The Karnataka Appellate Authority for Advance Rulings (AAAR) has upheld that the institutions set up to carry out functions entrusted by municipalities are governmental authority and attract a GST of @18%.
The applicant, the Indian Hume Pipe Company Limited HAD undertaken a contract for construction of Head Works, Sumps, Pump Rooms, laying, jointing of pipeline and commissioning and maintenance of the entire work for Water Supply Projects / Sewerage Projects / Facilities. Their major customers include Government Bodies / Entities / Authorities / Local Bodies/ Municipalities.
The Applicant was awarded a contract by Bangalore Water Supply and Sewerage Board (BWSS) to execute the work of Rehabilitation/ Remodelling/ Replacement of sewer line.
It was submitted by Manish R. Goel on behalf of the assessee, that the BWSSB was a Board set up by The Bangalore Water Supply and Sewerage and the same could not be considered a State Government. But as per section 3 of BWSSB Act 1964, all the members of BWSSB were appointed by the State Government. Since the BWSSB was set up by the Act of State Legislature to carry out a function entrusted to a Municipality under article 243W of the Constitution, the same would be considered a Governmental Authority.
The Division Bench of Ranjana Jha and Shikha C upheld the decision of Karnataka Authority for Advance Ruling (AAR) and held that,
“In so examining, we find that BWSSB does not qualify as a ‘local authority’ as defined in Section 2(69) of the CGST Act. Accordingly, we hold that with effect from 1″ January 2022, the Appellant is not eligible for concessional rate of tax of 12% in terms of entry Sl.No 3(iii) of Notification No 11/2017 CT (Rate) dated 28-06-2017 as amended by Notification No 15/2021 CT (Rate) dated 18-11-2021 on the supplies made to BWSSB. We uphold the order passed by the lower Authority with regard to the rate of applicable tax on the supplies of works contract service made by the Appellant to BWSSB with effect from 1″ January 2022.”
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