2019 (11) TMI 113 - AAR - GST

Classification of supply - contract for 'Design, Realisation, Integration and Commissioning of 1.2m Trisonic Wind Tunnel at Vikram Sarabhai Space Centre, ISRO, Thiruvananthapuram - eligibility for the concessional rate of GST under Sl.No.243A of First Schedule of Notification No.01/2017 Integrated Tax (Rate) dtd.28-06-2018 - works contract or not - whether covered under Entry Sl.No.3 of Notification No.08/2017 Integrated Tax (Rate) dtd.28-06-2017 as amended by Notification No.24/2017 Integrated Tax (Rate) dtd.21-09-2017 attracting GST at the rate of 12%? HELD THAT - The 1.2m Trisonic Wind Tunnel that is finally commissioned is an immovable system for test set up to be used purely for Research and Development purpose to design Launch Vehicle and Re-entry Space Craft. On commissioning of the project, the civil work as well as the machinery and equipments inside become an integral and inseparable system. As the installation and commissioning of the 1.2m trisonic Wind Tunnel includes works of civil structural, engineering, fabrication; procurement, electrical, pipelines and fire fighting systems, overall integration of the systems, commissioning, performance testing and training it is clear that the work will fall under the definition of works contract under Section 2 (119) of CGST Act, 2017. The activity being a works contract awarded by the Central Government Department by .way of construction, erection, commissioning, installation, completion, fitting out, of a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession will attract 12% GST as per Sl.No.3 (vi) of Notification No.08/2017 Integrated Tax (Rate) dated 28.06.2017 - In this case, VSSC is undertaking the activity of research and development to design Launch Vehicle and Reentry Space Craft as a public authority.

Summary

Issues:
1. Whether the supply under the contract can be considered as supply of equipment eligible for concessional rate of GST.
2. If the supply is considered as a works contract, whether it would attract GST at the rate of 12%.

Analysis:

Issue 1: Supply of Equipment Eligible for Concessional Rate of GST
The contract between Vikram Sarabhai Space Centre and Tata Projects Ltd for the design, realization, integration, and commissioning of a 1.2m Trisonic Wind Tunnel raised the question of whether it qualifies for the concessional rate of GST under Sl.No.243B of Notification No.01/2017 Integrated Tax (Rate). The ruling clarified that the concessional rate of 5% is specifically for scientific and technical instruments, apparatus, equipment, parts, and components required for launch vehicles and satellites. It does not extend to the installation, commissioning, or fitting out of civil structures. The final product, the Wind Tunnel, was deemed an immovable system integral for Research and Development purposes, making it ineligible for the concessional rate.

Issue 2: Works Contract and GST Rate
The ruling further delved into whether the design, realization, integration, and commissioning of the Wind Tunnel constituted a works contract attracting GST at the rate of 12%. It was established that the Wind Tunnel project involved various activities such as civil works, engineering, fabrication, procurement, electrical works, and overall system integration. As per Section 2(119) of the CGST Act, 2017, this project fell under the definition of a works contract. Additionally, since the project was awarded by a Central Government Department for research and development purposes, it was categorized as an original work predominantly for non-commercial use. Consequently, the project was subject to 12% GST as per Sl.No.3(vi) of Notification No.08/2017 Integrated Tax (Rate).

In conclusion, the ruling determined that the supply under the contract for the Wind Tunnel project did not qualify for the concessional rate of GST and was classified as a works contract attracting GST at the rate of 12% due to its nature and purpose.