The Uttar Pradesh Authority of Advance Ruling ( AAR ) has ruled that 12 % GST is not available to supply construction lines and open lines undertaken to Indian railways.
M/S The India Thermit Corporation Limited, the applicant is engaged in the supply of works contracts to the Indian Railways on tender for carrying out different works on construction lines or open lines.
Construction lines are the new rail lines/tracks which are being laid down by the Indian Railways and open lines are existing rail lines/tracks which are being used by the Indian Railways.The Applicant provided various supplies in respect of construction lines and open lines.The rail tracks are permanently attached to the earth and cannot be shifted from one location to another without dismantling and rail tracks will qualify as immovable property.
It was viewed that the specified activities undertaken by the Applicant are about the immovable property (i.e. rail tracks). Thus, the first condition to qualify as a works contract.
It was submitted that while executing the contracts of welding (AT welding) along with painting, etc. of the rails, goods, which are transferred are on account of the Applicant. The paint used for painting welds/rails and liquid metal, formed by igniting the exothermic aluminium powder, used for AT welding becomes a part of the railway tracks owned by the Indian Railways.
The property in the goods involved in the execution of the contracts of AT welding and/or painting, etc. stands transferred to the Indian Railways.The goods involved in the repair and maintenance of the ‘open line’ as well as in the ‘construction line’ are welding materials and paints consumed purely during the execution of the contract.
It was observed by the authority that the supply provided by the applicant does not fall under the category of ‘new construction’ as the applicant is not doing any work relating to new construction. Even in the case of work relating to ‘construction lines’ wherein new railway tracks are constructed, the applicant is not constructing new railway lines and only supplying completion and finishing services in respect of ‘construction lines’ wherein the applicant has to provide welding work and painting work.
Further, there is no erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise during the execution of contracts by the applicant.
Shri Rajendra Kumar, Member (Central Tax) and Shri Vivek Arya, Member (State Tax) observed that “the applicant is not entitled to benefit of entry 3(v)(a) of Notification No. 8/2017-integrated Tax (Rate) dated 28.06.2017 because there is no contract for building, construction, fabrication, completion, erection, Installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property.”
The Authority held that the applicant is not entitled to an IGST rate of 12 % after 18.07.2022 or even before 18.07.2022 and the appropriate rate of IGST payable by the applicant on services provided on ‘construction line’ as well as ‘open line’ is 18%.
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