AAAR: 18% GST Applies on Work Contract Services to UP Jal Nigam (UPJN)

The Uttar Pradesh Appellate Authority for Advance Ruling (AAAR) in its recent ruling, held that 18% Goods and Services Tax (GST) would be subjected to be applied to work contract services to Uttar Pradesh Jal Nigam (UPJN).

The bench of Dr Uma Shanker and Ministhy S. sees that the Uttar Pradesh Jal Nigam (UPJN) is not a local authority however the same shall be entitled to a Governmental authority therefore the same draws 18% Goods and Services Tax (GST).

The petitioner, The Indian Hume Pipes Company Limited is engaged in the contracts for the construction of headworks sumps, jointing of pipelines, pump rooms, and maintenance of the whole work for water supply projects, sewerage projects, etc.

The services are furnished within the government bodies, or the entities or the authorities like M/s Uttar Pradesh Jal Nigam for the stated work.

The Uttar Pradesh Authority for Advance Ruling (AAR), the supply of services via the petitioner to M/s Uttar Pradesh Jal Nigam does not cover by GST Notification No. 15/2021-Central Tax (Rate), dated 18th November 2021 read with Notification NO. 22/2021-CentraI Tax (Rate) on 31st December 2021 and draws an 18% tax rate.

From the AAR decision, the petitioner would not be satisfied and appeals within the appellate authority. 

The petitioner announced that M/s Uttar Pradesh Jal Nigam is counted beneath the definition of ‘Local Authority’ as furnished under Section 2(69) of the CGST Act, 2017 and under the Notification 11/2017- Central Tax (rate) as revised, the local authority is to be taxed at 12% GST.

The decision of the Supreme Court is been witnessed by the bench for the case of the Union of India and others v. R.C. Jain and others specified the ingredients that need to get satisfied cumulatively within the authority could be stated to be the local authority, under the description of local authority specified under section 3(31) of the General clauses act. 

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The government should secure a corporate body entity with its own legal existence. Legally independent entities are required. The authority must operate in a certain region and is often fully or partially, directly or indirectly, chosen by the local area.

The authority should have some extent of independence and be able to make decisions about matters of policy that pertain to the area they are in charge of managing. The authority must be given the same government activities and responsibilities that are typically given to municipal organizations by statute.

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The authority must have the ability to impose taxes, rates, charges, or other forms of revenue in order to obtain money for the advancement of its initiatives and the completion of its projects. Essentially, such authority must be given control or administration of the finances.

For acknowledging the governmental authority the appellate authority saw that a body should be made by the act of the State Legislature or the Parliament, secure 90% or exceeding that of the government, and perform any duties allotted to a municipality under Article 243W of the Indian Constitution. The bench decided that the UPJN does not entitle as a ‘Local Authority but authorized as a Governmental Authority’ and draws an 18% Goods and Services Tax (GST). The appellate authority kept the decision of the Authority for Advance Ruling.