GST on Works Contracts for Statutory Bodies: Karnataka Advance Ruling
A contract awarded as a single tender is an indivisible works contract, and statutory corporations do not qualify as State Governments for tax concessions.
- Ruling
- Advance Ruling No. KAR ADRG 03 / 2018 dated 21st March, 2018
- Dated
- 21 Mar 2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- The company asked if their KPTCL contract was divisible or a works contract.
- The Authority ruled the contract is an indivisible works contract.
- KPTCL is not a State Government, so the 12% concessional GST rate does not apply.
In short
Skilltech Engineers & Contractors asked the Karnataka Authority for Advance Ruling (AAR) if their contract with the Karnataka Power Transmission Corporation Limited (KPTCL) could be split into separate supply and service parts to claim a lower GST rate. Even though the work was documented in three separate agreements, the AAR looked at the single tender process and decided it was one unified project.
What has changed
How it worked before
Businesses often assumed that splitting a large project into separate agreements for materials and labor would allow them to treat the contract as divisible and potentially qualify for lower tax rates.
What has changed
The Authority decided that a project awarded under one tender is an indivisible works contract, regardless of how many sub-agreements exist. Furthermore, it clarified that statutory bodies like KPTCL are distinct legal entities and do not count as 'State Government' for the purpose of GST rate notifications.
Who this affects
Construction companies and contractors working for statutory corporations or government-owned entities.
An example
Imagine a construction firm, BuildRight, wins a single tender to build a substation for a state-run water board. They sign separate contracts for the supply of pipes and the labor to install them. Based on this ruling, the tax department would likely view this as one indivisible works contract. BuildRight cannot claim a concessional rate meant only for direct State Government projects.
What you should do
If you have a similar contract, do not assume you qualify for concessional rates based on this ruling. An Advance Ruling only binds the company that asked and its specific tax officer; it is not a law that applies to your business automatically. Consult your tax advisor to review your specific contract terms.
If you do nothing
If you apply a lower tax rate based on an incorrect assumption, you risk a tax demand notice for the unpaid GST plus interest and penalties. A tax officer may disagree with your interpretation, and you will have to prove your position in a formal dispute process. Relying on a ruling that does not apply to your specific facts can be a costly mistake.
The terms explained
- Works contract
- A contract that involves both the transfer of property in goods and the provision of services, typically for construction or repair of immovable property.
- Indivisible contract
- A single agreement where the supply of goods and services are so linked that they cannot be separated for tax purposes.
- Statutory body
- An organization created by a specific law, which operates as a separate legal entity from the government itself.
The ruling in detail
Authority for Advance Ruling
M/s Skilltech Engineers & Contractors Private Limited
Advance Ruling No. KAR ADRG 03 / 2018 dated 21st March, 2018 · Karnataka
Questions before the authority
- Whether the contract, executed by them for KPTCL, is a divisible contract [Supply of goods & Supply of Services] or an indivisible contract [ works contract]?
- Whether the tax rate of 12% [CGST-6% + SGST-6%] is applicable to the above contract, in pursuance of Notification No.24/2017-Central Tax (Rate) dated 21.09.2017?
Facts
The applicant entered into a contract with Karnataka Power Transmission Corporation Limited (KPTCL) for the construction of power lines, erection of transmission towers, and transformers. Although the work was split into three separate agreements for supply of materials, erection, and civil works, all were awarded under a single tender notification with common terms and conditions. The applicant sought to determine if this arrangement constitutes a divisible contract and if it qualifies for a concessional GST rate.
Ruling
| Question | What the authority ruled |
|---|---|
| Nature of contract | Indivisible works contract The contract is a service |
| Applicability of 12% GST rate | Not entitled KPTCL is not considered a State Government or State Government Authority |
The Authority ruled that the contract is an indivisible works contract and that the applicant is not entitled to the concessional GST rate of 12% under the cited notification. It concluded that KPTCL does not qualify as a State Government or State Government Authority for the purposes of the notification.
Reasoning
The Authority determined the contract is indivisible because it was awarded as a single composite tender with common terms, falling under the definition of a works contract in Section 2(119) of the CGST Act, 2017. Regarding the tax rate, it held that KPTCL, as a separate corporate entity, does not meet the definition of 'State Government' or 'local authority'. It relied on the principle from Agarwal Vs. Hindustan Steel that statutory bodies are distinct from the government. Consequently, the applicant does not qualify for the concessional rate provided in Notification No. 24/2017-Central Tax (Rate).
Provisions relied on
- Section 2(119) of the CGST Act, 2017
- Section 97 of the CGST Act, 2017
- Section 98(4) of the CGST Act, 2017
- Schedule II of the CGST Act, 2017
- Notification No. 24/2017-Central Tax (Rate) dated 21.09.2017
For the practitioner
This ruling clarifies that composite contracts awarded under a single tender are **indivisible works contracts** even if split into multiple agreements. It serves as a warning that statutory corporations like KPTCL are **not considered State Governments** for the purpose of claiming concessional GST rates under specific notifications. Practitioners should note that the status of the service recipient as a government entity is strictly interpreted.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/03-skilltech_engineers-aar-order.pdf
Legibility of the scan, as read: high.
Prepared 15-10-2026.
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