In a major ruling for railway project contractors, the Madras High Court rejected the tax department’s request for an 18% GST rate while retaining the 12 percent concessional rate of goods and services tax (GST) for contract services rendered to Rail Vikas Nigam Ltd (RVNL).
In the case, a contract for railway infrastructure projects was given to STS-KEC, a joint venture between KEC International and Stroytechservice LLC (Russia). Along with other infrastructure projects, the work included doubling the railway tracks between Vanchi Maniyachchi and Nagercoil in Tamil Nadu. Additionally, the Southern Railway’s Madurai and Thiruvananthapuram divisions needed signaling and telecommunications facilities.
The tax department filed GST demand orders against STS-KEC on December 12, 2023, for the assessment years 2018–19 to 2022–23. These orders imposed an 18% tax on railway infrastructure works completed for RVNL, rather than the 12 percent concessional rate that was set on June 28, 2017. A 12 percent concessional GST rate is offered for works contract services pertaining to railway infrastructure, such as building, erecting, commissioning, and installing original works, under this federal government announcement.
In response, STS-KEC submitted five writ petitions to the Madras High Court, contending that the nature of the work—rather than the recipient’s identity—should determine the GST categorization. In a common rulingthe court rejected the tax demand and confirmed that railway projects, whether they are carried out for Indian Railways, RVNL, or any other organization engaged in the development of railway infrastructure, are eligible for 12%.
The bench of Justice Mohammed Shaffiq has held that “the contract for doubling of track between Vanchi Maniyachchi to Nagercoil, construction of roadbed, minor bridges, platforms, buildings, water and effluent treatment facilities, wagon / coaching maintenance infrastructure, supply of ballast, installation of tracks and other electrical, signalling and telecommunication infrastructure in Madurai and Thiruvananthapuram Divisions of Southern Railway, between the petitioner and RVNL would be covered by Notification 11 of 2017 CGST (RATE) dated 28.06.2017 as amended vide Notification No. 20/2017 dated 22.08.2017, Notification No.8 of 2017 Integrated Tax (Rate) dated 28.06.2017 and G.O.Ms.No. 94 dated 22.8.2017 CT & RE and liable to tax at 12%.”
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