Rate of tax on the services to be provided and the applicability of entry No.69 or 72 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 on the sub contractor.

PJ/Case Law/2020-2021/3556

M/s M V Infra Services Pvt. Ltd KAR ADRG 04/2020 dated 17.02.2020
Brief Facts: -The appellant is engaged in provision of composite works contract services of erection, foundation, electrical works & painting of communication towers and their maintenance. They are expected to get sub contract work, of imparting training of soft skill development to Engineers, ITI students, Building and other construction workers, from the main contractor exclusively engaged in skill development training & are likely to get the main contract work.
Issues: -Rate of tax on the services to be provided and the applicability of entry No.69 or 72 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 on the sub contractor.
Appellant Contention: -The applicant contends that the total expenditure of the said training programme is to be borne by the Government under its flagship Skill Development Mission; they, though under sub-contract, will be providing services to Maharashtra State Skill Development Society, Skill Development & Entrepreneurship Department, Government of Maharashtra in a "bill to-ship to" model; the services of main contractor are exempted under entry No.72 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and the applicant, through the main contractor, will be providing the same services to the Government of Maharashtra and hence the said services, to be provided by the applicant under sub-contract, also should be exempted.
The applicant intends to rely on the order passed by Madhya Pradesh Advance Ruling Authority in the case of M/s. Network For Information & Computer (GST AAR Madhya Pradesh) dated. 10-04-2019, wherein applicant is engaged in Commercial Training 8s Coaching and business auxiliary services provided to Uttar Pradesh Skill development Corporation, through which they train the youth of Uttar Pradesh for gainful employment of the candidates, is being exempted from the payment of taxes vide SI. No. 72 of the Notification No. 12/2017- Central Tax (Rate), dated 28th June, 2017.
Entry No.72 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 exempts services provided to the State Government under any training programme for which total expenditure is borne by the State Government. In the instant case, the impugned training programme is hosted by the State Government of Maharashtra and hence the services provided under the said programme are exempt and accordingly main contractor is eligible for exemption.
The applicant intend to rely on the Advance Ruling given by this authority in the case of M/s Quatro Rail Tech Solutions Ltd., and also the ruling in the case of M/s NHPC Ltd., issued by the Advance Ruling Authority, State of Uttarakhand.
Reasoning of Judgement: -
Entry No.69 exempts the services, covered under Service Code 9991 or 9992 or 9983, provided by
(a) the National Skill Development Corporation (NSDC) set up by Government of India,
(b) a Sector Skill Council (SSC) approved by the NSDC,
(c) an assessment agency approved by the SSC or NSDC,
(d) a training partner approved by NSDC or SSC; in relation to
(i) National Skill Development Programme implemented by NSDC, or
(ii) a vocational skill development course under the National Skill Certification and Monetary Reward Scheme; or
(iii) any other scheme implemented by NSDC.
In the instant case, the tender has been called by Maharashtra State Skill Development Society, Skill Development and Entrepreneurship Department, Government of Maharashtra which is neither NSDC nor a SSC. The tender was meant for empanelment of "Training Providers". The applicant has not furnished any documentary evidence so as to arrive at whether the main contractor qualifies to be a training partner, approved by either NSDC or SSC, or not. Further the training providers are not entitled for exemption under the entry No.69. Therefore the main contractor, in case if they get the said work, would not be entitled for exemption under this entry for the said work.
Entry No. 72, of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017, which exempts the services, covered under Service Code 9992, provided to the Central Government, State Government, Union Territory Administration under any training programme for which total expenditure is borne by the Central Government, State Government, Union Territory Administration. In the instant case, the main contractor, if they get the work, would be providing service, of training for Recognition of Prior Learning (RPL) to construction workers, to the Government of Maharashtra, for which total expenditure is to be borne by the Government of Maharashtra. Therefore the main contractor would be eligible for exemption under entry No.72 of the said notification, subject to fulfillment of the aforesaid conditions.
The last issue was whether the aforesaid exemption that is applicable to the main contractor is applicable to the applicant or not. The conditions for the entitlement of the said exemption are as under:-
a) The services must be related to/ under any training programme.
b) The services must be provided to the Central Government, State Government and Union Territory Administration.
c) The total expenditure for the said training programme must be borne by Central Government, State Government and Union Territory Administration.
In the instant case though the services to be provided by the applicant would be under training programme for Recognition of Prior Learning (RPL) to construction workers, the services would be provided to the Main Contractor i.e. the recipient of the services would be the Main contractor, but not the State Government.
Therefore, the rate of 18% GST is applicable on services to be provided under sub-contract to main contractor, who in turn provides to M/s Maharashtra State Skill Development Society (MSSDS), in respect of training of Building and other construction workers (skill development training) and the SI. No. 69 or SI. No. 72 of the notification 12/2017- Central Tax (Rate) New Delhi, dated 28th June, 2017 are not applicable to the applicant.

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PJ/Case Law/2020-2021/3556

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