Recently, the AAR in the case of Shreeji Infrastructure India (P.) Ltd. (2018) 98 taxmann.com 438 (AAR-Madhya Pradesh), examined the scope of Sr. No. 3(vi)(c) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 which provides concessional rate of 12% GST to the composite supply of works contract provided to the CG, SG, local authority, government authority or government entity by way of construction of residential complex for self use or their employees on the condition that the services should have been procured by the said entity in relation to a work entrusted to it by the CG, SG or UT or local Authority.

The applicant company has provided works contract service for construction of residential quarters for  employees to MPPGCL classifiable under heading 9954. MPPGCL is a government entity engaged in the work of power generation entrusted by Government of Madhya Pradesh.

The AAR observed that the essential and sole work entrusted to MPPGCL is power generation. The works contract service of construction of residential quarters is neither the primary work entrusted to MPPGCL not it has any bearing on the work i.e. power generation by any means.

The intention of the legislature has been to concessional rate to such work which has been entrusted to a government entity for public interest in general. Only the work having direct involvement in the entrusted work i.e. power generation would merit concessional rate of 12% envisaged under Sr. No. 3(vi)(c) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and not work in relation to all activities of MPPGCL.

Thus, held that the impugned activity of the applicant would attract GST @18% in terms of  Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and not eligible for concessional rate of 12% GST.