GST applicable on Works Contract for Constructing Civil Structure for Govt Entity: AAR [Read Order]

The Authority for Advance Ruling ( AAR ), West Bengal has held that 18% GST would be applicable in case of works contracts for constructing Civil Structure for Government Entity.

According to the applicant, the construction of the Multi-modal IWT Terminal amounts to the composite supply of works contract service. The contractee is a Government Entity, a statutory body established under the Inland Waterways Authority of India Act, 1985, and functions under the administrative control of the Ministry of Shipping, Government of India.

The applicant claimed that since it is a statutory body, the supply is taxable @12% under the GST Act in terms of Serial No. 3(vi) of the Rate Notification.

The authority noted that from the very nature of the project that it creates infrastructure for commercial utilization of the national waterway. The predominant use of the infrastructure so created is, therefore, for facilitating commerce and business. IWAI may, as indicated in its letter to the GST Council referred to above, levy and collect fees and charges from the users of the infrastructural facilities being created.

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The authority observed that the IWAI is clearly not the Government of India, but a Government Entity having no sovereign authority to collect Government revenue.

“Moreover, contrary to what the Applicant claims, the user fees that IWAI collects is not credited to the Consolidated Fund of India and is, therefore, not revenue but proceeds from business as defined under section 2(17) of the GST Act. It is, therefore, evident that the Applicant is supplying works contract service for an original work that is meant for commerce and business. It does not, therefore, satisfy the conditions laid down under Serial No. 3(vi)(a) of the Rate Notification. The Applicant’s supply of works contract service for construction of the Multi-modal IWT Terminal at Haldia, therefore, attracts GST at 18% rate under Serial No. 3(xii) of the Rate Notification.”