The Authority for Advance Rulings (AAR), Maharashtra ruled that 12 percent Goods and Services Tax (GST) would be applicable to the services provided by sub-contractors to the main contractors in respect of Works Contract Services pertaining to Railways.
The applicant, a sub-contractor to the main contractor who in turn are supplying WCS for original work pertaining to the Railways. They submitted that when a contractor awards either wholly or partially, the work to a sub-contractor, then the work to be performed by both of them remains the same and identical to what is specified in the contract between the main contractor and the employer, the Railways. As per Notification dated 22-08-2017 the rate of GST is 12% for the composite supply of works contract supplied by way of construction, erection, commission or installation of original works pertaining to railways.
The applicants claimed that since the tax rate is 12% for the main contractor, the same rate should be applicable to them too. They submitted that Notification dated 25-01-2018 has made certain amendments to the earlier Notification but has not provided clarification with respect to services provided by subcontractor to main contractor on railways original works contracts.
The authority noted that works contract service is civil works performed by the sub-contractor for the Railways and the property in goods (materials used in the supply of Works Contract Service) also gets transferred to the Railways directly.
“In such a case as per the above mentioned clause (v) of Notification No, 20/2017-Central Tax (Rate) dated 22.10.2017, the works contract service provided by the sub-contractor to the main contractor would be supply of Works Contract pertaining to Railways and therefore chargeable to tax © 12% (6% of CGST and SGST each). However, the benefit of 12% tax rate would be available to the applicant only if the Works Contract services provided by them are Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, or installation of original works pertaining to railways.”
The authority noted that “In respect of Sr. No, 3 of Notification No. 11/2017 dated 28.06.2017 as amended up till today, even the sub-contractor providing services of composite supply of works contract in respect of original works pertaining to railways would be covered for concessional rate of GST © 12% as given under Sr. No. 3 of Notification No. 11/2017 as amended referred above.”
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