1. “Whether the contract, executed by them for KPTCL, is a divisible contract [Supply of goods & Supply of Services] or an indivisible contract [ works contract]?”
2. “Whether the tax rate of 12% [CGST-6% + SGST-6%] is applicable to the above contract, in pursuance of Notification No.24/2017-Central Tax (Rate) dated 21.09.2017?”
1. The contract contract entered by the applicant is of the nature of indivisible’ and squarely falls under the works contract, which is a service.
2. The Applicant is not entitled for the benefit of concessional rate of GST @12% in terms of Notification No.24/2017 -Central Tax (Rate) dated 21.o9.2017
The Authority of Advance Ruling ( AAR ) in Karnataka, on 21st March held that a statutory company cannot be treated as “Government” and therefore the benefit of concessional GST rate cannot be availed. The Skilltech Engineers and Contractors Pvt Ltd had entered into a Single composite contract with Karnataka Power Transmission Corporation Ltd(KPTCL) for the construction of power lines, erection of transmission towers and transformers. The contract had three connected agreements for the supply of materials erection and civil works respectively. All the three contracts were awarded to them in response to a single tender notification and the general terms and conditions were commonly applied to all the three agreements. The Skilltech Engineers and Contractors Pvt Ltd approached the AAR, seeking an advanced ruling as to whether KPTCL is a Government body or not so as to claim a concessional rate of GST at 12% in pursuance of notification No 24/2017-Central Tax (Rate) dated 21.09.2017. It also sought clarification as to whether the contract executed by them for KPTCL, is a divisible contract (supply of goods and supply of services)or an indivisible contract(work contract).
The AAR observed that a statutory body, corporation or an authority created by the parliament or state legislature in the exercise of the power conferred under article 53(3)(b)and article 154(2)(b) of the constitution respectively, is neither “Government” nor a “local authority”.
It also stated that the manpower of such authorities or bodies does not become officers subordinate to President under article 53(1) or Governor under article 154(1) of the constitution. Such statutory bodies or authorities as a juridical entity are separate from the state. Therefore regulatory bodies or autonomous entities cannot be regarded as the government or local authorities for the purposes of GST acts.
Therefore it was held that KPTCL cannot be treated as State Government. It was further observed that KPTCL is registered under Companies Act 1956 as a company and is a separate entity. Therefore the AAR held that the applicant is not entitled to the benefit of concessional rate of GST@12% in terms of notification No 24/2017-Central Tax (Rate) dated 21.09.2017. The AAR also held that the contract executed by the applicant is an indivisible contract as it squarely falls under the definition of ‘works contract’ as defined under section 2 clause 119 of the CGST Act 2017. The composite supply of works contract as defined in section 2 clause 119 of CGST Act 2017 is treated as the supply of service in terms of serial no.6, schedule II Of the CGST Act 2017.
M/s Skilltech Engineers &
Contractors Private Limited,
2″d Floor, 2904 CH 67 ,
Advance Ruling No. KAR ADRG 3 /2018
Dated: 21st March’ 2018
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