WORKS CONTRACT SERVICES TO GOVERNMENT – CHANGES W.E.F. 01.01.2022
An important amendment is made in Notification No. 11/2017-CT(R) dated 28.06.20217 and in Notification No. 12/2017-CT (R) dated 28.06.2017 regarding taxability of Works contract services provided to the Government.
As per amendment in Notification No. 11/2017-CT(R) dated 28.06.2017 in following entries the word Governmental Authority and Government Entity are removed which means that 18% rate will be applicable in case of following services provided to Governmental Authority and Government entity-
(1) Entry No. 3(iii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied to the Central Government, State Government, Union territory or a Local authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of, -
- a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);
- canal, dam or other irrigation works;
- pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal.
(2) Entry No. 3 (vi) Composite supply of Works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above provided to the Central Government, State Government, Union territory or a Local authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –
(a) a civil structure or any other Original works meant predominantly for use other than for commerce, industry, or any other business or profession;
(b) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or(iii) an art or cultural establishment; or
(c) a Residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Services Tax Act, 2017.
Explanation. - For the purposes of this item, the term ‘business’ shall not include any activity or transaction undertaken by the Central Government, a State Government or any Local authority in which they are engaged as public authorities.
(3) Entry No. 3 (vii) Composite supply of Works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, involving predominantly earth work (that is, constituting more than 75per cent. of the value of the works contract) provided to the Central Government, State Government, Union territory or a Local authority.
(4) Entry No. 3 (ix) Composite supply of Works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 provided by a sub-contractor to the main contractor providing services specified in item (iii) or item (vi) above to the Central Government, State Government, Union territory or a Local authority.
(5) Entry No. 3 (x) Composite supply of Works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 provided by a sub-contractor to the main contractor providing services specified in item (vii) above to the Central Government, State Government, [Union territory or a Local authority.
As per amendment in notification no 12/2017-CT (Rate) dated 28.06.2017 in following entries the benefit of exemption will not be available to the Governmental Authority and Government entity-
(1) Entry No. 3 Pure services (excluding Works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or Local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.
(2) Entry No. 3A Composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent. of the value of the said Composite supply provided to the Central Government, State Government or Union territory or Local authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.
Following terms are important for the purposes of these entries which are-
(1) Central Government
(2) State Government / Union Terrority
(3) Local Authority
(4) Governmental Authority, and
(5) Government Entity.
We shall discuss all these terms herein below:-
(1) Central Government – Central Government is not defined under GST law. Central Government directly function through various ministries such as-
1. Ministry of Agriculture
2. Ministry of Panchayati Raj
3. Ministry of Home
4. Ministry of Defense
5. Ministry of Water supply
6. Ministry of Civil Aviation
7. Ministry of Finance
8. Ministry of Commerce
9. Ministry of Corporate Affairs
10. Ministry of food & civil supplies
11. Ministry of Education including Central Govt. Schools
12. Ministry of Public Health etc. etc.
This is a not an exhaustive list. This is only directory and all the Central Government departments are covered under Central Government.
(2) State Government – State Government is also not defined under GST law-
Like Central Government all the departments directly functioning under State Government ministries are covered under State Government. Some of the important departments are-
1. Public Works Department (PWD)
2. Public Health Engineering Department (PHED)
3. Water Works
4. Irrigation Department
5. Education department including all State Govt. Schools & Colleges.
6. All Ministries etc.
(3) Local Authority
It is defined under GST Act. It is defined u/s 2(69) of the CGST Act, 2017 as below:-
local authority means–
(a) a “Panchayat” as defined in clause (d) of article 243 of the Constitution;
(b) a “Municipality” as defined in clause (e) of article 243P of the Constitution;
(c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund;
(d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006;
(e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution;
(f) a Development Board constituted under article 371 and article 371J of the Constitution; or
(g) a Regional Council constituted under article 371A of the Constitution;
As per above definition following are covered under Local authority
1. All Panchyat Samiti (Gram Panchyat)
2. All Municipality
3. Zila Parishad, District board
4. Cantonment Board as defined in sec. 3 of the Cantonment Act, 2006. These Boards work under Ministry of Defense as area for forces.
5. Regional council or a District Council constituted under sixth schedule to the Constitution (sixth schedule provides a list of ten tribal areas in Assam (3), Meghalaya (3), Tripura (1) and Mizoram (3).
6. Development Board constituted under Article 371 – Article 371 state that land and its resources in the state belongs to the people and not the Government. Article 371 gives the power to the President of India to establish separate development boards for Vidarbha, Marathwara regions of Maharashtra and the rest of the state and Saurashtra, Kutch and rest of Gujrat.
6A. Development Board constituted under Article 371J of the Constitution – article 371J grants special status to six backward districts of Hyderabad-Karnataka Regions.
7. Regional Council constituted under Article 371A of the Constitution – Article 371A is special provision with respect to state of Nagaland.
(4) Governmental Authority – As per point 4(ix) of the Notification No. 11/2021-CT (Rate) dated 28-06-2017-
Governmental Authority” means an authority or a board or any other body, -
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government,
with 90per cent. or more participation by way of equity or control, to carry out any function entrusted to a Municipality under article 243W of the Constitution or to a Panchayat under article 243G of the Constitution.
Some example of Governmental Authority
- Rajasthan Housing Board
- Jaipur Development Authority
- Urban improvement Trust (UIT)
- Bridge Development Corporation
- National Highway Authority of India (NHAI)
- Education Boards i.e. Rajasthan Education Board etc.
(5) Government Entity – Government entity is defined under point 4(x) of the Notification No. 11/2017-CT (Rate) dated 28.06.2017 as below:-
“Government Entity” means an authority or a board or any other body including a society, trust, corporation,
i) set up by an Act of Parliament or State Legislature; or
ii) established by any Government,
with 90per cent. or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Territory or a Local authority.
As per above definition any authority or a board or any other body including a society, trust, corporation carry out any function other than those covered under article 243W and 243G of the constitution are covered under the definition of Government Entity. All the corporations and Boards where 90% or more participation is of Government will be called the Government Entity – some examples are-
1) Vidhut Companies in a state
2) Road Transport Corporations
3) State Financial Institution
4) City and Development Corporation of Maharashtra Ltd. = Kapil Sons Explosives LLP [2022] 45 TAXLOK.COM 051 (AAR-Maharashtra)
Functions covered under article 243W
THE FUNCTIONS ENTRUSTED TO A MUNICIPALITY UNDER THE TWELFTH SCHEDULE TO ARTICLE 243W OF THE CONSTITUTION ARE AS UNDER:
TWELFTH SCHEDULE
(Article 243W)
(a) Urban planning including town planning.
(b) Regulation of land-use and construction of buildings.
(c) Planning for economic and social development.
(d) Roads and bridges.
(e) Water supply for domestic, industrial and commercial purposes.
(f) Public health, sanitation conservancy and solid waste management.
(g) Fire services.
(h) Urban forestry, protection of the environment and promotion of ecological aspects.
(i) Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded.
(j) Slum improvement and upgradation.
(k) Urban poverty alleviation.
(l) Provision of urban amenities and facilities such as parks, gardens, playgrounds.
(m) Promotion of cultural, educational and aesthetic aspects.
(n) Burials and burial grounds; cremations, cremation grounds; and electric crematoriums.
(o) Cattle pounds; prevention of cruelty to animals.
(p) Vital statistics including registration of births and deaths.
(q) Public amenities including street lighting, parking lots, bus stops and public conveniences.
(r) Regulation of slaughter houses and tanneries.
Functions covered under article 243G
FUNCTIONS ENTRUSTED TO PANCHAYAT UNDER ARTICLE 243G OF THE CONSTITUTION
ELEVENTH SCHEDULE
(Article 243G)
1. Agriculture, including agricultural extension.
2. Land improvement, implementation of land reforms, land consolidation and soil conservation.
3. Minor irrigation, water management and watershed development.
4. Animal husbandry, dairying and poultry.
5. Fisheries.
6. Social forestry and farm forestry.
7. Minor forest produce.
8. Small scale industries, including food processing industries.
9. Khadi, village and cottage industries.
10. Rural housing.
11. Drinking water.
12. Fuel and fodder.
13. Roads, culverts, bridges, ferries, waterways and other means of communication.
14. Rural electrification, including distribution of electricity.
15. Non-conventional energy sources.
16. Poverty alleviation programme.
17. Education, including primary and secondary schools.
18. Technical training and vocational education.
19. Adult and non-formal education.
20. Libraries.
21. Cultural activities.
22. Markets and fairs.
23. Health and sanitation, including hospitals, primary health centres and dispensaries.
24. Family welfare.
25. Women and child development.
26. Social welfare, including welfare of the handicapped and mentally retarded.
27. Welfare of the weaker sections, and in particular, of the Scheduled Castes and the Scheduled Tribes.
28. Public distribution system.
29. Maintenance of community assets.
In nut shell we can say that concessional rate of 12% is applicable only in following cases-
1) Central Government
2) State Government
3) Union Terriority
4) Local Authority – e.g. Panchyat Samiti, Municipality, Zila Parishad and District Boards.
Also See Article in Hindi |