In a recent decision the Rajasthan Appellate Authority for Advance Ruling (AAAR) ruled that 18% GST applicable on recovery of road cutting charges from Jaipur Smart City Limited.
M/s Lakhan & Qureshi Construction Co. have filed an appeal against the Ruling issued by the Authority for Advance Ruling, Rajasthan. The appellant are a partnership firm and a civil contractor engaged in construction of roads, buildings, civil structures or various other civil works as awarded from various Governmental and non-Governmental organizations.
The applicant has sought advance ruling on recovery of such road cutting charges by the Appellant from WS JSCL is liable to GST at the rate (i.e., 9% CGST and 9% SGST). As per clause (c) of sub-section (2) of Section 15 of CGST Act, 2017, any incidental expenses charged by the supplier to the recipient shall be included in the value of supply.
The AAR has found that for road cutting approval Jaipur Nagar Nigam had demanded Rs. 3,85,10,775/- vide letter dated 26.03.2021 in which the name of M/s JSCL has nowhere been mentioned. This shows that applicant i.e. LQCC hold the title to the services of road cutting approval so procured from Jaipur Nagar Nigam. Hence, the appellant is not qualified as pure agent in the instant case.
A Two-Member Bench of the Authority comprising Mahendra Ranga, Member Central Tax and Dr Ravi Kumar Surpur, Member, State Tax observed that “We find that the recovery of road cutting charges is not covered under an activity in relation to any function entrusted to a (i) Panchayat under Article 243 G of the Constitution; or (ii) Municipality under Article 243 W of the Constitution.”
“Therefore, we find that the exemption under Notification No. 12/2017- Central Tax (Rate), dated 28-6-2017 is not available to the appellant. Thus, the appellant is liable to pay GST on recovery of such road cutting charges (from M/s JSCL) (i.e. 9% CGST + 9% SGST).”
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