The contract for construction of new railway siding would be taxable at 12% ruled by the Authority for Advance Ruling (AAR), West Bengal.
The applicant Triveni Engicons Pvt. Ltd., engaged in execution of works contract services.
In this instance, M/s Rites Limited, a public sector enterprise owned by the Ministry of Railways, Government of India, has given the applicant a contract. On behalf of the Eastern Coalfields Limited (ECL), it was claimed that M/s Rites Limited had appointed the applicant for the specified job.
The authority observed that the work awarded to the applicant comprised construction of earthwork in formation, Major & Minor Bridge, ROB, Drain, P.Way Linking work including supply of Track Ballast, P. Way Fittings, Points & Crossings, Derailing Switches etc.,
Further, construction of Service Building including Internal Electrification, Installation, Testing & Commissioning of 140MT In-Motion Weigh Bridge and other allied works etc., (Pkg-III) in connection with the construction of New Railway siding at Jhanjra Area.
In accordance with serial number 3(v)(a) of Notification No. 11/2017 – Central Tax (Rate), the applicant claimed that the work could be regarded as a composite supply of works contract as defined in clause (119) of section 2 of the Goods and Services Tax Act, which is supplied by way of construction of original works pertaining to railways.
The department submitted, the rate of Tax in respect of sub-contract work received from M/s RITES Limited for construction of new railway siding is covered under entry Serial no 3(vi) of Notification no 11/2017- Central Tax (Rate) as amended by Notification no 20/2017-Central Tax (Rate). Further, liable to tax at 18%.
The authority highlighted that, the 12% tax rate specified in serial number 3(v) (a) of Notification No. 11/2017 – Central Tax (Rate) has been removed w.e.f. 18.07.2022 of Notification No. 03/2022 – Central Tax (Rate), dated 13.07.2022.
As a result, it was determined that if the applicant’s supply is determined to be under the aforementioned category, it will still be subject to an 18% tax starting on July 18, 2022.
After taking into account the type of work being done by the applicant, as described in the scope of work, the bench indicated that since the work is related to real property and undoubtedly involves the transfer of property in goods, it qualifies as a “works contract” as defined in section 2 clause (119) of the GST Act.
The bench of Brajesh Kumar Singh and Jyojit Banik ruled that the construction of new railway siding would be taxable at 12% till omission of the said entry vide Notification No. 03/2022- Central Tax (Rate) dated 13.07.2022.
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