MADHYA PRADESH POORV KSHETRA VIDYUT VITARAN COMPANY LIMITED

The Applicant is engaged in electrification work into the rural and urban areas for various ambitious projects of Central and State Government relating to strengthening of power distribution network and Rural Electrification for public welfare such as DDUGJY, IPDS, Saubhagya Yojna, ADB funded project, SSTD projects, FSP etc. For this purpose it also receives work contract services from vendors for supply and erection work under various projects.

The Applicant sought Advance ruling on "Whether clause(vi)(a) of Sr. No. 3 of table of Notification No. 11/2017-Central Tax (Rate) dated the 28th June, 2017 is applicable on the works contract services received by it and determination of liability to pay Tax?"

As per Notification No.24/2017 of entry no. (vi), notified concessional GST rate is 6% for the construction services provided to Central Government, State Government, Union Territory, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of given things.

Further Notification No. 31/2017, defines government entity as “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 the Government of Madhya Pradesh is having full control over the applicant M/s M.P. Poorv Kshetra Vidyut Vitran Co. Ltd. and the applicant is covered under the definition of Government Entity.

Further as Main objects to be pursued by the Company on its incorporation is to carry on the business of purchasing, selling, importing, exporting, selling, trading of electrical energy, including formulation of tariff, billing and collection thereof; to execute Power Purchase Agreements with the Bulk supplies, generating companies etc. Therefore  the benefit of Concessional Rate of 12%  is not available to the applicant on works pertaining to construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration, which are carried out in respect of projects under DDUGY, IPDS, ADB, SSTD, Saubhagya Yojna, FSP and all other schemes of governments as the same is undertaken for the business purpose.

In the instant case, the applicant had awarded work to the successful bidder for Supply of Materials and Erection respectively. Therefore, the contract entered by the applicant is squarely falls under the works contract and falls under entry no. (ii) of S. No. 3 of the table of notification no. 11/2017 – Central Tax (Rate), Dated – 28th June 2017 , the applicable rate of tax is 18% (9% under Central tax and 9% State tax).

 Crux: The Applicant is not entitled for the benefit of concessional rate of GST @12% (6% under Central tax and 6% State tax) for the said projects in terms of Notification No.24/2017-Central Tax (Rate) dated 21.09.2017 read with Notification No.31/2017-Central Tax (Rate) dated 13.10.2017.

The applicable rate of tax is 18% (9% under Central tax and 9% State tax).