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Sub-contractor of a sub-contractor is not eligible for concessional GST rate of 12% under Notification No.11/2017- CT(R): AAR 

There is no privity of contract between main contractor and 2nd sub-contractor: Says AAR


The applicant is a proprietary concern registered under GST and is engaged in the business of execution of works contracts relating to electrical works and electrical infrastructure.

The applicant has sought advance ruling in respect of the following question:-

1. Whether concessional rate of GST shall apply to the sub-contractor who is sub-contracted from a sub-contractor of the main contractor, the main contractor being provider of works contract to a Government entity?

The applicant states that he has been allocated electrical subcontractor works by the first sub-contractor M/s. Shaaz Electricals which in turn is sub-contracted by main contractor M/s. Ocean Construction (India) Pvt. Ltd., who have been awarded the contract by M/s. Karnataka Neeravari Nigam Ltd.

The applicant also states that the nature of works delegated to the main contractor, M/s. Ocean Construction (India) Pvt. Ltd. is for the construction of Channa basaveshwara Lift Irrigation Scheme which includes preparation of plans and drawings, construction of intake canal, jack well cum pump house, Rising main, Electrical sub-station, erection of vehicle turbine pumps, including commissioning of entire project, including maintenance for 5 years period on turnkey basis.

M/s. Karnataka Neeravari Nigam Ltd is being registered as a company which is wholly owned Government of Karnataka, as per the provisions of the Companies Act, 1956 with effect from 9th December 1998 for civil, electrical and mechanical works.

The applicant is of the opinion that the services provided by him falls under clause (ix) to serial number 3 of Notification 11/2017-Central Tax (Rate) dated 28-06-2017, as amended by Notification No.01/2018-Central Tax (Rate) dated 13-10-2017 and the concessional rate of tax @12% shall apply to him.

Description of the Service

Rate (per cent.)


“(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-contract or to the main contractor Providing services specified in item (iii) or item (vi) above to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity.


Provided that where the services are supplied to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union territory or local authority, as the case maybe.


In the instant case, it is seen that there is no privity of contract between the applicant and M/s. Karnataka Neeravari Nigam Ltd. The original contract is awarded by M/s. Karnataka Neeravari Nigam Limited to M/s. Ocean Constructions (India) Private Limited. Hence as per the notification, any subcontractor providing services to Main contractor by executing the works mentioned in the serial number 3 of clause (iii) and clause (vi) which is exclusively covered under the clause (ix) of serial no.3 of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 (as amended from time to time) will be exempted from payment of GST subject to M/s. Karnataka Neeravari Nigam Limited is qualified to be called as a Government Entity. In the present case, it is M/s. Shaaz Electricals who is the sub-contractor who is covered under the said entry. As there is no privity of contract between the applicant and M/s. Ocean Constructions (India) Private Limited and the contract is between the applicant and M/s. Shaaz Electricals, the services provided by the applicant is not covered under the said entry.

The composite supply undertaken by the applicant under question is not covered under entry no. 3(iii) or 3(vi) or 3(ix) of the Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 as amended and hence applicant is not eligible to charge GST at a rate of 6% under CGST Act and 6% under the KGST Act. The applicant has to discharge tax rate CGST @9% and KGST @ 9% each under the provision of the GST Acts.


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Published by


on Apr 20, 2021


Again one more Wrong design from GST department, main contract is nill rated means, how middle man can pay tax.
By: Krishna Poojai | Dt: Apr 20, 2021
Clause (ix) to Serial No. 3 of principal Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017 was amended by Notification No. 1/2018-Central Tax (Rate), dated 25.01.2018. The date of the amending Notification is incorrectly mentioned as 13.10.2017 in paragraph 5.6 of the Order.
By: Arindam Sarkar | Dt: Apr 24, 2021

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