2018 (10) TMI 684 - AAR - GST

Classification of Services - Rate of GST - contract for supply of water after removal of excess iron and to supply all goods and services for achieving the objective of supplying water after removing excess iron - contract entered into by the applicant with the Public health Engineering Department, Government of Bihar. What is the rate & HSN code of GST applicable (after it s introduction from 1st July 2017) when Extracting water from tube well, passing it through treatment plant of removing unwanted contaminants like Iron from ground water and eventually lifting it to overhead tank (in short the scheme) runs on solar power? Held that - The issue pertains to a contract entered into by the applicant with the Public health Engineering Department, Government of Bihar. Vide letter dated 31.10.2014, the Executive Engineer of the Public health Engineering Department, Purnea, Bihar had informed the applicant that their bid in respect of their tender for the work of Design, Construction, Supply and Commissioning of 200 Mini Piped Water Supply Schemes with solar powered pumps and suitable treatment plants (aeration and activated carbon based) for removal of excessive iron from the Iron affected habitations of 9 districts on TURNKEY basis with 3 months trial runs after commissioning and comprehensive of 60 months after successful completion of trial run period had been approved. The applicant has been awarded a contract for supply of water after removal of excess iron and to supply all goods and services for achieving the objective of supplying water after removing excess iron - From the work details submitted by the applicant it is very clear that the entire contact is in the form of a composite contract consisting of supply of goods and services and Where the main intention is to drinking water to the villages after removing excess Iron impurities and which therefore would be the main part of the contract. Here it would not be out of place to mention that the applicant is claiming that the work performed by them are water treatment schemes and not water purification schemes . The work done by them is a composite supply which attracts the provisions of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The said Notifications has specified the rate of central tax to be levied on Intra State supply of services of description specified in Column 3 of the Table in the said Notfn, falling under scheme of classification of services mentioned therein. Composite supply of WCS supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of, pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal attracts a tax rate of 6% each of CGST and SGST. 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, installation, completion, fitting out, repair, maintenance, renovation, or alteration of, pipeline, conduit or plant for (i) water supply (ii) water treatment. Ruling - TSH 9954 is applicable to the subject contract of Extracting water from tube well, passing it through treatment plant of removing unwanted contaminants like Iron from ground water and eventually lifting it to overhead tank and the same would attract a tax rate of 12% (6% each of CGST and SGST).

Summary

Issues Involved:
1. Determination of the rate and HSN code of GST applicable for a composite supply involving extraction of water, treatment to remove iron contaminants, and lifting to an overhead tank using solar power.

Detailed Analysis:

Nature of Work:
The applicant is involved in the "Design, Construction, Supply & commissioning of 200 mini piped water supply schemes with solar operated pumps and suitable treatment plants for removal of excessive Iron in Iron affected habitations of nine districts in Bihar." The scheme includes various components such as drilling tube wells, solar panels, iron removal treatment plants, mild steel staging, RCC plinth, prefabricated GI sheet enclosures, distribution lines, and house-to-house connections.

Composite Supply:
The work is categorized as a composite supply involving both goods and services. The main intention is to provide drinking water to villages after removing excess iron impurities. The applicant argues that the work performed is a "water treatment scheme" and not a "water purification scheme."

Relevant Notification:
The work falls under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, specifically under Sr. No. 3, Column 3 (iii), which pertains to composite supply of works contract supplied to the government for water supply or treatment.

Tax Rate and HSN Code:
The applicable HSN code for the composite supply is TSH 9954. The tax rate for such composite supply, as defined in clause (119) of section 2 of the CGST Act, 2017, is 12% (6% CGST and 6% SGST). This classification is based on the nature of the work, which includes construction, erection, commissioning, installation, completion, and fitting out of pipeline, conduit, or plant for water supply or treatment.

Contract Specifics:
The contract issued by the Public Health Engineering Department (PHED) of Bihar involves several activities such as:
- Digging of Tube Well: Involves inserting PVC pipes and ensuring smooth water flow.
- RCC Plinth: Civil work involving the laying of foundations.
- Mild Steel Structural Staging: Prefabricated steel structures assembled on-site.
- GI Sheet Enclosure: Assembly and fixing around the treatment plant.
- Solar Panel Assembly: Installation and interconnection of solar panels.
- Treatment Plant: Prefabricated and assembled on-site, connected with interconnecting piping.
- Pipe Laying and House Connections: Laying GI pipes and providing house-to-house connections using CPVC pipes.

Observations:
The applicant has been awarded a contract for the supply of water after removing excess iron, involving various functions such as drilling tube wells, installing solar panels, and setting up treatment plants. The entire contract is a composite supply aimed at providing drinking water to villages, which falls under the specified notification for water supply and treatment.

Conclusion:
Based on the detailed analysis and submissions, the composite supply of works contract for extracting water, passing it through a treatment plant, and lifting it to an overhead tank using solar power falls under HSN code TSH 9954 and attracts a GST rate of 12% (6% CGST and 6% SGST).

Order:
For reasons discussed, the applicable HSN code for the contract is TSH 9954, and the GST rate is 12% (6% each of CGST and SGST).