In re R. S. Development & Constructions Pvt Ltd. (GST AAAR Kerala)
The Kerala State Electricity Board Ltd falls under the category of a Government entity for the purpose of the said exemption.
The supply of services viz. execution of the civil works of Pazhassi small hydro electric project covered under Work order No. 06/CEECCN/ 2017-18 dated 06.10.2017 made by the appellant to the Kerala State Electricity Board Ltd are not eligible to concessional rate of CGST @6% provided by the said Notification No.11/2017-Central Tax (Rate) dated 28.06.2017.
Consequently, the said services shall not be eligible for concessional rate of SGST @6% also in terms of notification No. SRO 370/2017 dated 30.06.2017 since the CGST statutory provisions are pan materia with State GST provisions.
Moreover, on the basis of the above discussion and findings, the contention of the appellant that the Advance ruling in question is in violation of the principles laid down by the decision of the 25th GST council meeting is baseless.
FULL TEXT OF ORDER OF APPELLATE AUTHORITY OF ADVANCE RULING, KERALA
1. The appeal stands filed under section 100(1) of the GST Act, 2017, by M/s R. S. Development and constructions India Pvt Ltd having a registered office at . NMC, XIV/ 181A, Neyyattinkara, bearing GSTIN 32AAECR1869D1ZL (hereinafter also referred as the appellant). The appeal stands filed against the Advance ruling Order No: KER/64/2019 dated 12-10-2019 pronounced by the Kerala Authority for Advance ruling.
Brief facts of the case:
2. Kerala State Electricity Board has awarded the work of execution of civil works of Pazhassi Sagar Small Hydro electric project to the Appellant as per Work Order No: 06/ CE CCN/2017-18 dated 06.10.2017. As per the work order, the work involves construction of intake structure, leading channel, tunnel power house, tail race, civil works of the switch yard access roads and other allied works, fabrication and erection of Steel liners and specials from tunnel portal to powerhouse trash rack, intake gate, draft tube gate and Hoisting arrangements. The appellant had filed an application for advance ruling under Section 97(1) of the GST Act, 2017 with regard to:-
a. Whether the execution of Civil works of the Pazhassi Sagar Small Hydro Electric project as per the above Work Order would fall under S1 No. 3(iii)(b) or 3(vi) of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017 attracting GST @12%.
b. Since the CGST statutory provisions are pad materia with State GST provisions, whether the rate of SGST is also 6% in terms of Notification SRO 370/2017 dated 30.06.2017 for supplies covered under Work Order 06/CE CCN/ 2017-18 dated 06.10.2017.
3. The said application was disposed by the Kerala Advance Ruling Authority vide Order No. KER/64/2019 dated 12/10/2019 by pronouncing the Advance Ruling as follows:
1. No, the rate of 6% under Sl. No. 3(iii) or Sl. No. 3(vi) of the Notification No.11/2017-Central Tax (Rate) dated 28.06.2017 is not applicable for Works Contract Services supplied by the Applicant to the KSEB as per Work Order No. 06/CE CCN/2017-18 dated 06.10.2017.
2. No, in view of the ruling 1 above
The above decision of the Advance Ruling Authority was based on the following facts and law: –
3.1. The KSEB is a Government Company incorporated under the Companies Act, 1956 with 90% or more participation by way of equity or control of the Government of Kerala to carry out the business of generation, transmission and distribution of electricity in the state and is a state transmission utility within the meaning of section 2(67) of the Electricity Act,2003. Thereby KSEB cannot be considered as constituted or established by the Government to carry out any function entrusted to a municipality under Article 243 W or a Panchayat under Article 243 G of the constitution. Therefore KSEB will not come under the definition of Governmental authority under para 2(zf) of notification no: 12/2017-Central tax (rate) dated 28/6/2017. However, the KSEB squarely falls under the definition of ‘Government entity’ under para 2(zfa) of notification no: 12/2017-Central tax (rate) dated 28/6/2017.
3.2. The concessional rate of GST of 12% under Sl. No. 3(vi) of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017 is applicable only for composite supply of works contract as defined in Section 2(119) of the CGST Act 2017, supplied 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 use other than for commerce, industry, or any other business or profession. The concessional rate under this entry is not applicable for the works contract services provided as per the above work order as KSEB has been established for carrying out business of generation, transmission and distribution of electricity in the state of Kerala. As per the work order, it reveals that the work order awarded is in respect of civil works of a small hydro electric project in the existing dam of Pazhassi irrigation project and hence cannot be considered as civil work for canal, dam or other irrigation works eligible for the concessional rate.
4. Aggrieved by the above decision of the Advance ruling authority, the appellant has filed this appeal u/s 100 of the GST Act, 2017 with interalia following contentions;
4.1. The supply of service awarded by KSEB attracts tax ©12% (6% CGST + 6% SGST) .
4.2. Conditions to be fulfilled to . avail the rate of12% (6%CGST + 6% SGST) in terms of the Sl. No. 3(vi) of the notification no: 11/2017-CT (rate) are as follows;
a. Supply must be a works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017;
b. Supplies are to be provided to the Central Government, State Government, Union Territory, a local authority, a Governmental Authority or a Government Entity;
c. Supply 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.
4.3. The work order established that the supplies are works contract supplies as defined in Section 2(119) of the CGST Act. Therefore above condition (a) is fulfilled.
4.4. KSEB Limited is created by Section 131 of Electricity Act, 2003 (Central Act 36 of 2003), which is an Act of the Parliament. It is fully owned by the Government of Kerala. Relevant pages from the website of KSEB Limited and Electricity Act, 2003 are also submitted. The salient features of the National Electricity Policy, 2005 and Electricity Tariff Policy will prove that such works contracts are predominantly for the purpose of socio economic development of the country, which is one of the functions entrusted to a Municipality in Article 243W of the Constitution read with Twelfth Schedule. Therefore, KSEB Ltd is a Governmental Authority as defined in Notification No.11/2017-CT (Rate).
4.5. The pre-dominant nature of supply is construction of part of dam i.e., construction of various structures of dam like tunnels etc. Such structures are covered by the definition of DAM as per the Dam Safety Bill, 2019, which was passed in the Lok Sabha.
4.6. Therefore, Sl.No.3(iii)(b) of Notification 11/2017-CT (Rate) is applicable.
4.7. One of the conditions in Sl.No.3(vi) is that it must be meant pre-dominantly for use other than for commerce, industry, or any other business or profession.
The work order would satisfy nature of work is original works as defined in clause (zs) of para 2 of notification 12/2017-CT (Rate). As explained above, it i3 provided to a Governmental Authority, which is meant predominantly for socio economic development of the country. Therefore, all conditions are fulfilled.
4.8. Therefore, SI.No.3(vi)(a) of Notification 11/2017-CT (Rate) is also applicable.
4.9. In view of the above reasons, the rate of CT for the supplies covered under Work Order 06/CE CCN/2017-18 dated 06.10.2017 would be 6% either under Sl.No.3(iii) & under S1.No.3(vi) of Notification 11/2017-CT (Rate).
4.10. Since the above statutory provisions are pad materia with the State GST provisions, the rate of State Tax is also 6% in terms of Notification SRO.No.370/2017 dated 30.06.2017 for the supplies covered under Work Order 06/CECCN/2017-18 dated 06.10.2017.
4.11. On 30.09.2019, appellant had explained the above provisions by submitting a paper set containing 81 pages, Letter dated 05/2019 of TANGEDCO Limited, Order dated 15.05.2019 of Appellate Authority for Advance Ruling, West Bengal dated 15-05-2019 and Order of Advance Ruling Authority, Rajasthan dated 27.04.2018.
4.12. Applicant had received the certified impugned order KER/64/2019 dated 12.10.2019 on 29.11.2019. Before that, they had received the copy through e-Mail on 04.11.2019.
4.13. The appellant has also submitted that —
a. The submissions made on 30.09.2019 were not considered and discussed in the impugned order. Therefore, the impugned order is not a speaking order.
b. The submissions made on 30.09.2019 and the evidences relied on would establish that the applicant is entitled for the exemption in SI.No.3(iii) and 3(vi) of Notification No.11/2017-CT (Rate) dated 28.06.2017 and SRO.No.370/2017 dated 30.06.2017.
c. The impugned order is against the principles laid down in 25th GST Council’s decisions.
PERSONAL HEARING:
5. Shri. S Durairaj, Advocate, the authorized representative of the appellant was heard by the Appellate authority further on 15.10.2020 via virtual media, at the office of the Chief Commissioner, Central GST, Cochin. During the personal hearing, the authorized representative reiterated the aforesaid contentions made in the grounds of appeal.
DISCUSSION & FINDINGS:
6. We have carefully gone through the facts of the case, Advance ruling order dated 12.10.2019 passed by the Advance Ruling Authority, Kerala GST, grounds of appeal filed by the appellant and submissions made by them during the course of personal hearing and other evidences on record. The issues for determination in this appeal may be listed as follows:
a. Whether Kerala State electricity Board Ltd would fall under any of the categories viz. Central Government, State Government, Union territory, a local authority, a Government authority or a Government entity for the purpose of the said exemption?
b. Whether the supply of services viz. execution of the civil works of Pazhassi small hydro electric project covered under Work order No. 06/CEECCN/ 2017-18 dated 06.10.2017 made by the appellant to the Kerala State Electricity Board Ltd are eligible to concessional rate of CGST @6% under Sl no:3 (iii) or 3(vi) of notification no. 11/2017 Central tax (rate) dated 28.06.2017.
c. Consequently, whether the said services shall attract concessional rate of SGST also @6% in terms of notification No. SRO 370/2017 dated 30.06.2017 since the CGST statutory provisions are pad materia with State GST provisions.
7. In order to arrive at a decision on the issues highlighted above, the relevant legal aspects and the relevant notifications are being analyzed as under. The appellant has claimed concessional rate of GST @6% CGST on the said supplies of services in terms of Sl. No. 3(iii) or 3(vi) of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017. The relevant contents of the said notifications as applicable to the period involved herein are reproduced below:
7.1. Sl.No. 3(iii) of Notification No.11/2017 Central Tax (Rate) dated 28.06.2017 reads as follows;
