GST Rate on Faecal Sludge Treatment Plant Works Contract as on 01.06.2022: Rajasthan AAR Rules 12% Applicable
Background and Context
The Rajasthan Authority for Advance Ruling (AAR) delivered its ruling in Advance Ruling No. RAJ/AAR/2026-27/13 dated 04.08.2026 in the matter of In re MTS-EIEL (JV) (GST AAR Rajasthan), addressing a significant question concerning the GST rate applicable to works contract services involving faecal sludge treatment plant (FSTP) infrastructure as on 01.06.2022.
The applicant, M/s MTS-EIEL (JV), operates as a GST-registered joint venture bearing GSTIN 08AAQAM9113R1ZN, with its registered office at 5/2, Shahid Amit Bhardwaj Marg, Malviya Nagar, Jaipur, Rajasthan — 302017. The ruling addresses a practical difficulty faced by contractors engaged in municipal water and sanitation infrastructure projects — specifically, the impact of a mid-contract GST rate revision on the financial viability of bids submitted under an earlier rate regime.
Nature of the Contract and Project Details
The joint venture was awarded a comprehensive works contract under Contract Package No. RSTDSP/FSTP-9 Towns/03 by the Rajasthan Urban Infrastructure Development Project (RUIDP) along with the respective Nagar Parishads and Nagar Palikas for various towns. The scope of work covered:
- Design
- Supply
- Construction
- Testing
- Trial Run
- Commissioning
- Five years of Operation & Maintenance
of Faecal Sludge Treatment Plant (FSTP) infrastructure projects.
The accepted contract amount was Rs. 46,34,57,750/- (inclusive of a provisional sum of Rs. 2,11,00,000/-).
Key Chronology of Contract Events
| Event | Date |
|---|---|
| Tender Invitation | 24.04.2022 |
| Bid Submission | 28.06.2022 |
| Letter of Acceptance | 30.09.2022 |
| Notice to Proceed | 28.11.2022 |
At the time the bid was prepared and submitted, the applicant factored in GST at 12% (6% CGST + 6% SGST) in the quoted contract price, relying on the rate prevailing under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 as it stood on the relevant dates.
The GST Rate Change and Its Financial Impact
Following the issuance of Notification No. 03/2022-Central Tax (Rate) dated 13.07.2022, effective from 18.07.2022, the concessional rate entry that had governed the subject works contract was omitted. As a result, GST at 18% (9% CGST + 9% SGST) became applicable to works executed and billed on or after that date.
The applicant discharged GST liability at 18% on all subsequent invoices but contended that this created an additional tax burden of 6 percentage points over and above what had been considered in the original financial bid.
Questions Raised Before the Authority
The applicant sought an advance ruling on the following:
Q1) What is the applicable GST rate on Works Contract Services as on 01.06.2022?
(HSN Code 9954: S. No. 3/(iii)/(c) — pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal.)
Additionally, the applicant had raised a collateral issue regarding whether the additional 6% GST burden constituted a statutory tax liability recoverable from the contracting authority under the terms of the contract.