In Re: ITD Cementation India Ltd.
GST
2019 (1) TMI 485 – AUTHORITY FOR ADVANCE RULING, WEST BENGAL – [2019] 63 G S.T.R. 42 (AAR), 2019 (21) G. S. T. L. 72 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, WEST BENGAL – AAR
Dated:- 8-1-2019
Case Number 33 of 2018 Order No. 33/WBAAR/2018-19
GST
SYDNEY D'SILVA AND PARTHASARATHI DEY, MEMBER
Applicant's representative heard Sri Tarun Chatterjee, Advocate
1. The Applicant is stated to be supplying works contract service. He has entered into an agreement with Inland Waterways Authority of India (hereinafter the IWAI) for construction of a multi-modal IWT terminal at Haldia on EPC basis.
The Applicant seeks a ruling on applicability of Notification No. 24/2017-CT (Rate) dated 21/09/2017 and 31/2017 – CT (Rate) dated 13/10/2017. More specifically, he wants a ruling on what should be the rate at which GST should be charged on the works contract service to be supplied for construction of the above terminal.
The question is
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ance, renovation, or alteration of-
(a) a civil structure or any other original work meant predominantly for use other than for commerce, industry, or any other business or profession:
(b) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment: or
(c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Service Tax Act, 2017.
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Provided that where the services are supplied to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union territory or local authority, as the case may be.
Notification No. 17/2018 – CT (Rate) dated 26/07/2018 appends an Explanation to the above entry. It clarifies that for purposes of the above entry, the term 'business' shall not include any activity or transaction un
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3/10/2017, amending the Rate Notification, and says, “The status of IWAI vis-à-vis the definition of 'Government Entity' as explained at para 4(x) of Notification No. 31/2017 – CTR dated 13/10/2017 may be examined. It is to further add that consequent upon to this amendment, the composite supply of works contract to Government Entity by way of construction, erection, etc would attract GST @ 12%.”
4. Notification No. 31/2017 – CT (Rate) dated 13/10/2017 defines the terms 'Governmental Authority' and 'Government Entity' under para 4(ix) and (x) respectively. Both refer inter alia to an authority set up by an Act of Parliament or a State Legislature with 90% or more participation by way of equity or control. The Governmental Authority, however, is established to carry out functions entrusted to a Municipality or Panchayat under Art 243 W or 243 G of the Constitution respectively: whereas, a Government Entity is set up to carry out any function entrusted by the Central Government,
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cation, as described above. The concession under Serial No. 3 (vi) of the Rate Notification is contract specific. The recipient Government Entity should procure the works contract service in relation to a work entrusted to it by the Central Government, State Government, Union territory or local authority, as the case may be. If it is not covered under Serial No. 3(vi) (b) or 3(vi) (c), it should be a civil structure or an original work meant predominantly for use other than for commerce, industry, or any other business or profession [Serial No. 3(vi)(a)].
6. Section 14(1)(b) of the IWAI Act, 1985 empowers IWAI to set up infrastructural facilities for national waterways. No such projects, however, can be undertaken without approval from the Central Government unless the amount involved is below a threshold [2nd proviso to section 13 and section 14(4) of the IWAI Act, 1985]. Therefore, construction of multi-modal IWT Terminal, involving Rs. 517.36 crore, if lawfully contracted, is a pro
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waterway. Predominant use of the infrastructure so created is, therefore, for facilitating commerce and business. IWAI may, as indicated in its letter to the GST Council referred to above, levy and collect fees and charges from the users of the infrastructural facilities being created.
In its letter dated 12/02/2018 to the GST Council IWAI has made no reference to this specific contract, but admits to levying a user charge on the commercial operators for navigating through the waterway using facilities as being created. All such fees and charges received are, according to the above-mentioned letter of IWAI, credited to the Consolidated Fund of India. The Applicant argues that the very fact of such credit to the Consolidated Fund of India clearly establishes that the fees so collected are not proceeds from business.
All revenues received by the Govt of India, all loans it raises by issue of treasury bills, or ways and means advances and all moneys received by it in repayment of that
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ot the Government of India, but a Government Entity having no sovereign authority to collect Government revenue. Moreover, contrary to what the Applicant claims, the user fees that IWAI collects is not credited to the Consolidated Fund of India and is, therefore, not revenue but proceeds from business as defined under section 2(17) of the GST Act.
It is, therefore, evident that the Applicant is supplying works contract service for an original work that is meant for commerce and business. It does not, therefore, satisfy the conditions laid down under Serial No. 3(vi)(a) of the Rate Notification.
The Applicant's supply of works contract service for construction of the Multi-modal IWT Terminal at Haldia, therefore, attracts GST at 18% rate under Serial No. 3(xii) of the Rate Notification.
In view of the foregoing we rule as under
RULING
Amendments to Serial No. 3(vi) of Notification No. 11/2017-CT (Rate) dated 28/06/2017, brought about by Notification No. 24/2017-CT (Rate) dated 21/0
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