Works contract services provided to Malabar Cancer Centre Attracts 18% GST: Kerala AAR

The Kerala Authority of Advance Ruling (AAR) has held that work contract services provided to Malabar Cancer Centre attract 18% GST with effect from 01.01.2022.

The two-member bench of S.L. Sreeparvathy and Abraham Renn S. has observed that Malabar Cancer Centre is a society established by the State Government with 100 per cent participation by way of equity or control, to carry out the function of public health, a function entrusted to a municipality as well as a panchayat under Article 243W and Article 243G, respectively, of the Constitution and accordingly falls within the definition of governmental authority.

The AAR noted that Malabar Cancer Centre was eligible for the concessional rate of tax of 12% GST prescribed in the entry at SI No. 3(vi) of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as Malabar Cancer Centre is a governmental authority as per the definition of governmental authority. However, as a result of the issuance of Notification No. 22/2021 on December 31, 2021, amending the entry at SI No. 3 (vi) with effect from January 1, 2022, the concessional rate in terms of the entry shall be applicable only until December 31, 2021.

The applicant, Uralungal Labour Contract Co-operative Society Ltd (ULCCS), is registered under the Kerala Co-operative Societies Act, 1969. The applicant is primarily engaged in the construction of roads, bridges and other public infrastructure for the government and other institutions and is an accredited agency for the Government of Kerala.

The applicant entered into an agreement with the Director, Malabar Cancer Centre [MCC] Thalassery, Kannur, established as a charitable society registered under the Societies Registration Act for the construction and extension of the site and building.

The MCC is an autonomous institution under the Health and Family Welfare Department, Government of Kerala, started with the aim of establishing a comprehensive cancer centre, providing the much-required oncology care to the general public. The control and management of the society are vested in the Governing Body, consisting of 23 members, with the Chief Minister of Kerala as the Chairman. The routine activities are controlled by the Department of Health and Family Welfare, Government of Kerala. By virtue of their official positions, the members of the Governing Body and Executive Committee are functioning.

The MCC provides a full spectrum of ontological care as an autonomous, not-for-profit institution funded by the State Government and other sources. Patients are categorised according to their economic status, and accordingly, it is expected that 20% of patients will be provided free services and about 60% at concessional rates.

In accordance with Notification No.11/2017, the applicant has issued a GST invoice to MCC showing 18% GST. However, it was disagreed by the Director, stating that MCC is an autonomous institution under the Health and Family Welfare Department and only 12% GST is applicable to them.

The applicant sought an advance ruling on the issue of whether the work contract service provided to Malabar Cancer Centre is to be billed at 12% GST or to be billed at 18% GST.

The AAR has held that the applicant had entered into an agreement with Malabar Cancer Centre for the construction and extension of the site and building. Hence, the service rendered by the applicant falls under the ambit of the definition of a work contract under the CGST Act.

Applicant's Name: Uralungal Labour Contract Co-operative Society Ltd

Dated: 27.06.2022

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