GST rates on construction services provided to a government entity in relation to construction of Ropeway on turnkey basis
CBIC issued Circular No. 152/08/2021- GST dated 17th June, 2021 to clarify whether services supplied to a Government Entity by way of construction such as of “a ropeway” are eligible for concessional rate of 12% GST under Entry no. 3(vi) of Notification No. 11/2017- CT(Rate) dated 28.06.2017. The clarification is as below:
1. According to Entry No. 3(vi) of Notification No. 11/2017- CT (Rate) dated 28.06.2017, GST rate of 12% is applicable, inter alia, on-
“(vi) Composite supply of works contract as defined in clause (119) of section 2 of the CGST 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, a local authority, a Governmental Authority or a Government Entity, 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.”
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2. Thus, the said Entry No. 3(vi) does not apply to any works contract that is meant for the purposes of commerce, industry, business or profession, even if such service is provided to the Central Government, State Government, Union Territory, a local authority, a Governmental Authority or a Government Entity. The doubt seems to have arisen in the instant cases as Explanation to the said entry states, 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. However, this explanation does not apply to Governmental Authority or Government Entity, as defined in clause (ix) and (x) of the explanation to the said notification.
3. Further, civil constructions, such as rope way for tourism development shall not be covered by the said entry 3(vi) not being a structure that is meant predominantly for purposes other than business. While road, bridge, terminal or railways are covered by entry No. 3(iv) and 3(v) of the said notification, structures like ropeway are not covered by these entries too.
4. Therefore, works contract service provided by way of construction such as of ropeway shall fall under entry at Sr. No. 3(xii) of Notification No. 11/2017- CT (Rate) and attract GST @ 18%.
