Facts: M/s Shree Construction (“the Applicant”) is engaged in providing works contract service as sub-contractor to main contractor for original contract work pertaining to Railways. They execute and undertake composite supply of works contract as defined in Section 2 (119) of the CGST Act, 2017.
Issues Involved: The applicant seeks an advance ruling in respect of the following questions: –
- What Tax rate to be charged by the Sub-Contractor to main Contractor on Work Contract Service (WCS) pertaining to railway original Work Contract?
- What rate to be charged 12% or 18%?
Applicant’s Interpretation of Law: The Applicant took a view that as per Notification No. 20/2017-Central Tax (Rate) dated August 22, 2017 the rate of GST is 12% for composite supply of works contract supplied by way of construction, erection, commissioning or installation of original works pertaining to railways.
Further, In this respect, the Applicant relied on the Press Release issued for 25th GST Council meeting held on January 18, 2018 and stated that the rate of GST applicable to main contractor should be levied by sub-contractor.
Held: The Appellate Authority for Advance Ruling in Order No. MAH/AAAR/SS-RJ/15/2018-19 dated January 03, 2019 upheld the order of Authority for Advance Ruling while holding that sub-contractor providing works contract services to main contractor pertaining to railway’s original work is entitled to concessional GST rate of 12% under Sr. No. 3 of Notification No. 11/2017 as amended by Notification No. 1/2018. The assessee was providing works contract services to its main contractor who entered into works contract agreement with the Railways and services performed by them including property in goods used by them in execution of works contract was directly getting transferred to railways in entirety without any change or modification.
Thus, works contract though undertaken by sub-contractor was ‘pertaining to railways’ which fulfills the condition (v) of Sr. 3 of the said notification. Further, the AAAR stated that items included under condition (v) are service specific and service provider and service recipient are immaterial for determining beneficiary of concessional GST rate. It was concluded that the only conditions to be fulfilled under item (v) are as follows:
- There should be a composite supply of works contract defined under Section 2 (116) of the CGST Act, 2017 and
- It should be by the way of construction, erection, commissioning or installation of original works pertaining to railways
Therefore, the condition specified under item (v) of the Sr. No. 03 of the notification is completely fulfilled and therefore the service provided by the sub-contractor would attract concessional rate of 12% GST.
Citation: TS-184-AAAR-2019-NT