1.0. M/s NBCC (INDIA) Limited, Plot No. G/1, NBCC Imperia, New Govt Colony, Press Chhak, Bhubaneswar, Odisha-751017 (herein after referred to as the ‘Applicant’) having a GSTIN No. 21AAACN3053B1ZC, a Government of India Enterprises under the aegis of Ministry of Urban Development, Government of India, have filed an application on 17.01.2020 under Section 97 of CGST Act, 2017 and Section 97 of the OGST Act, 2017 in Form GST ARA 01 before the Authority for Advance Ruling, Odisha(herein after referred to as “AAR”) seeking an Advance Ruling on the applicability of rate of taxes with respect to the supplies made by NBCC to IIT, Bhubaneswar in terms of clause (vi)(b) of Sr.No.3(classification code 9954) of the Table in the Notification No.11/2017-Central Tax(Rate) dated 28.06.2017.

2.0. After thoroughly examining the contract details, the submission made by the Applicant and grounds of appeal, the Authority for Advance Ruling, Odisha pass the ruling as hereunder:-

2.1. Whether on the basis of the facts and circumstance of the case at hand, the nature of supply made by NBCC Ltd. (Applicant) to IIT, BBSR vide the agreement dated 02.05.2016 is a work contract services under Central Goods and Services Tax Act & Odisha Goods and Services Tax Act relying on clause 119 to section 2 read with item no. 6(a) to the schedule-II of the said Act. For that matter, the applicable rate of tax would be governed by Sr. No. 3 (classification code 9954) of the table in the Notification No. 11/2017-Central Tax (Rate) dated the 28th June, 2017.

Ans: Replied at para 4.2, 4.6 to 4.10

2.2. Whether on the basis of law as well as fact, IIT, Bhubaneswar is a ‘Governmental Authority’ or a ‘Government Entity’ as defined at clause no (ix) and (x) in the explanation at serial no. 4 to Notification No. 11/2017- Central Tax (rate) dated 28.06.2017 under Central GST Act.

Ans: IIT, Bhubaneswar is a ‘Government Entity’

2.3. If yes, whether the works contract service of construction of IIT Bhubaneswar Campus allotted to the Applicant company, is covered under clause (vi)(b) of Sr. No. 3 (classification code 9954) of the table in the Notification No. 11/2017-Central Tax(Rate) dated the 28th June, 2017. For that matter the applicable rate of tax is 12% (including State GST rate).

Ans: Replied at para 4.2, 4.6 to 4.10

2.4. Alternatively, if the works contract service could not be fully/ partially covered under entry 3(vi)(b), in the facts and circumstances of the Applicant company, then whether it would be covered under 3 (vi)(a) of the said notification as the construction work is predominantly for use other than for commerce, industry or any other business of profession.

Ans: Replied at para 4.10

2.5. Alternatively, whether the construction services related to sewerage project falls under clause (iii) of serial no 3 (classification code 9954) of the table in the Notification No. 11/2017-Central Tax(Rate) dated the 28th June, 2017.

Ans: Yes.

2.6. Or otherwise if the works contract service is not covered under clause (vi) or clause (iii) of entry 3 of the aforesaid notification, in the facts and circumstances of the Applicant company, then what will be applicable clause under entry no. 3 and what would be the rate of GST?

Ans: Replied at 4.2, 4.6 to 4.10

3.0. Aggrieved by the above mentioned ruling of the Authority for Advance Ruling, Odisha, the Applicant M/s.NBCC(India) Ltd. filed an appeal on dt.23.12.2020 before the Odisha Appellate Authority for Advance Ruling. The Applicant has paid the requisite fees of ₹ 20,000/-(₹ 10000/- CGST+₹ 10000/- SGST) through e payment in ICICI Bank Ltd., CPIN No. 20122100060292 dt.19.12.2020. The Applicant has filed the application within the due date as prescribed under Section 100 of the CGST/SGST Act, 2017. Accordingly, the appeal is admitted before the Hon’ble Odisha Appellate Authority for Advance Ruling

4.0. The Applicant also submitted subsequently two rejoinders on dt.02.02.2021 and dt.19.02.2021. The Applicant has submitted mainly two grounds of appeal which are as follows:-

(a) The Applicant has submitted that the eligibility mentioned in clause(vi)/(iii) of the Sl.No.3 of Notification No.11/2017-Central Tax (rate) dt.28.06.2017, is squarely covered as the works contract service provided by Applicant (M/s. NBCC) as turnkey basis to IIT, Bhubaneswar including construction of residential accommodation. Besides, Survey and Investigation, architectural drawing and design are part of each building project. Without survey, soil testing and investigation, multi-storeyed buildings for students, staff and faculties cannot be constructed as technical stability of the structure and its foundation and design is dependent upon safe bearing capacity/ratio of the soil etc. These are not independent works as per clause 119 of section 2 of the CGST Act and which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.

(b) They further prayed that the applicable rate of Goods and Service Tax shall be 12%, for construction of faculty/staff quarters, Directors bungalow and for charges for survey, investigation, Architectural drawing and design and PMC charges as per relevant clauses of Notification No. 11/2017-Central Tax(rate) dt.28.06.2017.

5.0. The Applicant was offered Personal Hearing on dt.19.02.2021 at 11.00 A.M. Sri Tarun Kumar Agarwalla, C.A. has attended the personal hearing through Video Conference. During the personal hearing, the Chartered Accountant has reiterated the submission already made in their appeal application and their rejoinders and also requested to decide the case favourably.

DISCUSSION & FINDINGS:

6.0. The question before us put forth by the Applicant to consider, whether the works executed by them can be treated as composite supply or not. Where the Authority for Advance Ruling in their rulings vide para 4.2, 4.6 & 4.10 of the order have held that a number of works have been entrusted to the Applicant would not make it entitled to be categorized as composite supply, particularly in terms of Section 2(30) of the CGST Act, 2017. The Applicant has been engaged as a Project Management consultancy, for which the Applicant shall be paid agency charges of 5.5% in addition to attract cost of the work. The Authority for Advance Ruling vide para 4.6 of their order, have held that, above PMC service are to be treated as Pure Service & shall not qualify for concessional rate of tax as envisaged under Sl.No.3(vi) to the Notification No. 11/2017-Central Tax (rate) dt.28.06.2017. Accordingly, the Authority for Advance Ruling, finally under Para 4.10 of the order have concluded that the works entrusted to the Applicant by IIT, Bhubaneswar under contract/agreement dt.02.05.2016 cannot be termed as composite supply.

6.1. The definition of composite supply is defined in CGST/SGST Act, 2017 under Clause 30 of the Section 2, which is reproduced below;

“Composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply”.

6.2. Further under Schedule II para 6 of the CGST Act, under the heading the composite supply, it is mentioned that works contract as defined in clause 119 of Section 2 of CGST Act, 2017 shall be treated as a supply of service.

6.3. During the Personal Hearing, the representative of M/s. NBCC(India) Ltd. Sri T.K. Agarwalla, C.A. has vividly argued that the subject works contract which was entrusted to M/s. NBCC (India) Ltd. by IIT, Bhubaneswar is a composite supply and naturally bundled. To support their stand, he has cited the content of memorandum of agreement between IIT, Bhubaneswar and M/s. NBCC(India) Ltd. executed on dt.02.05.2016.

6.4.1. The observation made by the Advance Ruling Authority vide para 4.7 of the order is very relevant to the prayer made by the Applicant. The observation of the Authority for Advance Ruling is reproduced below as reference:

“The works entrusted to the Applicant namely construction of 800 seater boys hostel, 200 seater girls hostel, Construction of lecture hall complex, Construction of Student Activity Centre, Dispensary, Construction of 1000 capacity Auditorium, Construction of Central Research & Instrumentation facilities, Construction of Central Workshop, Play grounds are within the purview of sub-clause (b) of Clause (vi) of Sl.No.3 (heading 9954) of Notification No. 11/2017-C.T. (Rate) under CGST Act and corresponding notification under OGST Act, 2017, and hence merits concessional rate of tax at applicable tax rate of 12% (6% under CGST & 6% under OGST Act, 2017).

6.4.2.  It is crystal clear from the above observation that the Authority for Advance Ruling, Odisha has held that, major part of the project works are covered under sub-clause (b) of Clause (vi) of S1 No.3 (heading 9954) of Notification No. 11/2017-C.T. (Rate) under CGST Act and corresponding notification under OGST Act, 2017, and hence merits concessional rate of tax of 12% (6% under CGST & 6% under OGST Act, 2017).

6.4.3.  Under the Sl.No.3 of notification no.  11/2017-C.T. (Rate), it is clearly mentioned that, the service which is eligible for concessional rate of tax is composite supply of works. In the instant issue, when the Authority for Advance Ruling has allowed the concessional rate of tax to the major part of project under Sl.No.3 of exemption notification no. 11/2017-C.T. (Rate), it is automatically construed that Authority for Advance Ruling has accepted the service as composite supply service. The service mentioned under Notification No. 11/2017-C.T. (Rate) dt.28.06.2017 of Sl.No.3 (Heading 9954) from (ii) to (vii) is only composite supply. As the Authority for Advance Ruling has extended the benefits of the concessional rate of tax specified in the notification for the major part of the work of the project, it automatically implies that they have accepted the works/services, which is rendered by M/s. NBCC (India) Ltd. to IIT, Bhubaneswar as composite supply of works contract. But under para 4.10, the Authority for Advance Ruling has held that works contract entrusted the Applicant by IIT, Bhubaneswar under contract agreement dt.02.05.2016 cannot be termed as composite supply. The above decision/observation clearly contradicts to the observation made under para 4.7. Moreover, the Authority for Advance Ruling under para 4.10 of the order has not cited cogent reasons to substantiate their findings.

6.5. On perusal of the copy of the agreement made between IIT, Bhubaneswar & M/s. NBCC (India) Ltd. executed on dt.02.05.2016, we observed that IIT, Bhubaneswar entrusted the entire project works on turnkey basis to M/s. NBCC (India) Ltd. for works relating to Planning, designing and supervision of construction of various building infrastructure development and interior work etc. in IIT, Bhubaneswar campus and its extended campus. Under para 1 of the agreement, it is clearly mentioned that after completion of the project M/s. NBCC(India) Ltd. will hand over the building to IIT, Bhubaneswar in ready to use condition. Nowhere in the agreement the works order were offered to M/s. NBCC(India) Ltd. differently for different works and also there is no such conditions made in the agreement to make separate invoices for separate works. The agreement clearly speaks that the project was awarded on turnkey basis. The turnkey project works executed by M/s. NBCC (India) Ltd. is an “works contract” in terms of clause 119 of Section 2 of CGST/OGST Act, 2017 and ought to be treated as a composite supply as per clause 30 of the Section 2 of CGST/OGST Act. Composite supply works contract are treated as a supply of service under Schedule II para 6 of the CGST/OGST Act. Therefore, we are not inclined to accept the decision of the Authority for Advance Ruling that the works contract entrusted to Applicant M/s. NBCC (India) Ltd. cannot be termed as composite supply.

ORDER

In view of the above findings in our view, the works entrusted to M/s. NBCC(India) Ltd. can be treated as composite supply and consequently the Faculty Quarters, Staff Quarters and Director’s Bungalow shall be entitled for concessional rate under Sl.No.3(vi) of the Notification No. 11/2017-C.T. (Rate) dt.28.06.2017 and matching State tax notification issued by the Government of Odisha.