2019 (10) TMI 315 - AAR - GST

Classification of services - 'Works Contract' services - construction of road over bridge (ROB) - construction, erection, commissioning and completion of 'Bridges' provided by the applicant as a sub-contractor to the Contractors who have been awarded the construction contract pertaining to construction/widening of roads by the Government Entities such as National Highway Authority of India. HELD THAT - In the present case, the Applicant has sought advance ruling only in respect of a situation where the main contractor is providing works contract services in respect of construction/widening of roads for NHAI, which are not covered by entry at Serial No. 3 (iii), (vi) and (vii) but are covered only under entry at Serial No. 3(iv). Moreover, before amendment vide notification dated 25-12018 introducing specific entry on rate of services provided by the sub-contractor to main contractor, the activity of the Applicant was covered under the scope of Serial No. 3(iv) of the Notification No. 11/2017 (as amended), which provided the rate of GST on the services supplied by way of construction of road/bridges. Thus, the services provided by the Applicant as sub-contractor to principal contractors continues to be covered under the Serial No. 3(iv) of the principal rate Notification No. 11/2017 which was inserted vide Notification No. 20/2017-Central Tax (Rate), dated 22-8-2017. - Rate of GST is 12%.

Summary

Issues Involved:
1. Classification of 'Works Contract' services for construction, erection, commissioning, and completion of bridges provided by the applicant as a sub-contractor.
2. Applicable rate of GST on the said services.

Issue-Wise Detailed Analysis:

1. Classification of 'Works Contract' Services:

The applicant, engaged in the construction, erection, commissioning, and completion of bridges, sought an advance ruling on the classification of services provided as a sub-contractor to main contractors awarded construction contracts by government entities like the National Highways Authority of India (NHAI). The relevant contracts involve the construction/widening of roads.

The applicant referenced Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017, which provides GST rates for construction services. Specifically, the applicant argued that their services fall under Serial No. 3(iv), which covers "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 a road, bridge, tunnel, or terminal for road transportation for use by the general public," attracting a GST rate of 12%.

The applicant contended that entries at Serial No. 3(ix) and 3(x) of the same notification, which pertain to works contract services provided by sub-contractors to main contractors offering services specified in Serial Nos. 3(iii), 3(vi), and 3(vii) to the Government, do not apply to their case. Since the construction of bridges for the Government is not covered under Serial Nos. 3(iii), 3(vi), and 3(vii), the applicant's services should be classified under Serial No. 3(iv).

The argument was supported by rulings from the Authority of Advance Ruling in Maharashtra and Kerala, and the recommendation of the GST Council in its 25th meeting, which resolved that sub-contractors would pay tax at the same rate as the principal contractor.

2. Applicable Rate of GST:

The ruling considered the definition of 'works contract' under Section 2(119) of the CGST Act, 2017, which includes contracts for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration, or commissioning of any immovable property involving the transfer of property in goods.

Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017, and its subsequent amendments, particularly Notification No. 20/2017-Central Tax (Rate), dated 22-8-2017, and Notification No. 1/2018-Central Tax (Rate), dated 25-1-2018, were analyzed. The amendments inserted new entries and clarified the GST rates for works contract services provided by sub-contractors to main contractors.

Specifically, entries at Serial Nos. 3(ix) and 3(x) pertain to sub-contractors providing services to main contractors offering services to government entities, covered under Serial Nos. 3(iii), 3(vi), and 3(vii). However, the applicant's services, related to the construction of bridges under contracts for road construction/widening by NHAI, fall under Serial No. 3(iv), which was not affected by the amendments.

The ruling concluded that the services provided by the applicant as a sub-contractor for the construction of bridges under contracts for road construction/widening by NHAI are classified under Serial No. 3(iv) of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 (as amended), attracting a GST rate of 12% (CGST 6% + SGST 6%).

Ruling:

The services pertaining to construction, erection, commissioning, and completion of bridges provided by the applicant as a sub-contractor in respect of construction contracts for road construction/widening by the National Highways Authority of India fall under the scope of Serial No. 3(iv) of Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017 (as amended), and attract GST at the rate of 12% (CGST 6% + SGST 6%).