Works for Co-operative Spinning Mills Not Eligible for 12% Government-Entity Rate: GSTAT Pune

The Pune Bench of the GST Appellate Tribunal upheld a ₹1.42 crore demand, holding that state-funded co-operative mills were not shown to be Government Entities and that their factory buildings serve industry.

GSTAT Pune has held that construction of factory buildings for co-operative spinning mills sponsored and funded under a Maharashtra Government scheme did not qualify for the concessional 12% rate under Sl. No. 3(vi) of Notification No. 11/2017-Central Tax (Rate), and attracted 18% under item (xii). It upheld a demand of ₹1,41,64,620 for 2018-19, covering differential tax, interest, a penalty under Section 73(9) and disallowed input tax credit (ITC). [Reliant Buildup, Sangli v. Commissioner of State Tax, Maharashtra, 2026-juristway.com-3296-GSTAT(Pune)-GST]

The Bench of Shridhar Mahadeo Bhosale, Member (Judicial), and Dr. Nirmal Kumar Soren, Member (Technical), dismissed the contractor’s appeal, with Dr. Nirmal Kumar Soren writing the order. The Sangli firm had charged 12% on works for four co-operative spinning mills, relying on tender approvals by a State-level Monitoring Committee chaired by the Minister (Textiles) and on letters of the Textile Department. In billing, GST of 9% was borne by the mills and the balance 3% by the firm.

The Bench found that the mills, and not the Government, invited the tenders, signed the agreements as owners and were billed for the work, so they were the recipients. A society registered under the Maharashtra Co-operative Societies Act, 1960 is not set up by statute, and the firm had not shown that any mill was established by the Government, as the second limb of the definition of ‘Government Entity’ requires. Departmental minutes settling the GST component of an approved price could not alter a rate notified under Section 9(1).

Independently, the works were not meant predominantly for use other than for commerce, industry or business. A factory building in which cotton is spun into yarn for sale is meant for industry and commerce, and the Bench observed that “an industry carried on for the benefit of a disadvantaged community remains an industry”.

Interest under Section 50(1) was held compensatory and payable regardless of bona fides, and the penalty under Section 73(9) was held fixed by statute, with payment within 30 days under Section 73(8) the only way to avoid it. Promissory estoppel could not operate against a statutory rate, and the plea for cum-tax valuation failed because the firm’s own invoices showed receipts exclusive of tax.

On ITC of ₹4,19,476 not reflected in GSTR‑2A, the firm produced no supplier or Chartered Accountant certificate under Circular No. 183/15/2022-GST despite repeated opportunity, and so had not discharged the burden under Section 155 of showing that the tax was paid as Section 16(2)(c) requires. The Bench held that the dismissal without reasons of the special leave petition against Suncraft Energy Pvt. Ltd. v. Assistant Commissioner, State Tax (2023) did not attract the doctrine of merger, and declined to remand.

2026-juristway.com-3296-GSTAT(Pune)-GST