According to a decision made by the Maharashtra Appellate Authority for Advance Ruling (MAAAR), the delivery made in accordance with the contract from 1.4.2019 to 12.2021 is considered to fall under entry at serial number 3(vi)(a) of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 and is subsequently taxed at 6% under CGST, 6% under SGST, or 12% under the IGST Act.
The appellant Sterlite Technologies Limited is a company registered under the GST Acts that manufactures telecom products like optical fibre, optical fibre cable, and services related to setting up control centres, installing equipment, commissioning networks, and performing other ancillary tasks that may be required to build network infrastructure for its clients. The appellant has a contract with the BSNL which is a government authority.
The Appellant said in its prior application that the development of the aforementioned network satisfies all other ancillary requirements for an activity to be considered a works contract.
Additionally, it made reference to Notification No.11/2017-Central Tax (rate), which was issued on June 28, 2017, and claimed that the works contract, it was planning to perform was covered by Entry No. 3(vi)(a), which was intended to be subject to Goods and Service Tax at a rate of 12%.
It may be noted that the Notification No 11/2017 mentioned by which concessional rate of 12% for specific works contract services provided to Government authority and Government be provided. However the same provision was withdrawn in another amendment to the notification on 31.12.2021 (w.c.f. 1.1.2022) and also entry 3(vi) omitted.
The bench observed in the first order of the AAR has held that supply of goods or services for ‘setting up of network’ would qualify as a Composite supply of works contract as defined in clause (19) of section 2 of the Central Goods and Services Tax Act, 2017.
On the other hand, the authorities determined that the Appellant’s operations would come under entry 3(xii) and be subject to GST at 18%. But, the appellant is upset that Entry No. Central 3(vi(a)) of Notification No. 11/2017- Central Tax (Rate) does not apply to their decision provided an instant supply. Hence, the appeal was submitted before the appellate tribunal.
The bench observed that the first order of MAAR has denied concessional rate of 12% under entry 3(vi)(a) on the grounds that the subject contract does not envisage original works and it is also seen that the contract is not in respect of a civil structure.
The word “original works” has been defined in the notification in order to qualify for the 12% concession rate. On close inspection of the aforementioned definition, the only things that are classified as original works are “all new constructions, erection, commissioning or installation of plant & machinery equipment or buildings”.
Further, the second order of the MAAR relied on its earlier order and ruled that on deletion of entry 3 (ii) of Notification the impugned activity would get covered under respective residual entry i.e. Sr. No. 3 (xii) of said Notification as amended by Notification No 03/2019 CGST (Rate) dated 29th March. 2019. Thus remarked that the MAAR applicable tax rate on said impugned activity would be 18%.
The bench of Dr. D. K. Srinivas (Central Tax) and Rajeev Kumar Mital (State Tax) further observed that the ruling of 18% GST rate is binding till 1st March 2019. However as per the notification, supply under the contracts from 1.4.2019 to12.2021 is 12%.
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