GST Applicable on Operation and Maintenance of Water Supply/ Sewerage Projects/ Facilities

The Authority of Advance Ruling (AAR Telangana) in the matter of M/s. Immense Construction Company has ruled out that GST will be applicable on the Operation and Maintenance of Water Supply/Sewerage Projects/Facilities.

M/s. Immense Construction Company, Plot No.105, Sunrise Homes Colony, Upperpally, Rajender Nagar, Ranga Reddy, Telangana – 500048 (36ADZPG2112K1ZD) has filed an application in FORM GST ARA-01 under Section 97(1) of TGST Act, 2017 read with Rule 104 of CGST/TGST Rules.

It is observed that the queries raised by the applicant fall within the ambit of Section 97 of the GST ACT. The Applicant enclosed copies of challans as proof of payment of Rs. 5,000 under SGST and Rs. 5,000 under CGST towards the fee for Advance Ruling. The Applicant has declared that the questions raised in the application have neither been decided nor are pending before any authority under any provisions of the CGST/TGST Act 2017. The application is, therefore, admitted after examining it and the records called for and after hearing the applicant as per section 98(2) of TGST Act 2017.

Facts of the Case:

The Applicant M/s Immense Construction Company is a Firm registered under the Goods and Services Tax Act, 2017. It undertakes Sub-Contracts/ Subcontracts of the entire work for Operation and Maintenance of Water Supply Projects / Sewerage Projects/ Facilities.

The Applicant has been awarded a contract by M/s. THE INDIAN HUME PIPE COMPANY LTD. (hereinafter referred to as “Principal Contractor”) vide Letter No. IHP-HIM/ Balkonda: TDWSP/ O&M/ Amendment-1/ 2022-23 dated 23 May 2022. The Contract so awarded as mentioned above, is a sub-contract awarded by the Principal Contractor out of the Original Contract as received by them from the State of Telangana, Mission Bhagiratha.

As per the Contract dated 13/01/2023 awarded by Mission Bhagiratha the Principal Contractor shall undertake Operation and Maintenance Contract with the State Government of Telangana in respect of water pipelines meant for providing drinking water to Balkonda, Armoor, Nizamabad, Kamareddy and part of Yellareddy Constituencies from SRSP reservoir, Nizamabad district including 1) CPWSS to Armoor & Other habitations 2) CPWS to Balkonda & other habitations 3) CPWS to Kamareddy & other habitations of SRSP Balkonda segment for Financial Year 2021-2022. A copy of the agreement is attached herewith and marked as Annexure-1.

The sub-contract agreement as carved out of the Principal Contract clearly indicates the scope of the work to be undertaken and the obligations of such sub-contractor. Further, the conditions of sub-contract provide that the sub-contract agreement is liable to termination if the work is not executed and maintained as per the Guidelines of Mission Bhagiratha, as agreed by the client viz State Government of Telangana.

Further, the Sub Contract so executed between the Applicant and the Principal Contractor, is only for the supply of Man Power – which is a Pure Service and hence exempted from payment of GST in terms of Entry 3 in Notification No 12/2017 – Central Tax (Rate) as amended by Notification No. 2/2018 – Central Tax (Rate) dated 25/01/2018.

Question and Ruling are as follows:

a. Whether the supply of Services by the Applicant to M/S. THE INDIAN HUME COMPANY LTD. is covered by Notification No. 12/2017- Central Tax (Rate), dated 28th November, 2017 as amended by Notification No. 2/2018 – Central Tax (Rate) dated 25/01/2018;

Ruling: No.

b. If the supplies as per Question (a) are covered by Notification No. 12/2017 Central Tax (Rate), dated 28th November, 2017 as amended by Notification No 2/2018 Central Tax (Rate) dated 25/01/2018, then what is the applicable rate of Tax under the Goods and Services Tax Act, 2017 on such Supplies; and

Ruling: Not applicable.

c. In case if the supplies as per Question (a) are not covered by the Notification supra then what is the applicable rate of tax on such supplies under the Goods and Services Tax Act, 2017.

Ruling: 9% CGST+ 9% SGST

For Official Ruling Download PDF Given Below: