The Bengaluru Authority for Advance Ruling (AAR) held that the supply of works contracts attracts 18% Goods and Service Tax (GST).
M/s Suez India Private Limited (applicant) is incorporated under the Companies Act 1956. The applicant is a leader in water resource management and entered into an agreement with Bengaluru Water Supply and Sewerage Board (BWSSB), an autonomous body formed by the state legislature.
The agreement is for the design, construction, operation, and maintenance of various water treatment and sewage treatment plants across Bengaluru.
The applicant has sought an advance ruling on the issue related to the GST rate of supply of work contracts services in relation to sewage treatment made by the applicant to BWSSB on or after 1st January 2022.
The applicant submitted before the authority that the service provided by BWSSB is taxable at 18% since BWSSB is a governmental authority under the Central GST (CGST) Act 2017. Further, it stated that BWSSB is a governmental authority under section 3 of the Bengaluru Water Supply and Sewerage Board Act, 1984.
As per the definition of governmental authority under the CGST Act, the authority should be established by the government for carrying out the functions entrusted to the municipality under article 243W or to the panchayat under article 243G of the constitution.
Thus applicant submits that they are providing service to BWSSB, a governmental authority, so they are liable to pay an 18% tax on the works contracts supplied to BWSSB.
The authority observed that notification No.11/2017 Central Tax (Rate) as amended Notification No.30/2017 defined governmental authority, so the applicant is a government authority as per the above notification.
Since the applicant is a governmental authority, as per 3(iii) of the notification 20/2017 Central Tax (rate), the applicant’s supply of work is eligible to GST 12%. However, 3(iii) of the notification 20/2017 Central Tax (rate) was omitted.
The work contract service supplied by the applicant to BWSSB was discussed 3(xii) of the notification 20/2017 Central Tax (rate). Hence, the 18% GST would attract the mentioned service.
After considering the submissions, AAR ruled that the work contract service supplied by the applicant about sewage treatment to BWSSB on or after 1st January 2022 attracts 18% GST.
For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@clear.in
DVSR Anjaneyulu known as AJ, is a Chartered Accountant by profession. Loves to listening to music & spending time with family and friends.
