GST Ruling – Whether exemption given to contractorsis also applicable to sub-contractors?

Immense Construction Company, based in Telangana, sought clarity on how GST would apply
to its services provided to THE INDIAN HUME PIPE COMPANY LTD., mainly focused on water
supply and sewerage projects. The company, known for executing contracts in this field,
particularly a sub-contract for operating and maintaining water supply projects in Telangana,
claimed that their pure services (involving only manpower) should be exempt from GST under
specific rules.
The main questions revolved around whether Immense Construction Company’s services fit
under Notification No. 12/2017-Central Tax (Rate) and, if so, what tax rate would apply. They
argued that, based on the nature of their contract and the limited involvement of goods (less
than 25%), they should be exempt as per the relevant notifications. However, the discussion
also brought up concerns about the absence of specific mention of sub-contractors in the
notifications, prompting a need for clarification on how GST applies to services provided by
sub-contractors to the main contractor.
The ruling stressed the importance of providing complete documentary evidence, which the
applicant had not yet submitted. It delved into the unique aspects of GST laws for works
contract services, highlighting the need for a precise interpretation and application of
exemption clauses. The ruling concluded that Immense Construction Company’s services to
THE INDIAN HUME PIPE COMPANY LTD. were not covered by the specified notification and
hence exemption cannot be given. In the absence of exemption, the applicable tax rate
under the Goods and Services Tax Act, 2017 was determined to be 9% CGST + 9% SGST.

Source: 2023 (11) TMI 592 – AUTHORITY OF ADVANCE RULING, TELANGANA

Ishan Kakkar, Associate- Indirect Tax, SW India