavathy Road, Fort Cochin — 682001 thereinafter referred to as ICG) and the Board of Trustees of Port of Cochin, a body corporate under Major Port Trusts Act, 1963 (referred to as COPT in the MoU has entered into an MoU for construction of Jetty for ICG by CoPT at a cost approved by the competent authority for the purpose, on Deposit Work terms as per MoU dated 03.04.2017.

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 KGST Act, Rules and the notifications issued there under.

3. Applicant requested advance ruling on the following:

3.1. Whether, having regard to the background and details including the scope of work of the Deposit work contained in the MoU entered into between Con and ICG, what is the nature of the services rendered by CoPT under the Moll entered into between Cel^l and ICG? Whether it would be treated as a ‘Works Contract” as per sec ion 2 (119) of the COST Act or as a Composite Supply for services as per Section 2(30) of the COST Act or as a mixed supply as defined in Section 2(79) of the CGST Act?

3.2. Whether, COPT being a Govt entity, as defined in the CGST (Rate) Notification No. 32/2017 dated 13.10.2017, can it avail the benefit of exemption Notification No.12/2017 dated 28.06.2017 and not levy tax on invoice on Indian Coast Guard?

3.3. If, for any reason, the benefit of exemption Notification No.12/2017 dated 28.06.2017 cannot be ava led, whether, having regard to the background and details including the scope of work of the Deposit work contained in the MoU entered into between CoRP and ICG, whether COPT is eligible to take the benefits of redulced rate of 12% GST as per Notification No 24/2017- Central Tax (Rate) dated 21.09.2017, in respect of the services provided by it to ICG under the Moll?

3.4. Whether having regard to the background and details including the scope of work of the Deposit work contained in the MoU entered into between CoPT and ICC, whether the contractors engaged by COPT to execute works as envisaged in the MoU, would be eligible to avail the benefits of reduced rate of 12% GST as per Notification No 24/2017- Central Tax (Rate) dated 21.09.2017, in respect of the services provided by them to CoPT?

3.5. If CoPT is eligible to take the benefit of reduced rate of 12% GST as per Notification No 24/2017- Central Tax (Rate) dated 21.09.2017 or the benefit of exemption Notification No.12/2017 dated 28.06.2017 read with CGST (Rate) Notification No. 32/2017 dated 13.10.2017 from the date of inception of the work, whether it is entitled to claim refund of the excess remittance of GST (6% if 12 % is the rate applicable) or full amount of tax (if exemption notification is applicable) as the case may be, remitted from the date of applicability of the said notifications?

4. The contentions of the Applicant:

4.1. The applicant submits that the Indian Coast Guard (ICG) and the Board of Trustees of Port of Cochin, a body corporate under Major Port Trusts Act, 1963 (herein after referred to as CoPT) has entered into an MoU for construction of Jetty for ICG by CoPT at a cost approved by the competent authority for the purpose, on Deposit We k terms as per MoU dated 03.04.2017. As per this MoU, President of India, represented by Dist. Commander, ICC signs the Moll with CoPT. ICG has acquired the site from COPT on long lease [for 30 years] as per the lease deed executed on 20.11.2019. The ICG has not taken any registration under the Kerala GST as a tax payer, however, they have GST registration in Kerala as a deductor of tax. As per the broad terms of the MoU, CoPT has agreed to execute the project for ICG on Deposit Work terms. Apart from the broad guidelines which are as per CPWD norms, the specific terms and conditions as per procedures approved by Ministry of Parts, Shipping and Waterways, Govt. of India, are detailed in Para 1, Page 3 of the Moil (Broad Terms], as under:

a) ICG has placed the order or the deposit workon CoPT along with 1% of estimated cost asp r MoU to be signed between CoPT and ICG.

b) A Detailed Technical Report (DTP) to be prepared by COPT.

c) Tendering and award of various contract by CORP.

d) COPT shall provide Work Progress Report and Fund Utilization at every stage as required by CO.

e) ICG shall make payment on COPT as per the payment schedule.

4.2. As per the MoU referred to above,. the COPT has agreed to take up the following activities (Clause 2, 3 and 4, Page 3 and 4 of the MoU):

a) Studies: All relevant studies and assessment that are required shall be undertaken by COPT through established agencies.

b) Approvals and clearances: in case CRZ / environmental clearances or approvals of local bodies / agencies (including that of the State Government) are required a be obtained, it is the responsibility of ICG and CoPT shall extent all assistance to obtain such approval.

c) Turnkey design and execution of the Deposit Work.

d) All action towards execution will be as per laid down and approved procedures and in accordance with the powers vested by the Government of India.

4.3. The background and details of Deposit Work are contained in the proceedings dated 22.01.2015 of the Board of Officers constituted for this project and the same is attached as Annexure -2. The entire cost towards the construction of Berth and allied facilities will be met by ICG on the basis of actual cost of construction based on open tender invited by COPT plus departmental charges at the rate 7% and tax at prevailing rates as applicable. The estimated project cost approved by ICG as per the Moll is Rs. 93 Crores including departmental charges/ fees at the rate of 7% entitled to the con’ and applicable taxes. Pursuant to the MoU as above, the COPT commenced the work. The said deposit work undertaken by CoPT is carried out by engaging various independent contractors. Thus, the said work is not carried out by COPT on its own, rather it is done through various independent contractors / suppliers. As per the existing procedure followed, the contractors / suppliers so engaged by the CoPT would raise invoice on the CoPT and CoPT would in turn raise invoices on the ICG for the expenditure and also the departmental charge. CoPT currently raises monthly invoices an ICG towards expenditure and also departmental charge of 7% of such expenditure, together with GST at the rate of 18%, being the said activities undertaken falls within the ambit of works contract. The ICC has represented to the COPT that the applicable rate of GST is 12%, relying on the Notification No.24/2017 – Integrated Tax (Rate) dated 21.09.2017.

4.4. The applicant submits that originally, the Government had notified the rate of GST applicable for construction services under the heading 9954 at 18% as per Notification No.11/2017-CGST (Rate) dated 28.06.2017. Subsequently, government reduced the GST rate to 12% as per Notification No 24/2017- Central Tax (Rate) dated 21.09.2017 in respect of certain supplies as stated therein. As per the said Notification dated 21.09.2017, for services provided – to the Central Government, State Government, Union Territory or a Government 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 the use other than for commerce, industry or any other business or profession, the rate applicable would be 12%. in order to fall within the purview of the Notification No 24/2017- Central Tax (Rate) dated 21.09.2017 the contract should be for construction, erection, commissioning, installation, completion, fitting out, repair, maintenance etc of a civil structure Or any other original works. According to he applicant, the activities undertaken by it, as per the MoU with ICG satisfies all the conditions required to be satisfied in order to qualify as a works contract as defined under Section 2(119) of COST Act and hence i in the nature of supply of services. Therefore, the construction of jetty and allied facilities, installation of crane and capital dredging for the project squarely falls under the above said category of services provided to the Central Government or a Government 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 the use other than for commerce, industry or any other business or profession and hence the rate applicable for the services rendered by applicant to ICG would be the reduced rate of 12%.

form of grants. The notification defines the term Government Entity’ as under:

“‘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 90 per 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”.

4.6. CoPT is established by the Central Government under Major Port Trusts Act, 1963 and also 100% control of COPT is with the Central Government. Therefore, COPT falls under the above definition ‘Government Entity’ since it complies both the conditions (i) and (ii) above.

5. Contentions of Jurisdictional Officer:

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

6. Personal Hearing:

The applicant was granted an opportunity for a personal hearing on 20.07.2022 via virtual mode. Shri. Radhesh L Bhat Chartered Accountant attended the personal hearing. The representative reiterated the contentions made in the application.

7. Discussion and Findings

7.1. The issue was examined in detail. At the outset, it has to be examined whether the questions on which the advance ruling is sought are admissible as per the provisions of the CGST Mt 2017 governing advance ruling,

7.2. Section 95(a) of CGST Act detail advance ruling’ as follows: –

(a) ‘advance ruling’ means a decision provided by the Authority or the Appellate Authority or the National 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 or of section 101C, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.

7.3. From the above definition, it is evident that an applicant can seek an advance ruling in relation to the supply of goods or services or both undertaken or proposed to be undertaken by them. Further, as per Section 103(1) of the CGST Act such an Advance Ruling is binding only on the applicant and on the officer concerned or the jurisdictional officer in respect of the applicant.

7.4. Section 97 of the CGST / SGST Act specifies the subjects on which an application for advance ruling can be made. Section 97 of the CGST/ SGST Act reads as follows:-

(1) An applicant desirous of obtaining an advance ruling under this Chapter may make an application in such form and manner and accompanied by such fee as may be prescribed, stating the question on which the advance ruling is sought,

(2) The question on which the advance ailing is sought under this Act shall be 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 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

7.5. Section 103 of the CGST Act governs the applicability of Advance ruling wherein it is specified that;

(1) The advance ruling pronounced by the Authority or the Appellate Authority under this Chapter shall be binding only—

(a) on the applicant who had sought it in respect of any matter referred to in sub-section (2) of section 97 for advance ruling;

(b) on the concerned officer or the jurisdictional officer in respect of the applicant.

(2) The advance ruling referred to in sub-section (I) shall be binding unless the law facts or circumstances supporting the original advance ruling have changed.

7.6. On a combined reading of the above provisions governing advance ruling under the COST Act it is evident that an applicant can make an application for advance ruling if the following conditions are satisfied; ill the applicant is either registered under GST law or is desirous of obtaining registration; (2) the matter or question pertains to any issue specified in Section 97 (2); (3) such a transaction is being undertaken or proposed to be undertaken by the applicant and the advance ruling is binding only on the applicant and the jurisdictional officer of the applicant.

7.7. On perusal of the fourth question raised by the applicant, it is seen that the applicant has sought the taxability of the services provided by the contractors to the applicant and hence the applicant is the recipient of the services. Therefore, the question does not pertain to a transaction that is being undertaken or proposed to be undertaken by the applicant and hence does not fall within the purview oft he definition of advance ruling. Further, it is categorically stated in Section 103 of the CGST Act that the ruling pronounced is binding only on the applicant and the jurisdictional authority of the applicant. Hence, if a recipient obtains a ruling on the taxability of his inward supply of goods or services or both the supplier of such goods or services and their jurisdictional authority is not bound by that ruling and the supplier and their jurisdictional authority is free to assess the supply and the ruling has no relevance Or applicability. Therefore, the above question is not admissible.

7.8. The fifth question raised by the applicant relates to the eligibility to claim a refund of excess tax paid; if any. This issue is not covered by any of the matters enumerated in sub-section (2) of Section 97 of the CGST Act, 2017 and hence not admissible.

7.9. The first question raised by the applicant is regarding the classification of the activity undertaken by the applicant as per the Moll dated 03.04.2017. The second and third questions are about the applicability of a notification issued under the provisions of the COST Act 2017. The above questions are covered under clauses (a) and (b) respectively of sub-section (2) of section 97 of the CGST Act 2017 and hence admissible.

7.10. The first question is regarding₎the nature .of the services provided as per the MoU. As per the MOU dated 03.04.2017, the applicant has to execute the contract for the Construction of Jetty for ICG at Fortkochi on turnkey basis as “Deposit Work’.

7.11. As per Section 2 (119) of the CGST Act, 2017; ‘works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract. From the terms and conditions of the MOU dated 03.04.2017; it is evident that the activity undertaken by the applicant for the Construction of Jetty for ICG squarely falls within the ambit of ‘Works Contract” as defined in Section 2 (119) of the CGST Act, 2017. As per SI. No. 6 (a) of Schedule II of the CGST Act, 2017; the composite supply of works contract as defined in clause (119) of Section 2 shall be treated as a supply of services.

7.12. The second question raised by the applicant is whether they are entitled to the exemption as per Notification No.12/2017 dated 28.06.2017 as amended by Notification No. 32/2017 dated 13.10.2017.

7.13. The Notification No. 32/2017 dated 13.10.2017 inserted a new entry as Si. No. 9C in Notification No.12/2017 dated 28.06.2017; which reads as follows:

SL. No.	Chapter, Section or Heading	Description of Service	Rate rd4	Condition
9C	Chapter 99	Supply of service by a Government Entity to Central Government, State Government, Union territory, local authority or any person specified by Central Government, State Government, Union territory or local authority against consideration received from Central Government, State Government, Union territory or local authority, in the form of grants.	Nil	Nil

7.14. .The conditions to be satisfied. for exemption under he above entry are;

a) The supply should be a supply of service;

b) The supplier should be a Government Entity;

c) The recipient must be Central Government, State Government, Union territory, local authority o any person specified by Central Government, State Government, Union territory or local authority; and

d) The consideration must be received in the form of grants from Central Government, State Government. Union territory or local authority.

7.15 We have already concluded that the subject supply is “Work Contract” as defined in Section 2 (119) of the CGST Act, 2017 and as per SI. No. 6 (a) of Schedule ” of the COST Act; is treated as a supply of services. Hence the first condition is satisfied.

7.16 Now it is to be examined whether the supplier of service is a government entity. The term Government entity” is defined in clause (zfa) of Paragraph 2 of Notification No.12/2017 dated 28.06.2017 as amended as follows;

“Government Entity” means an authority or a board or any other body including a society, trust, corporation,

(1) set up by an Act of Parliament or State Legislature; or

(ii) established by any Government,

with 90 per 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,’

7.17. The applicant is established by the Central Government under the Major Port Trusts Act, 1963. The statement of objects and reasons of the Major Port Trusts Act, 1963 and sub-section (3) of Section 1 – Short title, commencement and application reads as follows;

“An Act to make provision for the constitution of port authorities for certain major ports in India and to vest the administration, control and management of such ports in such authorities and for matters connected therewith”

“1(3) It applies in the first instance to the major ports of Cochin, Kandla and Vishakhapatnam and the Central Government may, by notification in the Official Gazette, apply the provisions of this Act to such other major port and with effect from such date, as may be specified in the notification.”

7.18. Further, as per. Section 3 of the Major Port Trusts Act, 1963 which governs the constitution of the board of trustees it is seen that 100% control of the applicant is with the Central Government. Hence the applicant falls within the definition of Government Entity’ and accordingly the second condition is satisfied. The recipient of the services is the Indian Coast Guard, which is the Central Government and hence the third condition is also satisfied. However, there is nothing n the MOU dated 03.04.2017 or in any other document submitted with the application to show that the consideration for the services is received by the applicant in the form of grants from the Central Government. Therefore, the 4th condition is not satisfied and accordingly, the service provided by the applicant to the ICG as per MoU dated 03.04.2017 is no eligible for exemption under the entry at SI. No. 9C of Notification No.12/2017 dated 28.06.2017 as inserted by Notification No. 32/2017 dated 13.10.2017.

7.19. The third question raised by the applicant is whether they are eligible to take the benefit of the reduced rate of 12% GST as per Notification No 24/2017- Central Tax (Rate) dated 21.09.2017, in respect of the services provided by it to ICG under the Mod

7.20. SI. No. 3 (vi) of Notification No. 11/2017 – Central Tax (Rate) dated 28.06.2017 as substituted by Notification No 24/2017- Central Tax (Rate) dated 21.09.2017 reads as follows;

“(vi) Services provided to the Central Government, State Government, Union Territory, a local authority or a governmental authority by mayor’ construction, erection, commissioning, installation completion, fitting out, repair, maintenance, renovation, or alteration of-

(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;

(b) a structure meant predominantly for use as Nan educational, (ii) a clinical, or Nib an art or cultural establishment; or

(c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule Hi of the Central Goods and Services Tax Act, 2017. – Rate – 6 96- Condition – Nil”

7.21. Subsequently, the above entry was amended by Notification Nos. 31/2017 Central Tax (Rate) dated 13.10.2017; 46/2017 Central Tax (Rate) dated 14.11.2017; 17/2018 Central Tax (Rate) dated 26.07.2018 and 03/2019 Central Tax (Rate) dated 29.03.2019 and the amended entry reads as follows;

“(vi) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, (other than that covered by items (i), (ia), (ic), (id), (e) and (f above) provided to the Central Government, State Government, Union Tenitory, a local authority, a Governmental Authority or a Government Entity by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –

(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;

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

(c) a residential complex predominantly meant for self use or the use of their employees or other persons specified in paragraph 3 of the Schedule HI of the Central Goods and Services Tax Act, 2019

Explanation. – For the purposes of this item, the term “business” shall not include any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities. – Rate – 6 % – Condition – Provided that where the services are supplied to a Government Entity, they 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.”

7.22. We have already discussed and concluded that the services provided by the applicant are works contract Services as defined in section 2 (119) of the CGST Act, 2017 and it is provided to the Indian Coast Guard, the Central Government for the purpose of creating berthing infrastructure for Indian Coast Guard Ships operating along Kerala and Lakshadweep Coasts. Therefore, the works contract services are provided to the Central Government for the construction and commissioning of a jetty meant for use for undertaking activities of the Indian Coast Guard as a public authority. Hence the services provided by the applicant as per the MoU dated 03.04.2017 are eligible for the concessional rate of GST of 12% (6%- CGST + 6% SGST) as per the entry at Item Kit of Si No.3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended. However, it is seen that the entry at Item (vi) of SI. No. 3 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017as amended has been omitted by 03/2019 Central Tax (Rate) dated 29.03.2019 with effect from 18.07.2022. Therefore, the concessional rate of GST of 12% is applicable only in respect of the services supplied as per the said Moll for which the time of supply as determined in terms of Sections 13 and 14 of the CGST Act, 2017 falls between 21.09.2017 and 17.07.2022.

In the view of the foregoing observations and findings, the following rulings are issued:

RULING

Ruling: No ruling can be given since the question is not in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant.

Ruling: No ruling can be given since the question is not covered by any of the matters enumerated in sub-section (2) of Section 97 of the CGST Act, 2017.