GST – AAR Telangana: Works contract service provided to Telangana State Tourism Development Corporation Limited (Government entity) by way of construction of building are in the nature of activities engaged as public authorities, hence attract concessional rate of tax 12% till 31.12.2021 and 18% from 01.01.2022 [Order attached]
Order date – 08 December 2022
Key Pointers –
- The Applicant, M/s. Shree Constructions are in the business of works contracts wherein they are executing some works on the land provided by the Telangana State Tourism Development Corporation Limited (TSTDCL).
- The TSTDCL is wholly owned by the Government of Telangana and incorporated on 28 Aug, 2014 under the Companies Act. It's a public unlisted company and is classified as 'company limited by shares'.
- Whether the rate applicable for the works contract service provided to the Telangana State Tourism Development Corporation Limited by way of construction of building on their land is 12% as the Telangana State Tourism Development Corporation Limited is wholly owned by the Government of Telangana or 18% as the Telangana State Tourism Development Corporation Limited is a business entity and collecting fee from its customers?
- The AAR observed that the applicant received purchase orders from Telangana State Tourism Development Corporation Limited for executing 4 construction contracts, the first 2 contracts are in the nature of activities engaged as public authorities. In the later 2 contracts the Telangana State Tourism Development Corporation Limited will generate revenue by way of commerce/business activities.
- It is also finds that in view of the definition of notification No. 31/2017 – Central Tax (Rate) dt 13.10.2017 in Notification No. 11/2017 as clauses (ix) & (x) to explanation at Para 4, it clear that Telangana State Tourism development corporation limited is a Government entity and the first 2 contracts fall under the Entry at S.No. 3(vi) of Notification No. 11/2017 and therefore attract a concessional rate of tax in the capacity of contracts made to Government entity @6% CGST & SGST upto 31.12.2021 as this entry was amended to exclude Government Entity & Government authority vide Notification No. 15/2021 dt:18.11.2021 so that now the rate of tax for works executed from 01.01.2022 is 9% CGST & SGST each.
- However for the next 2 contracts it is seen that the structures constructed by the applicant will be used for the purpose of business and therefore these contracts are not qualified for concessional rate of tax made to Government Entity. Hence the rate of tax applicable on supply of these contract services is 9% CGST & SGST each from the inception of the contracts.