Tamil Nadu AAR: Work Contract Services by Applicants to Water Supply & Drainage Board Liable for 18 Percent GST

Tamil Nadu AAR: Work Contract Services by Applicants to Water Supply & Drainage Board Liable for 18 Percent GST

For government authority, the facilities were not covered by the lower tax rate of 12 percent

The Tamil Nadu bench of the Authority for Advance Rulings (AAR) has ruled that the works contract services supplied by the applicant to the Tamil Nadu Water Supply and Drainage Board was liable for 18 percent Goods and Service (GST) Tax.

The Tribunal held that the TWAD Board was a ‘governmental authority’ as defined under the GST law. Therefore, the services supplied to it were not covered by the lower tax rate of 12 percent that applied to works contracts supplied to the Central and state governments, union territories, and local bodies.

Indian Hume Pipe Company Limited, the applicant, specialized in undertaking contracts for various construction projects related to water supply and drainage facilities. Its works included constructing headworks, sumps, pump rooms, laying and jointing pipelines, and overseeing the commissioning and maintenance of projects.

It handled projects for water supply and sewerage facilities, with its clientele primarily comprising government bodies, entities, authorities, and local bodies. Among them, one significant client was the TWAD Board.

To clarify the tax implications of their services, the applicant sought an advance ruling. It sought a determination of whether the services provided to the TWAD Board fell under the provisions of Notification No.15/2021-Central Tax (Rate) of 18 November 2021, read with Notification No. 22/2021-CT (Rate) of 31 December 2021.

The Coram of R. Gopalsamy (Additional Commissioner) and N. Usha (Joint Commissioner) noted that as per Notification No.22/2021-CT, issued to replace Notification No.15/2021-CT, the lower tax rate of 12 percent specified in Entry 3(xii) of Notification No.11/2017-CT of 28 June 2017, was limited to work contracts supplied to the Central and state governments, union territories, and local authorities. The term 'governmental authority or ‘government entity' was omitted.

The AAR observed that the TWAD Board operated with full financial support from the government and was under its control, overseen by appointed directors. The primary mandate of the Board was the development of water supply and sewage facilities within the municipalities and panchayats across the State of Tamil Nadu.

Thus, the bench held that since the Board qualified as a 'governmental authority', the applicant's services were categorized as supplied to a 'governmental authority’. It added that the works contract services supplied by the applicant to the TWAD Board were liable for tax at 18 percent.