Service of beautification of streets under Smart Cities Mission is a composite supply of works contract & taxable at 12%: AAR

Case Details: Authority for Advance Rulings, Andhra Pradesh Shapoorji Pallonji & Company (P.) Ltd., In re - [2021] 130 taxmann.com 344 (AAR - ANDHRA PRADESH)

Judicial and Counsel Details

• • D. Ramesh and A. Syam Sundar, Member
  • Kanupriya Bhargava and Divya Bhardwaj for the Applicant.

Facts of the Case

The applicant-company was engaged in the construction business and provided services to Government, public sector undertakings, Government entities and private sector entities. It entered into an agreement with a company which was a Special Purpose Vehicle (SPV) created by the Government of Andhra Pradesh. As per agreement, it would provide services of beautification of streets including Streets cape Design, Landscaping and intersection Redesign in Visakhapatnam’s Area Based development under smart Cities Mission. It filed an application for advance ruling to determine taxability of services provided under this agreement.

AAR Held

The Authority for Advance Ruling observed that the applicant entered into an agreement with a company in which he Andhra Pradesh State Government and the Greater Visakhapatnam Municipal Corporation are the promoters having 50:50 equity shareholdings, which substantiates more than 90 per cent of participation of the Government. Therefore, it would be treated as Government Entity.

Moreover, the services provided by the applicant of construction, development and maintenance of the project including plantation, landscaping, Street lighting etc., would be composite supply of works contract. Since, these services would be provided to a Government Entity, it would be classifiable under the Heading No. 9954 and would be liable to tax at the rate of 12%.