No Separate GST Registration Required in Karnataka for Works Contract: AAR

The Karnataka Authority of Advance Ruling (AAR) ruled that no separate GST registration will be required for executing works contract services in a state other than the registered state of business. The AAR passed the order on GEW (India) Pvt. Ltd., a sub-contractor with a registered office in Pune and unit in Noida. They had sought clarification about an infrastructure project being carried out in Karwar, Karnataka. 

The private limited company had been given a works contract from Larsen & Toubro to set up a steel structure for the harbouring of ships at the Karwar naval base. Their unit in Noida fabricated the metal that was to be installed by casting and bolting it to the ground at the site in Karwar. The supply was a composite supply that involved both goods and services and entailed the installation of a steel structure to harbour ships. 

The applicant GEW (India) Pvt. Ltd. had sought this advance ruling to determine whether they were required to get registered in Karnataka to execute this works contract. The Karnataka AAR noted that the company had only one principal place of business, which was in Noida, and a GST registration was already obtained for the same. Hence, there was no separate requirement for registration in Karnataka for executing the works contract. The company could issue an invoice from its Noida office with the place of supply as Karnataka and charge Integrated Goods and Services Tax (IGST).

However, the AAR also held that in the absence of an office in Karnataka, the company would not register as an Input Service Distributor (ISD). This means that they would not pass on the input tax credit on goods and services received from their vendors at the site to their Noida office.

This ruling clarifies companies who intend to take up work contracts in different states but do not intend to set up a permanent establishment apart from their registered office.

For any clarifications/feedback on the topic, please contact the writer at athena.rebello@cleartax.in

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