The Gujarat Authority of Advance ruling (AAR) ruled that M/s. Railtel Corporation of India Ltd. does not fall under the category of ‘Government Authority’, so the applicant is liable to pay 12% GST.
The applicant, M/s. Shree Hari Engineers & Contractors are engaged in the business of providing works contract services. They have been awarded a Tender by M/s. Railtel Corporation of India Limited (A Government of India Undertaking, Ministry of Railways). The work to be performed is that of the Excavation of trenches and laying of OFC (Optical Fiber Cable) through ducts, testing, commissioning of OFC.
The applicant submitted that the work is an Original work, that the end use of the Optical Fibre Cable is for the purpose of connecting with the Gram Panchayat for socio-economic development hence it is not for the purpose of Commerce, Industry or any other business or profession. They have also submitted that M/s. Railtel Corporation of India Ltd. by whom they have been awarded the tender has 100% shareholding by Union Government and is a Government of India Enterprise.
The applicant sought the advance ruling on the issue of whether the Contract with Railtel Corporation of India Ltd. will fall under the Notification 24/2017-Central Tax (Rate) Sr.No.3 (iv)-Construction Service or Original Work to Government Authority, and the rate of tax applicable by 12%.
The Authority consisting of Sanjay Saxena and Mohit Agarwal ruled that the Contract of the applicant M/s. Shree Hari Engineers and Contractors with M/s. Railtel Corporation of India Ltd. does not fall under the Notification 24/2017-Central Tax (Rate) Sr.No.3 (VI)-Construction Service or Original Work to Government Authority.
The services provided by the applicant would be liable to tax at the rate of 12% in terms of entry No.3(vi) of Notification No:11/2017-Central Tax (Rate), AAR added.
“It cannot be construed that the optical fiber cables laid underground are meant predominantly for use other than for commerce, industry, or any other business or profession as stated by the applicant. Thus, the resultant structure that has arisen under the ground in the form of optical fiber cables due to the work executed by the applicant can be used for commerce, industry, or any other business or profession. Hence the fourth condition is not satisfied. Therefore, we are of the view that the contract in question does not satisfy the conditions envisaged in 3(vi) of Notification No.24/2017-Central Tax (Rate) dated 21.09.2017,” the Authority said.
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