Order date – 29 March 2023

Facts –

• The Appellate, M/S SHREEJI EARTH MOVERS, is a registered firm engaged in providing works contract service directly to sub-contractors.
• The firm sought a ruling from the Gujarat Authority for Advance Ruling on the rate of tax liability on its services, classification of its services for execution of irrigation, construction, and maintenance work, and whether to charge 12% or 18% GST.
• The GAAR ruled that the rate of GST on the subject supply is 18% for services supplied by the sub-sub-contractor to sub-contractor M/s Radhe and supply.
• Shreeji Earth Movers filed an appeal against this ruling on the grounds that it is a works contractor providing composite supply of works contracts as defined in clause 119 of Section 2 of CGST Act, 2017, and that the rate applicable to it is 12% under Notification No. 20/2017-CT (R) dated 22.08.2017.

Issue –

• Whether the applicable rate of GST to the Appellate be 12% or 18%?

Order –

• The court observed that the benefit of concessional rate is available only upon strict compliance of conditions mentioned in the Notification, and taxes are to be determined as per the taxing statue. The burden of proving applicability of exemption notification is on the assessee.
• It is seen that the appellant is a sub-contractor of the sub-contractor of the main contractor. For availing the benefit of the concessional rate of 12% in terms of the provisions mentioned in the Notification No. 11/2017-CT(R) as amended, it is important that both the criterion, i.e. the nature of supply of service to the specified authority (as per Notification No. 20/2017-CT(R) ) and the status of service provider (as per Notification No. 1/2018-CT(R) ) should be fulfilled. However, as there is no direct relation between the main contractor and the appellant and the appellant and the Governmental authority. Therefore, it is clear that the appellant does not fulfill the criteria mentioned in Sr. No 3(ix) of Notification No. 1/2018-CT(R) dated 25.01.2018
• It held that the appellant is not eligible for the concessional rate of GST @12% as their activity is not covered under entry No. 3(iii) or under 3(ix) of Notification No. 11/2017-CT(R) as amended. Hence, GST is leviable @18% under Entry No 3(ii) of Notification No.11/2017-CT(R) dated 28.06.2017 further amended vide Entry No.3(xii) of Notification ibid as amended.
• Order of Gujarat Authority for Advance Ruling is upheld.

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