What constitutes a ‘government authority’ or ‘government entity’; Karnataka Authority of Advanced Ruling answers

AAR GST

   

Authority of Advanced Ruling (Karnataka): The two-member bench of M.P Ravi Prasad and T. Kiran Reddy has ruled that works contract services executed to Public Works Department, for construction of Airport Terminal Building and for development of Greenfield airport is liable to tax at 9 percent GST. Further, the works contract services executed to Karnataka State Police Housing and Infrastructure Corporation Ltd. for construction of High Security prison; Kudala Sangama Development Board (KSDB) for construction of Basava International Center and Museum; Karnataka Residential Educational Institutions Society (KREIS) for Constructions of Residential School Complex are all liable to 9 percent tax.

In this case, the Authority examined whether the Karnataka State Police Housing and Infrastructure Corporation Limited, KSDB and KREIS, to whom the applicant is providing the services, constitute a government authority or entity.

The Authority took note of the notification No. 11/2017 of Central Tax rate that defines Governmental authority as an authority or a board or any other body that is set up by an Act of Parliament or a State Legislature; or established by any government with 90 percent or more participation by way of equity or control to carry out any function entrusted to a Municipality or to a Panchayat, and also defines government entity as an authority or a board or any other body including society, trust, corporation set up by an Act of Parliament or State Legislature or established by any Government with 90 percent or more participation by way of equity or control, to carry out a function entrusted by the central Government, State Government, Union Territory or a Local authority.

The Authority observed that Karnataka State Police Housing and Infrastructure Corporation Limited is a company of the Government of Karnataka incorporated under the Companies Act, 1956 and all the shares of the Company are held by the Government of Karnataka, thus, it qualifies to be considered as a government entity. Further, KSDB was established under the KSDB Act, 1994 to develop and maintain Kudala Sangama Kshetra in Bagalkot district, and more than 90 percent of the board members are from the State Government and all the administrative expenses of the board are covered by the grants given by the State Government. Thus, KSDB qualifies to be considered as a Government Entity.

Moreover, KRIES was formed under the Societies Registration Act to establish, maintain, control and manage residential institutions for the talented and meritorious children belonging to the scheduled caste, scheduled tribes and other backward classes. Further, the Karnataka Government may appoint persons to review the progress of the society and can hold enquiries and give directions, also KRIES has 13 members, and all are from State Government, thus, KRIES qualifies to be considered as a government entity.

The Authority also viewed that the works of construction of Airport Terminal Building /facilities and the work of Development of Airport are the works supplied to State Government. However, the said works for construction of airport terminal building or greenfield airport are predominantly meant for commerce and hence are covered under Entry 3(xii) of notification no.11/2017 of the Central Tax Rate.

[KMV Projects Limited, In re, 2022 SCC OnLine Kar AAR-GST 16, decided on 16.09.2022]


Represented by: Assistant General Manager A. Bhaskar Reddy.

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