Composite supply of works contract to Governmental Authority or Government Entity taxable @ 18%

 

Earlier, CBIC had issued Notification No. 11/2017- Central Tax (Rate), dated the June 28, 2017 (“Services Rate Notification”) w.r.t. the rates for supply of various services under Central Goods and Services Act, 2017 (“CGST Act”).

Following Notification has been issued in respect of the same.

Notification:

Now, the CBIC vide Notification No. 15/2021-Central Tax (Rate) dated November 18, 2021, has further amended the Services Rate Notification to, in a following manner:

• In S. No. 3 of the Services Rate Notification, related to the rates for supply of construction services, the words “Union territory, a local authority, a Governmental Authority or a Government Entity” in item no. (iii), (vi), (vii), (ix) and (x), has been substituted with “Union territory or a local authority” in order to make composite supply of works contract services supplied to Governmental Authority or Government Entity taxable @ 18%
• Omitted the condition specified in item no. (iii), (vi), (vii), (ix) and (x) under S. No. 3 of the Services Rate Notification regarding the services supplied to a Government Entity.

The Notification will come into force with effect from January 1, 2022.

Similar notifications have been passed under Integrated Goods and Services Tax Act, 2017 (“IGST Act”) and Union Territory Goods and Services Tax Act, 2017 (“UTGST Act”).

CGST (Rate) Notification: http://www.a2ztaxcorp.com/wp-content/uploads/2021/11/Notification-15-2021-CGST.pdf

IGST (Rate) Notification: http://www.a2ztaxcorp.com/wp-content/uploads/2021/11/Notification-15-2021-IGST.pdf

UTGST (Rate) Notification: http://www.a2ztaxcorp.com/wp-content/uploads/2021/11/Notification-15-2021-UTGST.pdf

Our comments:

Similar changes have been made in Serial No. 3 (i.e., pure services) and 3A (i.e., Composite supply of goods and services in which the value of supply of goods constitutes not more than 25% of the value of the said composite supply) Notification No.12/2017- Central Tax (Rate), dated the June 28, 2017 (“Services Exemption Notification”) vide Notification No. 16/2021-Central Tax (Rate) dated November 18, 2021 to exclude Governmental authority and Government Entity. Thus, services mentioned in Serial No. 3 and 3A provided to Governmental authority and Government Entity shall no longer be exempt from January 1, 2022 and shall attract GST as applicable under Services Rate Notification.

CA BIMAL JAIN