GST Rate of 18% Applicable on hiring services of AC system and fire extinguishing system [Read AAR]

The West Bengal Authority for Advance Ruling (AAR West Bengal) in the matter of SUN KNOWLEDGE PRIVATE LIMITED has ruled out that GST Rate of 18% Applicable on hiring services for AC systems and fire extinguishing systems.

The applicant submits that being a 100% Export Oriented Unit registered with Software Technology Park of India, Kolkata, it provides ITes services to its clients located in the USA. The applicant, as a sub lessee, has entered into a “Sub Lease Deed” with M/s Bengal Intelligent Parks Private Limited (hereinafter referred to as, BIPPL) whereby the sub lessor grants the applicant to use a specified area on the 11th floor in the Building Omega of Bengal Intelligent Park, Block EP & GP, Sector V, Salt lake to conduct business activities from the said premises.

In the light of the foregoing discussions, we are of the opinion that in the instant case, the rate of tax on the supply of hiring services of air conditioning system and fire extinguishing system would not be determined to vide serial number 17(iii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. According to our view, each of the supplies would attract tax @ 18% under serial number 17(viii) of the said notification as leasing or rental services and therefore, the supply received by the applicant from TCGUIH, being a mixed supply, would also be taxable @ 18% i.e., supply which attracts the highest rate of tax.

The issue now left with us is to determine whether the applicant is eligible to avail of the credit of tax being paid by him to the supplier. The term „input tax‟ has been defined in clause (62) of section 2 of the GST Act which reads as under:

“input tax” in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes-

(a) the integrated goods and services tax charged on the import of goods;
(b) the tax payable under the provisions of sub-sections (3) and (4) of section 9 ;
(c) the tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods and Services Tax Act;
(d) the tax payable under the provisions of sub-sections (3) and (4) of section 9 of the respective State Goods and Services Tax Act; or
(e) the tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Union Territory Goods and Services Tax Act,
but does not include the tax paid under the composition levy; [emphasis supplied]

A registered person is eligible to avail credit of input tax if all the conditions laid down in section 16 of the GST Act get fulfilled and such credit is not restricted under sub-section (5) of section 17 of the Act ibid. In the instant case, tax paid by the applicant on hiring charges is not restricted under sub-section (5) of section 17 of the Act. As a result, we hold that the applicant is entitled to take credit of input tax charged by his supplier namely TCGUIH subject to fulfilment of all the conditions under section 16 of the GST Act.

RULING

Supply on account of hiring of electrical equipment, sprinkler system comprising fire detectors for true ceiling, air conditioning system up to the floor Air Handling Unit with existing ducting‟s and diffusers, DG set emergency power supply as received by the applicant would attract tax @18%. However, the applicant is eligible to take credit of input tax which has been charged by his supplier subject to fulfilment of all the conditions under section 16 of the GST Act.

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