Important Keyword: Circular 152/08/2021-GST, GST on ropeway construction, Ropeway GST rate, Government Entity GST, Works contract GST, Notification 11/2017 GST, Entry 3(vi) GST, Turnkey construction GST, EPC contractor GST, Tourism infrastructure GST, Government contract GST, Finodha GST Guide,
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CBIC-190354/36/2021-TRU Section-CBEC
Government of India
Ministry of Finance
Department of Revenue
*****
North Block, New Delhi,
Dated the 17th June, 2021
Circular No. 152/08/2021 - GST: Clarification regarding rate of tax applicable on construction services provided to a Government Entity, in relation to construction such as of a Ropeway on turnkey basis
To,
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioner of Central Tax (All) /
The Principal Director Generals/ Director Generals (All)
Madam/Sir,
Sub– Clarification regarding rate of tax applicable on construction services provided to a Government Entity, in relation to construction such as of a Ropeway on turnkey basis-reg.
Reference has been received by the Board for a clarification whether services supplied to a Government Entity by way of construction such as of “a ropeway” are eligible for concessional rate of 12% GST under entry No. 3 (vi) of Notification No. 11/2017- CT (R) dt. 28.06.2017. On the recommendation of the GST Council, this issue is clarified as below.
2. According to entry No. 3(vi) of notification No. 11/2017-CT (R) dated 28.06.2017, GST rate of 12% is applicable, inter alia, on-
“(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 –
- a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; “….
2.1 Thus, said entry No 3 (vi) does not apply to any works contract that is meant for the purposes of commerce, industry, business of profession, even if such service is provided to the Central Government, State Government, Union Territory, a local authority a Governmental Authority or a Government Entity. The doubt seems to have arisen in the instant cases as Explanation to the said entry states, 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.
However, this explanation does not apply to Governmental Authority or Government Entity, as defined in clause (ix) and (x) of the explanation to said notification. Further, civil constructions, such as rope way for tourism development shall not be covered by said entry 3(vi) not being a structure that is meant predominantly for purposes other than business. While road, bridge, terminal, or railways are covered by entry No. 3(iv) and 3(v) of said notification, structures like ropeway are not covered by these entries too. Therefore, works contract service provided by way of construction such as of rope way shall fall under entry at sl. No. 3(xii) of notification 11/2017-(CTR) and attract GST at the rate of 18%.
3. Difficulty if any, may be brought to the notice of the Board.
Yours faithfully,
(Rajeev Ranjan)
Under Secretary, TRU
Email: rajeev.ranjan-as@gov.in
Tel: 011 2309 5558
📚 Frequently Asked Questions (FAQs): Circular No. 152/08/2021 - GST
Q1. What is Circular No. 152/08/2021-GST about?
Answer:
Circular No. 152/08/2021-GST clarifies the GST rate applicable to construction services, such as ropeway projects executed on a turnkey basis for Government Entities.
It explains why these projects are not eligible for the concessional 12% GST rate.
Q2. Is ropeway construction for a Government Entity taxable at 12% GST?
Answer:
No.
The circular clarifies that ropeway construction undertaken primarily for tourism or commercial purposes does not qualify for the concessional 12% GST rate under Entry No. 3(vi).
Q3. What GST rate applies to ropeway construction?
Answer:
The applicable GST rate is 18%, as the works contract falls under Entry No. 3(xii) of Notification No. 11/2017-Central Tax (Rate).
Q4. Why is the concessional rate under Entry No. 3(vi) not available?
Answer:
Entry No. 3(vi) applies only where the original works are predominantly meant for use other than commerce, industry, business, or profession.
Ropeways developed for tourism are regarded as commercial infrastructure and therefore do not satisfy this condition.
Q5. Does supplying services to a Government Entity automatically qualify for 12% GST?
Answer:
No.
The identity of the recipient alone is not sufficient. The nature and purpose of the construction project must also satisfy the conditions prescribed under the notification.
Q6. Does the explanation regarding Government activities apply to Government Entities?
Answer:
No.
The circular specifically clarifies that the explanation excluding certain Government activities from the definition of "business" applies only to the Central Government, State Governments, and local authorities, and not to Governmental Authorities or Government Entities.
Q7. Are ropeways covered under the entries applicable to roads and bridges?
Answer:
No.
Roads, bridges, terminals, and railways are covered under separate concessional entries, but ropeways are not included within those provisions.
Q8. Does this circular introduce a new GST rate?
Answer:
No.
The circular merely clarifies the correct classification and confirms that the existing 18% GST rate applies to ropeway construction services.
Q9. Who is most affected by this clarification?
Answer:
The clarification primarily affects EPC contractors, infrastructure companies, tourism project developers, Government contractors, and Government Entities executing ropeway projects.
Q10. Why was this clarification necessary?
Answer:
Different interpretations had emerged regarding whether ropeway projects qualified for the concessional GST rate applicable to certain Government works contracts.
The circular ensures uniform tax treatment across the country.
Download PDF: Circular No. 152/08/2021 - GST
More Information: https://taxinformation.cbic.gov.in/
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