School building for use by State Government for education cannot be considered a commercial building

In re Tirupati Construction (GST AAR Gujarat)

Whether the activity of composite supply of works contract service by way of construction of Construction of Fire Station And Staff Quarters at T.P.S NO – 42 (BHIMRAD), F.P NO-65, in SWZ(A) at Bhimrad, Surat, for the Surat Municipal Corporation and as detailed in Work Order-North Zone/Out/879 dated 26.02.2019 entered in to by the applicant supplier and the said local authority recipient i.e. Surat Municipal Corporation, merits classification at Serial Number 3(vi)(a) of Notification Number 11/2017 – Central Tax(Rate) dated : 28.06.2017 (hereinafter referred to as the said NT) , as amended from time to time and last amended by Notification Number 21/2012-Central Tax(Rate) dated 31.12.2021 w.e.f. 01.01.2022?

Held by AAR

We find that the subject contract is for the construction of immovable property wherein transfer of property in goods is involved in the execution of subject contract. We hold that subject supply is Works Contract Service. The Supply comprises supply of school building, school hostel, college hostel, Principal’s bungalow and staff quarters. We hold subject supply is a composite supply of works contract service. We find that the service recipient is Government of Gujarat (GoG).

We note that vide Explanation to Serial No 3(vi) of said NT, ‘business’ shall not include any activity or transaction undertaken by the State Government in which they are engaged as public authorities. Thereby we find this activity undertaken by GoG out of the purview of business, as described at sr no 3(vi)(a) of Said NT. Also, School building is a structure meant for use as an educational establishment as described at entry at Sr no 3(vi)(b)(i) of said NT; and supply of Staff Quarters is covered at 3(vi)(c) of said NT.

We note that Revenue submits that said civil structure may be used for commerce or business. We hold that a School building will be used by State Government for education and cannot be considered a commercial building. Further, as already discussed, with the explanation of term business incorporated into Sr no 3(vi) of said NT as discussed in previous para and nothing of contrary vide a specific intelligence report submitted by Revenue that the structure supplied is for business/ commerce purpose, we find no merit in Revenue’s submission.

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

The applicant M/s. Tirupati Construction, have been awarded a works contract for Construction of New Adarsh Nivashi Shala (Kumar) / School Hostel (324 Bed ) / Staff Quarters and Kumar Chhatralay (300 Bed) at Village : Baben , Taluka : Bardoli, District : Surat, by the Road and Building Department in the Government of Gujarat vide Work Order Number : AB/TC/B-2/3/1181 dated : 01.06.2020. The said construction contract is labour plus material. The “Construction of said New Adarsh Nivashi Shala (Kumar) / School Hostel (324 Bed) / Staff Quarters and Kumar Chhatralay (300 Bed) involves the following stages such as: (a) School Student Hostel (Ground + 5 Floors) having capacity of 324 beds (b) College Student Hostel (Ground + 4 Floors) having capacity of 300 beds (c) School Building (d) C-Type Staff Quarters (Seven Floors ) and Principal Bungalow. The applicant submits that this is an ongoing activity as on the date of filing this advance ruling application.

2. The applicant submits as follows:

(i) The activity of “Construction of New Adarsh Nivashi Shala (Kumar) / School Hostel (324 Bed ) / Staff Quarters and Kumar Chhatralay (300 Bed) at Village : Baben , Taluka : Bardoli, District : Surat ” is a supply of service within the meaning of Section 7(1)(a) of the CGST Act,2017 read with Section 2(102) of the said Act.

(ii) There is a charge of CGST and SGST on the said supply of service under Section 9 of the CGST Act, 2017 and Section 9 of the SGST Act, 2017 since the said supply is an intra-state supply within the meaning of Section 8(2) of the IGST Act, 2017.

(iii) Section 2(119) of the CGST Act, 2017 defines ‘Works Contract’ as under:

(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;

(iv) The Central Government, in exercise of the powers conferred under Section 9(1) of the CGST Act, 2017 has issued Notification No.11/2017-Central Tax(Rate) dated 28.06.2017 (hereinafter referred to as the said NT), specifying and notifying the rates of CGST on various services. Similar notification has also been issued by the State Government for levying SGST on the said services. Entry at Sr. No. 3(vi) of the said Notification reads as under:

“(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 items covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above, provided to the Central Government, State Government, Union Territory, 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 –

Please become a Premium member. If you are already a Premium member, login here to access the full content.