Gujarat AAR: Non-commercial construction in education institutions to draw less GST

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Gujarat AAR: Non-commercial construction in education institutions to draw less GSTBest Chartered Accountant in Pimpri Chinchwad

Gujarat AAR ruled that such buildings would attract 12% GST, not 18% levied for other construction activities.

Construction of buildings, such as hostels, principal’s bungalow and staff quarters, in educational institutions is taxable at lower rate of goods and services tax (GST), if the structures are not used for commercial activities than those for normal business purposes, ruled Gujarat Authority for Advance Rulings (AAR).

The court ruled that such buildings would draw 12 per cent GST, and not 18 per cent levied for other construction activities. It should be noted that education draws zero GST, while construction work and the inputs used therein attract tax.

The applicant, Tirupati Construction, approached AAR to find out about the applicability or GST on these activities. The company was awarded a works contract for constructing a hostel and staff quarters at a village in Surat by the Road and Building Department of the Gujarat government.
While the company argued for 12 per cent GST rate, the revenue department opposed it on the ground that the company is silent on the use of these structures.

However, the AAR did not buy the argument of the revenue department, saying that the activity or transaction undertaken by the state government does not fall under the business activities.