18% GST Applicable on Electrical Works Contract done to Government Corporations: AAR [Read Order]

The Telangana Bench of J. Laxminarayana and B. Raghu Kiran, IRS of Authority for Advance Ruling (AAR) ruled that 18% Goods and Services Tax (GST) is applicable on Electrical works contracts done to the government corporations.

The applicant, M/s. Sealwel Corporation Private Limited is engaged in the business of execution of ‘works contracts’ as defined under Section 2(119) of the Goods and Services Tax Act (GST), 2017. It is a registered taxable person under the Act. It is executing such works contracts inter-alia including Telangana State Southern Power Distribution Company Limited (TSSPDCL).

The applicant contended that any works contract done to the Government Corporation like TSSPDCL, TSNDPDCL and alike are all Government/Government Agency/ Government Entity and hence the rate of tax to be adopted is 12% GST only.

Further placed that though a contractee is basically not a Government, Government Agency or Entity, when a given work is being done by the funds of the Government/ Government Agency or Entity, then the benefit of 12% GST can be availed.

The Authorised representative of the applicant D. Dastagiri (Accountant) attended the personal hearing and made his submissions.

The bench observed that from the schedule concerning “Shareholding of Promoter” of the annual accounts of M/s Telangana State Southern Power Distribution Company Limited (TSSPDCL) that 100% shares of the company were held by the Governor of Telangana. This clearly indicated that the Government of Telangana has 100 percent control over TSSPDCL and thus TSSPDCL is evidently covered under the definition of “Government Entity”.

Further ruled that works were used for commercial/business activities in view of the facts and circumstances and accordingly the same are taxable at a rate of 18% (9% CGST + 9% SGST) under Goods and Services Tax.

It was also opined that the impugned works undertaken are for business/commercial purposes and therefore, the benefit of Concessional Rate of 12% is not applicable to the services supplied by the applicant.

To Read the full text of the Order CLICK HERE

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