18% Goods and Services Tax (GST) is applicable on Electrical works contracts accomplished to the government corporations the Telangana Bench of J. Laxminarayana and B. Raghu Kiran, IRS of Authority for Advance Ruling (AAR) stated.
The applicant, M/s. Sealwel Corporation Private Limited has the business of executing ‘works contracts’ as described under Section 2(119) of the Goods and Services Tax Act 2017. Under the Act, it is a registered taxable individual. It is carryon on the identical works contracts and other works including Telangana State Southern Power Distribution Company Limited (TSSPDCL).
The work contract provided to the Government Corporations such as TSSPDCL, and TSNDPDCL, and similar to that of all Government/Government Agencies/ Government Entity and therefore the tax rate to be adopted is 12% GST only, the petitioner questioned.
The advantage of 12% GST could get claimed when a contactee would not be a Government, Government Agency, or Entity when a provided work is being performed via the funds of the Government/ Government Agency or Entity.
The personal hearing is been attended by the Authorised representative of the applicant D. Dastagiri (Accountant) and then made his submissions.
The bench witnessed that from the schedule of “Shareholding of Promoter” of the annual accounts of M/s Telangana State Southern Power Distribution Company Limited (TSSPDCL) that 100% of shares of the company were carried via the Governor of Telangana.
This shows that the Government of Telangana has 100 percent rule over TSSPDCL and hence TSSPDCL is clearly counted beneath the definition of “Government Entity”. Further, it held that works were utilized for commercial/business activities for the facts and circumstances, and as per that the same would get taxed at an 18% rate (9% CGST + 9% SGST) under Goods and Services Tax.
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It was further stated that the impugned works were done for business/commercial reasons, and hence the advantage of the Concessional Rate of 12% did not apply to the services provided by the applicant.