Contract for Construction of Nuclear Fuel Complex for provision of Electricity is ‘Works Contract’ subject to 18% GST: AAR [Read Order]

The Rajasthan Authority for Advance Ruling [AAR] in an application filed by M/s Tata Projects Ltd. held that the works contract service for construction of Nuclear Fuel Complex supplied by the applicant for the provision of electricity shall be subject to 18% GST.

The issue before the present Authority was the determination of the liability to pay tax on the goods and services provided by the applicant to the government under a contract “for civil, structural and PH works for plant and Non Plant Buildings (both RCC and Pre-Engineered Buildings) along with other allied structures for Prrr & ZFF Facilities at Nuclear Fuel Complex” (NFC).

It has been submitted by the applicant that tax rate of 12% is applicable in case of Composite supply of Works Contract as defined under Section 2(119) provided to the Central Government, State Government, Union Territory, a Local Authority, etc. by way of construction, erection, commissioning, installation, etc. of (a) civil structure or any other original works meant predominantly for use other than for commerce, Industry or any other business or profession;…

The Bench comprising of Members J.P. Meena and Hemant Jain analyzed the conditions which are required to be fulfilled in order to fall within the notification. The analysis satisfies the first essential condition whereby Nuclear Fuel Complex qualifies as ‘Central Government’ since the same is managed by Department of Atomic Energy and the same being under the authority of Prime Minister’s Office and Atomic Energy Commission.

In order to determine whether Supply involved shall qualify as ‘Composite Supply of works contract’, Section 2(119) was analyzed. The result of the supply of works contract i.e. ‘Immovable Property’ was stressed upon. It was held that since all the civil works will give rise to immovable property, hence the same would be covered within the definition of Works Contract.

It was hence held by the Bench that the activity is a ‘Works Contract supply’ also for the reason that the same does not fall within the limitation placed by the notification. However, it was held that the activity will fall under the definition of ‘business’ as NFC is engaged in the manufacture and enrichment of fuel which will ultimately be used for production of electricity which is a ‘commercial activity’. A GST of the rate 18% (SGST 9% + CGST 9%) shall be applicable to the supply.