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.
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-
