2018 (12) TMI 1226 - AAR - GST

Rate of GST - construction of railway siding -r Sl. No 3(v)(a) or Sl No 3(xiii) of Notification no 11/2017-CT(Rate) dated 28.06.2017 - Held that - The scope of work, as outlined in the Applicant s agreement with DVC, is that of works contract, as defined under section 2(119) of the GST Act, fit to be called an original work within the meaning ascribed to the term in para 2(zs) of Notification No. 12/2017-CT (Rate) dated 28/06/2017, and pertains to railways , provided it is meant for public carriage of passengers or goods. Whether the phrase public carriage of passenger or goods prevents a private siding from being included in the definition of railways has repeatedly come up for judicial scrutiny. The courts generally held that the phrase public carriage of passengers or goods cannot be construed in such manner as to exclude from the ambit of railways the sidings built and owned by organizations other than the government. DVC, a public sector undertaking, is the owner of the railway siding being built. It is meant for carriage of coal and oil fuel to RTPS. The purpose of the carriage of goods is, therefore, not recreation, but producing public goods like electricity. It is, therefore, not excluded under section 2(31)(ii) of the Railways Act, 1989 - The construction of the private siding that the Applicant refers to, therefore, pertains to railways . Ruling - Construction of a private railway siding for carriage of coal and oil fuel to Raghunathpur TPS, as described in the agreement between the Applicant and DVC, is a composite supply of works contract taxable @ 12% under Serial No 3(v)(a) of Notification no 11/2017-CT(Rate) dated 28.06.2017.

Summary

Issues:
Interpretation of GST rate for construction of railway siding under specific notifications.

Analysis:
1. The Applicant, a Consulting Engineer, sought a ruling on the applicable GST rate for the construction of a railway siding. The Advance Ruling Authority admitted the application under section 97(2) (a) & (b) of the GST Act as the question was not decided by any authority.
2. The Applicant was appointed as a Project Management Consultant by Damodar Valley Corporation for constructing a private siding between two stations. The Applicant's responsibilities included passing bills, making payments, and ensuring compliance with tax regulations.
3. The agreements provided by the Applicant outlined the scope of work, including procurement of materials, construction of railway infrastructure, and installation of equipment. The estimated project cost was &8377; 496.69 crore.
4. The relevant notification specified that the composite supply of works contract for railways is taxable at 12%. The definition of "original work" and "railways" under the GST Act was discussed to determine the applicability of the tax rate.
5. The scope of work in the Applicant's agreement was considered a works contract for railways, falling under the definition of "original work" if meant for public carriage of passengers or goods.
6. Judicial precedents were cited to support the inclusion of private sidings in the definition of railways for tax purposes, emphasizing that the phrase "public carriage of passengers or goods" should not exclude such infrastructure.
7. The Constitution and relevant laws were analyzed to conclude that the private railway siding constructed by a public sector undertaking for transporting coal and oil fuel was not excluded from the definition of railways. Therefore, the construction of the private siding was deemed to pertain to railways.
8. The ruling stated that the construction of the private railway siding for transporting coal and oil fuel was a composite supply of works contract taxable at 12% under the specified notification until declared void under the GST Act.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Authority's decision regarding the GST rate for the construction of a railway siding.