The West Bengal Authority For Advance Ruling ( AAR ) bench of Brajesh Kumar Singh and Jyojit Banik decided that the welding of railway tracks with labour services will be viewed as a composite supply of services and will be beholden to 18% Goods and Service Tax ( GST ).
The applicant, Purple Distributors Pvt. Ltd., works on the tracks to convert Short Welded Rails (SWR) to Long Welded Rails (LWR) using the Flash Butt Welding process under a subcontract with M/s Patil Rail Infrastructure Pvt. Ltd. (Principal Contractor). The work also includes supply of labour help for welding rail junctions.
The applicant submitted that the goods (rail tracks) sent by the principal contractor are the property of the Indian Railways.
The bench observed the contention of the applicant that as both the principal contractor and the Indian Railways are registered under the GST Act and the treatment or process of welding has only been carried out on such goods (rail tracks) to convert from SWR to LWR, the said services provided by them would fall under the ambit of job work.
The applicant submitted that the supply of services provided by them would attract tax at 12%.
The authority observed that the railway tracks, for its permanent characteristic and in absence of mobility like other goods, would be regarded as immovable property and therefore fail to qualify to be goods.
Further noted that the work of conversion of SWR to LWR by Flash Butt Welding process cannot be treated as “job work‟ since to qualify any treatment or process to be job work, the same has to be undertaken on goods only.
The authority highlighted the applicant’s assertion that the supply of labour services they provided along with the supply of job work services should be considered as a composite supply because these supplies are naturally combined in this industry, where the job work supply would be the primary supply and the labour supply would be ancillary.
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