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Work contract services provided by M/s. Hombale Constructions and Estates Private Limited to National Centre for Biological Sciences (NCBS) for construction of Hostel building at NCBS Campus to be taxable at general rate of 18% GST and not 12% GST : Says AAR

Facts of the case:

The Applicant is M/s. Hombale Constructions and Estates Private Limited and entered into a works contract agreement with National Centre for Biological Sciences (NCBS) for construction of Hostel building at NCBS Campus in Bangalore.

NCBS began as a separate centre of Tata Institute of Fundamental Research (TIFR) which receives grants from the Department of Atomic Energy, Government of India.

Issue under consideration before AAR:

The applicant states that in this transaction, contractor and contractee have different opinions regarding the applicability of GST Rate on the transaction.

The applicant i.e. M/s. Hombale Constructions and Estates Private Limited is of the opinion that general GST Rate of 18% should be applicable in this case.

However NCBS, is of the opinion that since it is a fully funded aided institute administratively controlled by the Department of Atomic Energy (DAE), Government of India and the activities of NCBS are related to the educational research , special rate of 12% GST is applicable as per the Serial No.3 of item no.(vi) of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 as amended by Notification No.24/2017 - Central Tax (Rate) dated 21.09.2017. 

So applicant wants to know, whether he should charge 12% or 18% GST on this transaction.

Held by AAR:

NCBS has obtained registration under the GST Act as a Trust and the Council managing this organisation has three members appointed by the Government of India, one member appointed by the Government of Maharashtra, two members appointed by the Trustees of Sir Dorabji Tata Trust, the Director of the Institute (NCBS) is an ex-officio member and one co-opted member appointed by the Council. Hence four members are from the Government.

Special GST Rate of 12% is applicable if services are provided to “Central Government, State Government, Union Territory, a local authority, a Governmental Authority or a Government Entity”. 

It is clear at the outset itself that NCBS is not Central Government or State Government or Union Territory or a local authority or a Governmental Authority. The only question that needs to be examined is whether NCBS is a Government Entity or not? Clause (x) of paragraph 4 of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 (as amended by Notification No.31/2017 - Central Tax (Rate) dated 13.10.2017) defines Government Entity as under:

“(x) “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 90 per 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.”

Further it was observed that the NCBS began as a separate centre of TIFR in 1992, first in the Molecular Biology Unit at TIFR in Bombay, and then at the IISc Campus in Bangalore where its laboratories are established. The Government of India has agreed to fund the institute and the institute was to function as an “autonomous unit under the aegis of TIFR . . .”. Hence it is clear that NCBS is neither set up by an Act of Parliament or State Legislature nor is established by any Government.

Further the council which administers this institute has only four members appointed by the Government and hence the Government does not have more than 90% control over it.

One more important point to note is that this institute is not established to carry out a function entrusted by the Government.

Hence, for all these reasons, NCBS is not covered under the definition of a “Government Entity” as per the clause (x) of paragraph 4 of Notification No.11/2017- Central Tax (Rate) dated 28.06.2017.

18% GST shall be applicable on the transaction.


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Published by

TaxReply

on Jun 2, 2020

Comments


Perfectly right as per law
By: K T Satpte | Dt: Jun 2, 2020


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