GST on supply of services to Tamilnadu Water Supply and Drainage Board

In re Indian Hume Pipe Company Ltd (GST AAR Tamil Nadu)

Introduction The Goods and Services Tax (GST) ruling concerning Indian Hume Pipe Company Ltd’s services to the Tamilnadu Water Supply and Drainage Board has brought forth several nuanced considerations. With the examination of various notifications and rates, the Tamil Nadu GST Advance Ruling Authority concluded on the tax rate applicable to the company’s services.

Contractual Commitment with TWAD Board The Indian Hume Pipe Company Ltd was bestowed a contract by the Tamilnadu Water Supply & Drainage Board on 16th August 2018. This contract focused on providing a Combined Water Supply Scheme for various panchayats and districts, with Cauvery river as the source. Additionally, the arrangement includes an 18-month construction period, a 6-month trial run, and a maintenance clause for five years.

Legal Provisions and Notifications At the core of this case are the amendments and the definitions within the Central Goods and Services Tax Act, 2017. The most crucial being the definition of a “works contract” and its implications on the kind of services Indian Hume Pipe Company Ltd offers. Several notifications have amended the tax rate for such services over time, with the latest being Notification No. 15/2021 and Notification No. 22/2021.

Determining the Nature of the TWAD Board It was imperative to classify the Tamilnadu Water Supply and Drainage Board’s nature, whether it’s a ‘Local Authority’ or a ‘Governmental Authority’. The differentiation is vital because the GST rate varies based on who the service is provided to. Based on the Tamil Nadu Water Supply and Drainage Board Act, 1970 and the CGST Act, 2017, the board is not a Local Authority. However, the board qualifies as a ‘Governmental Authority’ as it is established by the state’s legislature, wholly funded and controlled by the government, and is vested with developing water supply and sewerage facilities.

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