Fact: M/s. ITD Cementation India Ltd “the applicant” is engaged in 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.
Issue Involved: 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?
Applicant Interpretation of Law: The applicant contended that construction of the Multi-modal IWT Terminal amounts to composite supply of works contract service. The contractee is a Government Entity, being a statutory body established under the Inland Waterways Authority of India Act, 1985 (hereinafter the IWAI Act, 1985), and functions under the administrative control of the Ministry of Shipping, Government of India. The supply is, therefore taxable @ 12% under the GST Act in terms of Serial No. 3(vi) of the Rate Notification. The Council further draws attention to Notification No. 31/2017 – CTR dated 13/10/2017, amending the Rate Notification, and says, “The status of IWAI vis-a-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%.”
Held: The Hon’ble AAR of West Bengal vide Advance Ruling Order No. 33/WBAAR/2018-19, dated January 08, 2019 observed that for the purposes of aforesaid activity, the term ‘business’ shall not include any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities. Further from the definition, IWAI is clearly not 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. This Explanation does not include within it ambit a Governmental Authority or a Government Entity.” are not applicable to the Applicant’s supply of works contract service for construction of the Multi-modal IWT Terminal at Haldia. Therefore, it will attract GST at 18% rate under Serial No. 3(xii) of 11/2017-CT (Rate) dated June 28, 2017.