Clarification regarding rate of tax applicable on construction services provided to a Government Entity, in relation to construction such as of a Ropeway on turnkey basis-

Circular Number 152/08/2021-GS dated 17th June 2021

1. Reference has been received by the Board for a clarification whether services
   supplied to a Government Entity by way of construction such as of “a ropeway” are
   eligible for concessional rate of 12% GST under entry No. 3 (vi) of Notification No.
   11/2017- CT (R) dt. 28.06.2017. On the recommendation of the GST Council, this issue
   is clarified as below.

2. According to entry No. 3(vi) of notification No. 11/2017-CT (R) dated
   28.06.2017, GST rate of 12% is applicable, inter alia, on-
   “(vi) Composite supply of works contract as defined in clause (119) of section 2 of the Central
   Goods and Services Tax Act, 2017, (other than that covered by items (i), (ia), (ib), (ic), (id),
   (ie) and (if) above) provided to the Central Government, State Government, Union Territory,
   a local authority a Governmental Authority or a Government Entity, by way of construction,
   erection, commissioning, installation, completion, fitting out, repair, maintenance,
   renovation, or alteration of –
   (a) a civil structure or any other original works meant predominantly for use other
   than for commerce, industry, or any other business or profession; “

3. Thus, said entry No 3 (vi) does not apply to any works contract that is meant
for the purposes of commerce, industry, business of profession, even if such service
is provided to the Central Government, State Government, Union Territory, a local
authority a Governmental Authority or a Government Entity. The doubt seems to
have arisen in the instant cases as Explanation to the said entry states, the term
‘business’ shall not include any activity or transaction undertaken by the Central
Government, a State Government or any local authority in which they are engaged
as public authorities. However, this explanation does not apply to Governmental
Authority or Government Entity, as defined in clause (ix) and (x) of the explanation
to said notification. Further, civil constructions, such as rope way for tourism
development shall not be covered by said entry 3(vi) not being a structure that is
meant predominantly for purposes other than business. While road, bridge,
terminal, or railways are covered by entry No. 3(iv) and 3(v) of said notification,
structures like ropeway are not covered by these entries too. Therefore, works
contract service provided by way of construction such as of rope way shall fall under
entry at sl. No. 3(xii) of notification 11/2017-(CTR) and attract GST at the rate of 18%.