Withdrawal of Lower or Nil GST Rates for Government Authority or Government Entity

November 24, 2021Indirect TaxRMPSCo.

Effective from 1^st January, 2022, the lower and Nil GST rate as available for supply of “Composite supply of works contract” [section-2(119) of CGST Act, 2017] to a Government Authority or a Government Entity is withdrawn and hence, from the effective date, following services, will be taxed at 18% if no other, specific rate or exemption available.

Chapter / Section / Heading – Heading 9954 (Construction services)			Notification No. 15/2021- Central Tax (Rate)
Description of Service	IGST	Condition	Effective from 1st Day of January 2022
Description of Service	Rate(%)	Condition	Effective from 1st Day of January 2022
(iii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and ServicesTax Act, 2017, supplied to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of, –	12	Provided that where the services are supplied to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union territory or local authority, as the case may be;	This entry will not be available for supply of said “Composite supply of works contract” [section-2(119) of CGST Act, 2017] to a Government Authority or a Government Entity. And hence, such services now will be taxed @18% from 01-01-2022.
(a) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);
(b) canal, dam or other irrigation works;
(c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal.
(vi) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if) above, provided to the Central Government, State Government, Union Territory, a local authority, a Governmental Authority or a Government Entity by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –	12	Provided that where the services are supplied to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union territory or local authority, as the case may be	This entry will not be available for supply of said “Composite supply of works contract” [section-2(119) of CGST Act, 2017] to a Government Authority or a Government Entity. And hence, such services now will be taxed @18% from 01-01-2022.
(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;
(b) a structure meant predominantly for use as (i) an educational, (ii)a clinical, or(iii) an art or cultural establishment; or
(c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in paragraph 3 of the Schedule III of the Central Goods and Services Tax Act, 2017.
Explanation. – For the purposes of this item, the term ‘business’ shall not include any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities.
(vii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, involving predominantly earth work (that is, constituting more than 75per cent. of the value of the works contract) provided to the Central Government, State Government, Union territory, local authority, a Governmental Authority or a Government Entity.	5	Provided that where the services are supplied to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union territory or local authority, as the case may be	This entry will not be available for supply of said “Composite supply of works contract” [section-2(119) of CGST Act, 2017] to a Government Authority or a Government Entity. And hence, such services now will be taxed @18% from 01-01-2022.
(ix) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 provided by a sub-contractor to the main contractor providing services specified in item (iii) or item (vi) above to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity.	12	Provided that where the services are supplied to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union territory or local authority, as the case may be.	This entry will not be available for supply of said “Composite supply of works contract” [section-2(119) of CGST Act, 2017] to a Government Authority or a Government Entity. And hence, such services now will be taxed @18% from 01-01-2022.
(x) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 provided by a sub-contractor to the main contractor providing services specified in item (vii) above to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity.	5	Provided that where the services are supplied to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union territory or local authority, as the case may be.	This entry will not be available for supply of said “Composite supply of works contract” [section-2(119) of CGST Act, 2017] to a Government Authority or a Government Entity. And hence, such services now will be taxed @18% from 01-01-2022.

Chapter / Section / Heading	Description of Service	IGST Rate(%)	Notification No. 16/2021- Central Tax (Rate) Effective from 1st Day of January 2022
Chapter / Section / Heading	Description of Service	IGST Rate(%)
Chapter 99 (Sr. No.3)	Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government Entity by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.	Nil	Now, the said exemption is not available, and hence, all such services will be now taxable at respective rates as per classification. If no specific rate available, the General Rate of 18% will Apply
Chapter 99 (Sr. No.3A)	Composite supply of goods and services in whichthe value of supply of goods constitutes not more than 25 per cent. of the value of the said composite supply provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government Entity by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.	Nil	Now, the said exemption is not available, and hence, all such services will be now taxable at respective rates as per classification. If no specific rate available, the General Rate of 18% will Apply