Sub –Contractor Activities of Shifting Electrical utilities for Construction of NH 34 Project cannot regard as Composite Supply of Work: AAR [Read Order]

The West Bengal Authority of Advance Ruling (AAR) recently held that sub -contractor activities of shifting electrical utilities for construction of NH 34 project cannot be regarded as composite supply of work.

The applicant is engaged in the business of rendering various works contract services related to modification/construction, renovation and maintenance of roads and highway projects and works connected with and incidental thereto. The applicant has been awarded a sub-contract from M/s KCC Buildcon Private Limited for shifting of electrical utilities for construction of Proposed 4-Laning of Barasat – Krishnagar Section of NH-34 Project on EPC mode.

The applicant sought the advance ruling on the issue of Whether in the facts and circumstances of the case, does the activity carried out by the applicant falls under Heading 9954: Entry No. 3(iv)(a) of Notification No. 11/2017-CT(R) and liable to tax at 12%?

Applicants submit that the National Highway Authority of India carried out the development, maintenance and management of National Highway and The task of development of highways by the NHAI is a multifaceted process which involves various phases that must be carried out. In such cases, organizations like the NHAI may get this work executed through contractors. They got the contract from the main contractor M/s KCC Buildcon Private Limited.

Revenue contented that  The applicant, who happens to be a subcontractor, has been awarded the work of shifting of electrical utilities while Notification No. 11/2017-Central Tax (Rate) allows concessional rate in case of works contract of road, bridge, tunnel or terminal for road transportation for use by general public. Hence, the activities do not fall under serial number 3(iv) (a) of the said Notification.

The authority observed that applicant awarded a subcontract from the main contractor for shifting of electrical utilities which requires removing of old materials from the project site along with erection of materials/lines.The applicant has entered into the agreement with M/s KCC Buildcon Pvt Ltd i.e., the main contractor for shifting of electrical utilities and for this work, the main contractor is liable to pay the consideration to the applicant. The service provided by the applicant cannot be regarded as supply by way of construction of road. The terms and condition of the agreement made between NHAI and the contractor stipulates that the cost of such shifting shall be reimbursed by the Authority to the Contractor which also indicates the independent nature of the work.

After considering the averments the authority consisting of member Brajesh Kumar Singh  and JoyjitBanik ruled that The activities being carried out by the applicant as a subcontractor for shifting of electrical utilities for construction of Proposed 4-Laning of Barasat – Krishnagar Section of NH-34 Project cannot be regarded as composite supply of works contract by way of construction of road as specified under serial number 3(iv)(a) of Notification No. 11/2017-Central Tax (Rate).

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