Order date – 08 December 2022

Key Pointers –

• The Applicant, M/s. Shree Constructions, are in the business of works contracts wherein they are executing construction of building on the land provided by the Telangana State Industrial Infrastructure Corporation Limited (TSIICL).
• The applicant is constructing ware houses and cold storage at primary processing centre in Jillela Village of Rajanna Siricilla District. The applicant also submitted that TSIICL will be letting out godowns for rent and that this amounts to business activity. TSIICL is wholly owned by the Government of Telangana and therefore the supply of works contract service by them is to a Government entity.
• Whether the rate applicable for the works contract service provided is 12% as the for Telangana State Industrial Infrastructure Corporation Limited (TSIICL) is wholly owned by the Government of Telangana or 18% as the for Telangana State Industrial Infrastructure Corporation Limited is a business entity and collecting rent for letting our Godown/Building from its customers?
• The AAR observed that from the definitions it is clear that Telangana State Tourism development corporation limited is a Government entity. However the original notification No.11/2017 applied concessional rate of tax to Government Entities & Governmental Authorities @6% of CGST & SGST each only if such construction is predominantly for use other than for commerce, industry or any other business or profession.
• As seen from the agreement contract, the contract is for “construction of ware house & cold storage at primary processing centre in Jillela Village, Tangalapally Mandal of Rajanna Sircilla District. Further, the applicant has also averred that these godowns will be given on rent by TSIICL. Therefore, the concessional rate of tax is not applicable to this transaction and tax payable will be 9% CGST & SGST each.
• Further, this entry was amended in Nov’ 2021 vide Notification No. 15/2021 dt. 18.11.2021 and the phrases ‘Government Entity’ & ‘Governmental Authority’ were deleted from the Entry at S.No. 3(vi) of Notification No. 11/2017 with effect from 01.01.2022. Thus the works executed even for the ‘Governmental Entity or ‘Government Authority’ will be taxable @9% CGST & SGST each.