GST Rate for Works Contracts for Tirunelveli Smart City Limited
The Authority for Advance Ruling confirmed that works contracts for Tirunelveli Smart City Limited attract an 18% GST rate.
- Ruling
- Advance Ruling No. 15/ARA/2023 Dated: 15.06.2023
- 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
- Tirunelveli Smart City Limited is classified as a Government Authority.
- Works contracts for this entity attract an 18% GST rate.
- The ruling applies to the period starting from January 1, 2022.
In short
The company asked the Authority for Advance Ruling (AAR) to clarify the Goods and Services Tax (GST) rate for construction work done for Tirunelveli Smart City Limited. They wanted to know if the work qualified for a lower tax rate, which often applies to government projects. The authority examined whether this entity counts as a Government Authority under the law.
What has changed
How it worked before
Businesses often assumed that work for government-linked entities might qualify for lower GST rates, leading to uncertainty about whether to charge 12% or 18%.
What has changed
The authority decided that Tirunelveli Smart City Limited is a Government Authority. Because of this classification, the services provided to them are subject to an 18% GST rate. This means contractors must charge the higher rate for these specific projects.
Who this affects
Construction contractors and engineering firms providing works contract services to government-owned special purpose vehicles or smart city projects.
An example
Imagine a construction firm, BuildRight India, is hired to build a community center for a different city's Smart City project. They might wonder if they can charge 12% GST based on the government nature of the client. This ruling suggests that if their client is structured similarly to Tirunelveli Smart City Limited, they will likely be required to charge 18% GST. BuildRight India should review their specific contract and consult a professional before deciding on the tax rate.
What you should do
If you work for a similar entity, do not assume this ruling automatically applies to your contract. An advance ruling is only binding on the business that asked for it and its specific tax officer. Use this as a reference for your tax planning, but consult your own tax advisor to confirm the correct rate for your specific project.
If you do nothing
If you charge 12% when 18% is required, you will be underpaying your GST. When a tax officer audits your records, they may demand the unpaid 6% difference plus interest and penalties. Relying on a ruling that does not apply to you is not a valid legal defense.
The terms explained
- Works contract
- A service that involves both the supply of goods and labor, typically used in construction or building projects.
- Government Authority
- An entity established by the government that carries out specific functions or duties assigned to it by the state.
- Advance Ruling
- A formal decision from tax authorities on how GST laws apply to a specific business situation.
The ruling in detail
Authority for Advance Ruling
Sri Naachimaar Engineering Constructions
Advance Ruling No. 15/ARA/2023 Dated: 15.06.2023 · Tamil Nadu
Questions before the authority
- The GST rate @ 12% or 18%, which rate of tax applicable on composite supply of works contract to Tamil Nadu Urban Habitat Development Board, known formerly as Tamil Nadu Slum Clearance Board works;
- The GST rate @ 12% or 18%, which rate of tax applicable on composite supply of works contract to Tirunelveli Smart City Limited under the control of Tirunelveli City Municipal Corporation works;
- Whether they are Government Authority or not?
Facts
The applicant is a contractor providing composite supply of works contract services to government-related entities, specifically the Tamil Nadu Urban Habitat Development Board and Tirunelveli Smart City Limited. The applicant sought an advance ruling to determine the applicable GST rate for these services, specifically for the period from 01.01.2022 to 18.07.2022 for the latter entity. The applicant withdrew the request regarding the Tamil Nadu Urban Habitat Development Board during the proceedings.
Ruling
| Question | What the authority ruled |
|---|---|
| GST rate for Tamil Nadu Urban Habitat Development Board | No ruling Withdrawn by applicant |
| GST rate for Tirunelveli Smart City Limited | 18% (CGST 9% + SGST 9%) Effective from 01.01.2022 under serial number 3 (xii) of Notification No. 11/2017 |
| Status of Tirunelveli Smart City Limited | Government Authority Based on definition in explanation to Notification No. 31/2017 |
The Authority ruled that the services provided to Tirunelveli Smart City Limited are covered under serial number 3 (xii) of Notification No. 11/2017 C.T. (Rate) dated 28.06.2017, attracting a total GST rate of 18% (9% CGST and 9% SGST) effective from 01.01.2022. It further held that Tirunelveli Smart City Limited qualifies as a **Government Authority** within the meaning of the relevant notification. No ruling was provided for the Tamil Nadu Urban Habitat Development Board due to the applicant's withdrawal of that question.
Reasoning
The Authority determined that Tirunelveli Smart City Limited is a **Government Authority** because it was established by the government with significant participation to carry out functions entrusted by the government. Consequently, the works contract services provided to it fall under the category of services to a Government Authority. The Authority applied the rate prescribed under serial number 3 (xii) of Notification No. 11/2017 C.T. (Rate) as amended, which mandates an 18% rate for such services. It explicitly noted that the applicant does not qualify as a local authority under section 2(69) of the CGST Act.
Provisions relied on
- Section 97(2)(e) of the GST Act, 2017
- Section 2(119) of the GST Act, 2017
- Section 2(69) of the GST Act, 2017
- Notification No. 11/2017 C.T. (Rate) dated 28.06.2017
- Notification No. 31/2017 C.T. (Rate) dated 13.10.2017
- Notification No. 15/2021 C.T. (Rate) dated 18.11.2021
- Notification No. 22/2021 C.T. (Rate) dated 31.12.2021
For the practitioner
This ruling clarifies that a Special Purpose Vehicle like Tirunelveli Smart City Limited is classified as a **Government Authority** for GST purposes. Practitioners can use this to support the classification of similar entities, though it confirms that such services attract an 18% GST rate rather than the lower 12% rate. It does not provide a ruling on the Tamil Nadu Urban Habitat Development Board due to the withdrawal of that specific question.
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/15_aar_2023_sri_naachimaar.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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