Case Law Details

Case Name : In re PPS Builders Private Limited (GST AAR Uttar Pradesh)
Appeal Number : Authority For Advance Ruling No. UP ADRG 33/2023
Date of Judgement/Order : 11/09/2023
Related Assessment Year :

In re PPS Builders Private Limited (GST AAR Uttar Pradesh)

Get clarity on GST rates for contracts pre & post-notification (No. 03/2022-Central Tax). AAR ruling for PPS Builders Pvt Ltd. 12% or 18%? Find out!

Introduction: The Authority for Advance Ruling (AAR), Uttar Pradesh, recently addressed a crucial question related to the Goods and Services Tax (GST) rate applicable to contracts executed before a specific notification. This case involves M/s PPS Builders Private Limited, a civil construction company, and its contract with Aligarh Smart City Limited.

Background: M/s PPS Builders Private Limited, with its registered office in Bulandshahar, Uttar Pradesh, sought an advance ruling under Section 97 of the CGST Act, 2017, and UPGST Act, 2017. The company primarily engages in civil construction projects, particularly with government departments. The specific contract in question pertains to the “Redevelopment of Carriageway, foothpath, vending zone covering ROW within ABD area of Aligarh Smart City (CW-23) on EPC mode (Package-1) at Aligarh.” The contract was executed on 27th December 2021.

Key Question: The crucial question posed by the applicant was whether the company should charge GST at 12% or 18% for contracts executed before the notification (No. 03/2022-Central Tax (Rate) dated 13.07.2022) became effective on 18-07-2022.

Legal Framework: The relevant legal provisions include Section 97(2)(a) of the CGST Act 2017, which allows for seeking an advance ruling on matters related to GST rates and liability to pay GST. The change in the tax rate, from 12% to 18%, for certain construction services was introduced through Notification No. 03/2022-Central Tax (Rate) dated 13.07.2022.

Applicant’s Interpretation: The applicant, in their submission, highlighted that the contract was awarded in the financial year 2020-2021, with the GST rate specified as 12%. However, a subsequent notification increased the rate to 18% from 18th July 2022 onwards. The applicant argued that the change in rate should not apply retrospectively, especially for contracts where the bid/tender was based on the initial 12% rate.

GST Rate

Response from the Authority: The AAR analyzed the situation based on Section 14 of the CGST Act, 2017, which deals with the change in the rate of tax. The determination of the applicable rate depends on factors such as the date of the invoice and the date of payment. The Authority considered invoices issued before 18.07.2022, and payments received after this date to be subject to the 12% GST rate. In contrast, for invoices issued and payments received after 18.07.2022, the applicable rate is 18%.

Conclusion: The ruling clarifies that the GST rate for contracts executed before the specified notification ( Notification No. 03/2022-Central Tax (Rate) dated 13.07.2022.) is contingent on the timing of the invoice and payment. This decision provides guidance on the transitional aspects of tax rate changes in continuous supply contracts.

Validity and Jurisdiction: The ruling is valid within the jurisdiction of the Authority for Advance Ruling, Uttar Pradesh, and is subject to the provisions under Section 103(2) of the CGST Act, 2017, until declared void under Section 104(1) of the Act.

In conclusion, the AAR’s decision brings clarity to the GST rate application in cases where contracts span the period before and after a change in the tax rate, offering insights into the transitional provisions governing such scenarios.

FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, UTTAR PRADESH

M/s PPS Builders Private Limited, having registered office 122, Hari Enclave, Chandpur Road, Bulandshahar Uttar Pradesh – 203001 (hereinafter referred as “the applicant”) having GSTIN-09AAGCP7968P1Z9, have filed an application for Advance Ruling under Section 97 of the CGST Act, 2017 read with Rule 104 of the CGST Rules, 2017 and Section 97 of UPGST Act, 2017 read with Rule 104 of the UPGST Rules, 2017 in Form GST ARA-01 (the application form for Advance Ruling), discharging the fee of Rs. 5,000/- each under the CGST Act and the UPGST Act.

2. The applicant is a registered firm/assessee under the GST regime having GSTIN: 09AAGCP7968P1Z9. The Company carries on the business of the civil constructions mainly with the Govt. Departments against the Contracts awarded by them. The company Aligarh Smart City Limited (ASCL) is a Public company and was incorporated on 30 August 2017. It is classified as State Govt company and is registered at Registrar of Companies, Kanpur. The Company has awarded the contract of “Redevelopment of Carriageway, foothpath, vending zone covering ROW within ABD area of Aligarh Smart City(CW-23) on EPC mode (Pakage-1) at Aligarh” by the Aligarh Smart City Limited (ASCL), Manasi Ganga Building, Baraula Bye Pass, Near Shanti Lodge, Aligarh, Uttar Predesh PIN 202001. Which was executed on 27th day December, 2021. Contract Agreement has been provided by the applicant.

3. The applicant has sought advance ruling in respect of the following questions:-

1) Whether the company will charge the GST @ 12% or @18% in the case of the contracts executed before the said notification? (No. 03/2022-Central Tax (Rate) dated. 13.03.2022 w.e.f 18.07.2022.

4. The question is about applicable GST rate under the provisions of CGST Act and liability to pay GST, hence is admissible under Section 97(2) (a) of the CGST Act 2017. Further, as per declaration given by the applicant in Form ARA-01, the issue raised by the applicant is neither pending nor decided in any proceedings under any of the provisions of the Act, against the applicant.

5. Statement of relevant facts having a bearing on the question(s) raised The applicant is a registered firm/assessee under the GST regime having GSTIN: 09AAGCP7968P1Z9. The Company carries on the business of the civil constructions mainly with the Govt. Departments against the Contracts awarded by them. The company Aligarh Smart City Limited (ASCL) is a Public company and was incorporated on 30 August 2017. It is classified as State Govt company and is registered at Registrar of Companies, Kanpur. The Company has awarded the contract of “Redevelopment of Carriageway, foothpath, vending zone covering ROW within ABD area of Aligarh Smart City(CW-23) on EPC mode (Pakage-1) at Aligarh” by the Aligarh Smart City Limited (ASCL), Manasi Ganga Building, Baraula Bye Pass, Near Shanti Lodge, Aligarh, Uttar Pradesh PIN 202001. Which was executed on 27th day December, 2021. Contract Agreement has been provided by the applicant.

The rate of tax (GST) on Work contract for Roads, Bridges, Railways, Metros etc and work contract supply to Central Govt. State Govt, and Local Authorities for historical monuments, canal, Dams, Pipelines, Plant for water supply etc. was enhanced from 12% to 18% vide notification No.03/2022-Central Tax (Rate) dated 13.07.2022 w.e.f. 18.07.2022.

Applicant has sought ruling with respect to the applicable rate of GST on work contract.

6. The applicant has submitted their interpretation of law as under-

6.1 The Aligarh Smart City Limited (ASCL) has awarded contract of Redevelopment of Carriageway, foothpath, vending zone covering ROW within ABD area of Aligarh Smart City(CW-23) on EPC mode (Pakage-1) at Aligarh to the Applicant and contract was executed on 27th December 2021.

6.2 The Govt, proposed to enhance the rate of tax from 12% to 18% on certain construction services relating to Roads, Bridges, Railways, Metros, Effluent Treatment Plant, crematorium, Historical monuments, Canals, Pipe lines, plant for water supply, Educational institutions, Hospital etc. and sub-contractor thereof and involving predominantly earthwork and sub contract thereof under GST w.e.f. 18.07.2022. This contract was awarded in the year of 2020-2021.The rates were provided inclusive of all taxes. When the bid/tender was applied the Rate of the GST was @12% while subsequently vide Notification No. 03/2022-Central Tax (Rate) dated 13.07.2022. w.e.f. 18.07.2022 the tax rate was changed to 18%.

Section 2(119) “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,

Government Contracts means “A contract to which the Central Govt or a State Govt, is party can be called Government Contractor and the party who is required to execute the contract for or on behalf of the Government is referred to as a Govt. Contract.

6.3 That this contract was awarded in the year of 2020-2021.The rates were provided included the GST. When the bid/tender was applied the Rate of the GST was @12% while after the notification No.03/2022-Central Tax (Rate) dated 13.07.2022 w.e.f. 18.07.2022 the change was made in the rate of tax which as follows-

List of Work Contact

Old Rate GST New GST Rate
Work contract for Road, Bridge, Railway, 12% Metro etc and work contract supply to Central Govt. State Govt and Local Authority for historical monuments, canals, Dams, Pipelines, Plant for water supply etc. 12% 18% 18th July 2022
Sub contracts/work contract involving predominantly earthwork supplied to Central Govt State Govt and Local Authority 5% 12% 18th July 2022

After this notification No.03/2022-Central Tax (Rate) dated 13.07.2022 w.e.f. 18.07.2022 the ASCL had paid GST @18% (from 12 March 2022 to 14.01.2023) after the notification but latter on from 15 January 2023 they paid GST @12% . The applicant charged GST @ 18%.

They submitted that the time of Supply is continued and place of supply (POS) is Aligarh and that the ASCL had not considered the provisions contained in Section 13 and Section 14 of CGST Act, 2017, pertaining to Time of Supply of Services and Change in rate of tax in respect of Supply of goods or services.

They also added that after introduction of GST Act in India, “Works Contact Services” would generally classify as contracts for continuous supply of services, the issuance of invoices in case of continuous supply of services prescribed in section 35(1) of the CGST Act 2017. So as per section 35(1) of the CGST Act 2017 in case of continuous supply of services the due date for issue of invoice is as under-

(a) Due date of payment is ascertainable on or before the payment due date.

(b) Due date of payment is not ascertainable: before or at the time when payment is received.

(c) Payment is linked to completion of an event: on or before the completion of event.

An application for advance ruling is being presented for obtaining the clarification about the rate of tax in the present case after the Notification No. 03/2022 dated 13.07.2022 and with effected from 18.07.2022.

7. The application for advance ruling was forwarded to the Central Jurisdictional GST Officer vide letter dated 23.06.2023 to offer their comments/views/verification report on the matter.

The Additional Commissioner, SGST- Ghaziabad Zone -II has submitted his comments vide his letter dated 18.07.2023 wherein it has been submitted that M/s P.P. Builders Pvt. Ltd. 122, Hari enclave, Chandpur Road, Bulandshahr GSTIN 09AAGCP7968P1Z9 is registered in his office and civil construction work is done by the firm.

They reiterated the facts of the case and submitted that consequent to the change in rate of tax, the tax rate can be determined according to provisions contained in Section 14 of CGST/SGST Act 2017 accordingly they have submitted that the tax rate for invoices issued by the applicant will be as follows :

Scenario Invoice Date Date of payment Rate of Tax
Work in continue 12.03.2022 24.03.2022 12%
Work in continue 30.03.2022 16.11.2022 12%
Work in continue 16.11.2022 16.11.2022 18%
Work in continue 29.11.2022 29.11.2022 18%
Work in continue 15.01.2023 19.01.2023 18%
Work in continue 15.01,2023 19.01.2023 18%
Work in continue 15.01.2023 19.01.2023 18%
Work in continue 01.03.2023 03.03.2023 18%
Work in continue 01.03.2023 03.03.2023 18%
Work in continue 28.03.2023 31.03.2023 18%
Work in continue 28.03.2023 31.03.2023 18%
Work in continue 29.03.2023 08.05.2023 18%
Work in continue 04.05.2023 08.05.2023 18%
Work in continue 04.05.2023 08.05.2023 18%

8. The applicant was granted opportunity for personal hearings on 19.07.2023, 04.08.2023 and 08.09.2023. But they neither appeared for personal hearing on any of these dates, nor sought any adjournment/extension. Applicant was given sufficient time/opportunities. Now the case is being taken up for decision on merits.

DISCUSSION AND FINDING

9. At the outset, we would like to make it clear that the provisions of both the CGST Act and the UPGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the UPGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / UPGST Act would be mentioned as being under the ‘CGST Act’.

10. We have gone through the Form GST ARA-01 filed by the applicant and observed that the applicant has ticked following issues on which advance ruling required-

(1) Applicability of a notification issued under the provisions of this Act..

(2) Determination of the liability to pay tax on any goods or services or both.

At the outset, we find that the issue raised in the application is squarely covered under Section 97(2) of the CGST Act 2017, We therefore, admit the application for consideration on merits.

11. The applicant is a registered firm/assessee under the GST regime having GSTIN: 09AAGCP7968P1Z9. The Company carries on the business of the civil constructions mainly with the Govt- Departments against the Contracts awarded by them. The company Aligarh Smart City Limited (ASCL) is a Public company and was incorporated on 30 August 2017. It is classified as State Govt company and is registered at Registrar of Companies, Kanpur. The Company has awarded the contract of “Redevelopment of Carriageway, foothpath, vending zone covering ROW within ABD area of Aligarh Smart City(CW-23) on EPC mode (Pakage-1) at Aligarh” by the Aligarh Smart City Limited (ASCL), Manasi Ganga Building, Baraula Bye Pass, Near Shanti Lodge, Aligarh, Uttar Predesh PIN 202001. Which was executed on 27th day December, 2021. Contract Agreement has been provided by the applicant.

The rate of tax (GST) on Work contract for Roads, Bridges, Railways, Metros etc and work contract supply to Central Govt. State Govt, and Local Authorities for historical monuments, canal, Dams, Pipelines, Plant for water supply etc. was enhanced from 12% to 18% vide notification No.03/2022-Central Tax (Rate) dated 13.07.2022 w.e.f. 18.07.2022.

Applicant has sought ruling with respect to the applicable rate of GST on work contract.

12. We have gone through the submissions made by the applicant and have examined the same. The applicant in the present application has sought advance ruling on following question/clarification-

1) Whether the company will charge the GST @ 12% or @18% in the case of the contracts executed before the said notification? (No. 03/2022-Central Tax (Rate) dated. 13.03.2022 w.e.f 18.07.2022.)

13. The Applicant has been awarded the contract of “Redevelopment of Carriageway, foothpath, vending zone covering ROW within ABD area of Aligarh Smart City(CW-23) on EPC mode (Pakage-1) at Aligarh” by the Aligarh Smart City Limited (ASCL) vide contract agreement dated 23.12. 2021.

Work contract as per Section 2(119) of CGST Act 2017 is defined as under:

“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;”.

The Works contract services provided by the applicant was chargeable to GST @ 12% vide Notification 11/2017 – CT (Rate) as amended dated 28.06.2017. However subsequently vide Notification No. 03/2022-Central Tax (Rate) dated 13.07.2022., the same was amended and enhanced to 18% w.e.f 18.07.2022.

Consequent to the change in rate of tax during an ongoing continuous jerrice. applicable rate of tax is to be decided in terms of provisions contained in Section 14 of the CGST Act, 2017. The same is as follows :

“Section 14. Change in rate of tax in respect of supply of goods or services.- Notwithstanding anything contained in section 12 or section 13, the time of supply, where there is a change in the rate of tax in respect of goods or services or both, shall be determined in the following manner, namely:-

(a) in case the goods or services or both have been supplied before the change in rate of tax,-

(i) where the invoice for the same has been issued and the payment is also received after the change in rate of tax, the time of supply shall be the date of receipt of payment or the date of issue of invoice, whichever is earlier; or

(ii) where the invoice has been issued prior to the change in rate of tax but payment is received after the change in rate of tax, the time of supply shall be the date of issue of invoice; or

(iii) where the payment has been received before the change in rate of tax, but the invoice for the same is issued after the change in rate of tax, the time of supply shall be the date of receipt of payment;

(b) in case the goods or services or both have been supplied after the change in rate of tax,-

(i) where the payment is received after the change in rate of tax but the invoice has been issued prior to the change in rate of tax, the time of supply shall be the date of receipt of payment; or

(ii) where the invoice has been issued and payment is received before the change in rate of tax, the time of supply shall be the date of receipt of payment or date of issue of invoice, whichever is earlier; or

(iii) where the invoice has been issued after the change in rate of tax but the payment is received before the change in rate of tax, the time of supply shall be the date of issue of invoice:

Provided that the date of receipt of payment shall be the date of credit in the bank account if such credit in the bank account is after four working days from the date of change in the rate of tax.

Explanation.- For the purposes of this section,- the date of receipt of payment shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his bank account, whichever is earlier.”

13.1 In view of the above provisions, the rate of GST tax applicable in the matter is as under:

Invoice No. Invoice Date Date of payment Rate of Tax
PPS/0022/21-22 12.03.2022 24.03.2022 12%
PPS/0028/21-22 30.03.2022 16.11.2022 12%
PPS/0007/22-23 16.11.2022 16.11.2022 18%
PPS/0009/22-23 29.11.2022 29.11.2022 18%
PPS/0011/22-23 15.01.2023 19.01.2023 18%
PPS/0012/22-23 15.01.2023 19.01.2023 18%
PPS/0013/22-23 15.01.2023 19.01.2023 18%
PPS/0019/22-23 01-03.2023 03.03.2023 18%
PPS/0020/22-23 01.03.2023 03.03.2028 18%
PPS/0030/22-23 28.03.2023 31.03.2023 18%
PPS/0031/22-23 28.03.2023 31.03.2023 18%
PPS/0035/22-23 29.03.2023 08.05.2023 18%
PPS/0003/23-24 04.05.2023 08.05.2023 18%
PPS/0004/23-24 04.05.2023 08.052023 18%

14. In view of the above discussions, we, both the members, unanimously rule as under:

RULING

1) Whether the company will charge the GST @ 12% or @18% in the case of the contracts executed before the said notification? (No. 03/2022-Central Tax (Rate) dated. 13.03.2022 w.e.f 18.07.2022.

Answer : In cases where advance is received or invoices are raised before 18.07.2022, GST rate applicable is 12%.

In cases where advance is received and invoices are raised after 18.07.2022.

GST rate applicable is 18% .

As clarified in the table in para 13.1 above.

15. This ruling is valid only within the jurisdiction of Authority for Advance Ruling Uttar Pradesh and subject to the provisions under Section 103(2) of the CGST Act, 2017 until and unless declared void under Section 104(1) of the Act.

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