The Authority of Advance Ruling (AAR) ruled that an applicant who is supposed to execute an independent work can not be treated as a sub-contractor of the main contract. The construction services undertaken by the applicant does not fall under entry no. (iv)(a) and (ix) of the Notification No. 11/2017 dated June 28, 2017.
The National Highway Authority of India (NHAI) awarded a contract to the private entity wherein the Contractor has entered into an agreement with a Special Purpose Vehicle ‘Sadbhav Jodhpur Ring Road Private Limited (SPV) for the development of a four-lane highway as a part of the NHDP. The SPV has been granted a 17-year concession by NHAI for the four-laning of the specified highway. Under this agreement, the scope of work of the Contractor involves the four-laning of the highway, as well as highway facilities.
The Applicant is a proprietorship concern engaged in the business of construction and is proposing to submit a bid to the aforementioned Contractor for carrying out the work of construction of the project at the site, as detailed in Article XI of the Agreement.
The Applicant filed the application in order to determine whether Entry (iv) of Heading 9954 of the Rate Notification would be applicable to them for the contract proposed to be undertaken.
Notification No. 11/2017 dated June 228, 2017 pertained to the rate of GST applicable in relation to construction services with respect to ‘construction of roads’ has been given in Heading 9954 (iv) as 6% Similar rates have been prescribed under Rajasthan Goods and Services Tax Act, 2017 (CGST). On a combined reading of notifications issued under the CGST Act and RGST Act, the effective rate of tax comes to 12% on the construction of roads. The Rate Notification also notifies the applicable rate of GST for various kinds of construction services. As per the Rate Notification, the rate of tax for civil structures or any other original works has been specified at the rate of 6% under Heading 9954(vi), and the effective rate of tax comes to 12%.
The Authority consisting of members J.P. Meena and Hemant Jain ruled that an applicant who is supposed to execute an independent work can not be treated as sub-contractor of the main contract. The construction services undertaken by the applicant does not fall under entry no. (iv)(a) and (ix) of the Notification No. 11/2017 dated June 28, 2017.
“There established no nexus between the main contract awarded to the main contract awarded for construction of a road by the NHAI and the work proposed to be undertaken by the applicant,” the bench observed.
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