Karnataka AAR: Works Contract Services to Slum Development Board Attracts 18% GST

Karnataka Authority of Advance Ruling (AAR) has ruled that works contract services for Pradhan Mantri Awas Yojana (PMAY) and constructing a police station attract 18% Goods and Services Tax (GST).

The applicant is a civil works contractor and provides works contract services. The applicant sought an advance ruling regarding the works contract services provided to:

  • Karnataka Slum Development Board (KSDB) under PMAY as the main contractor.
  • Belgaum Smart City Corporation Limited (BSCCL) as the main contractor.
  • Karnataka Housing Board, Bangalore, for the construction of a police station

Also, the applicant sought the GST rate if the above services if he provided them as a sub-contractor.

The AAR held that only the composite supply of works contract provided by a sub-contractor to the main contractor who provides services specified in item 3(iii) or item 3(vi) to the Central Government, State Government, Union territory or a local authority is liable to tax at 12% GST. 

However, the services provided by the applicant are not covered under 3(iii) to 3(vi) and fall under entry 3(xii) of Notification No.11/2017–Central Tax (Rate), dated 28th June 2017 and further amended through Notification No.03/2022–Central Tax (Rate), dated 13th July 2022 and is taxable at 18% GST.

Hence, the two-member AAR bench ruled that works contract services executed to the KSDB under PMAY, as the main contractor or sub-contractor, attract 12% GST till 17the July 2022 and is liable for 18% GST w.e.f 18th July 2022.

Also, the AAR ruled that the works contract service provided to BSCCL either as main contractor or sub-contractor and Karnataka Housing Board for construction of police station will also fall under the same category and attract 12% GST till 17th July 2022, and after that, 18% GST.

For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@clear.in

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