2019 (6) TMI 1268 - AAR - GST

Nature of transaction - supply of goods or transfer of property? - Applicant has procured two contracts from M/s. Mackintosh Burn Ltd (MBL) for filling in the compound, tank, low land etc. with silver sand and earthwork in layers, including spreading and compacting the same at the district Correction Home, Baruipur - whether it is classifiable as a supply of sand (HSN 2505)? HELD THAT - In terms of the description of the work, contained in the work orders, the Applicant is required to fill in the foundation or plinth by silver sand in layers and consolidating the same by saturation with water ramming. The work also involves earth work for filling in the compound, tank, low land, ditches etc. with good earth spread in layers, including breaking clods and consolidating the same by ramming and dressing. It is, therefore, not a contract for the supply of goods, but the transfer of property in such goods in the course of preparing the site for construction of the New Central Correctional Home at Baruipur. It, therefore, amounts to improving and modifying land - an immovable property and is works contract, as defined under section 2(119) of the GST Act. The Applicant s supply is, therefore, classifiable as site preparation service (SAC Group 99543) and taxable @ 18% under Sl No. 3(xii) of Notification No. 11/2017-CT (Rate) dated 28/06/2017 (corresponding State Notification No. 1135-FT dated 28/06/2017), as amended from time to time. In this respect, this Authority agrees with the views of the concerned officer from the Revenue.

Summary

Issues:
1. Admissibility of the Application
2. Submissions of the Applicant
3. Submission of the Revenue
4. Observations and findings of this Authority

Admissibility of the Application:
The Applicant sought a ruling on the classification of their supply of filling in compound, tank, low land with silver sand and earthwork. The issue of admissibility arose during the hearing, with the Revenue officer objecting to it based on the completion of supply. The Authority clarified that an advance ruling can cover activities undertaken, not just future ones, and once admitted, objections to admissibility cannot be entertained post-proceedings.

Submissions of the Applicant:
The Applicant argued that their supply should be classified under HSN 2505 (sand supply) based on the ratio of a similar case in Jharkhand. They presented contract details showing sand as a significant part of the supply value. The Applicant contended that the supply predominantly involved sand, supporting its classification under HSN 2505.

Submission of the Revenue:
The Revenue officer contended that the Applicant's activities constituted site preparation services for subsequent construction work, falling under HSN 9954 and taxable at 18%. They argued that the work involved making the land suitable for construction, thus classifying it as a works contract service.

Observations and Findings of this Authority:
The Authority analyzed the work descriptions and contract details to determine that the supply involved improving and modifying land, making it a works contract transferring property in goods during site preparation. They dismissed the relevance of the Jharkhand case, as the value of earthwork in the Applicant's contracts was below the threshold for that classification. The Authority ruled that the Applicant's supply was a works contract service, classifiable as site preparation service and taxable at 18%.

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