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2021 (1) TMI 539 - AAR - GSTWorks Contract - Composite supply or not - works contract involving pre dominantly earth work i.e. constituting more than 75% of the value of work in contract provided to Central Government, State Government, Union Territory, Local authority, a government authority or a Government Entity having GST rate of 5% applicable to the applicant - Serial No. 3 of N/N. 31/2017-Central Tax (Rate) dated 13th October, 2017? HELD THAT - The applicability of the notification no. 31/2017 on the present contract of the applicant, the nature of work needs to be examined. The term Earth Work has not been defined under any GST provisions. The Webster Dictionary defines Earth Work as an embankment or construction made of earth specially one used as a field fortification. The Collins dictionary defines Earth Work as excavation of earth as in engineering construction; a fortification made of earth. The Wikipedia defines Earth Work as Earth Work are engineering works through the processing of parts of earth surface involving quantities of soil or unformed rocks. After going through different definitions of earth work, we find bulk earthworks include removal, moving or adding of large quantities of soil or rock from a particular area to another. They are done in order to make an area of suitable height and level for a specific purpose. It is evident that the said work order is in the nature of composite supply of work contract involving predominantly earthwork. It has also been detailed in PART III of the allotted tender (as annexed with the application by the applicant) that the nature of work is production of stones, supply of skilled unskilled manpower, supply of special purpose vehicles other mining equipments also involving construction services and supply of goods wherein transfer of property in goods is involved. The major part of the contract involves earth work i.e. more than 75% of the work involves earth work. Comments of the Officer under Section 98(1) of the CGST, HGST Act 2017 As per the nature of work assessed by the proper officer pertaining to work contract as awarded by Haryana State Industrial Infrastructure Development Corporation (HSIIDC) to the applicant, it involves predominantly earthwork the same is in the nature of composite supply of work contract as defined in clause 119 of section 2 of CGST/HGST Act,2017. Also HSIIDC is undertaking a government entity as 100% equity shares of company are held by the state government and as per clause 53, Section 2 of HGST Act, government entity was Government of Haryana. Also as per section 617 of Companies Act,1956, HSIIDC is registered as a government company - the proper officer assessed that notification 31/2017 is applicable to the contract of the dealer - since the major part of the work order, i.e. more than 75% is Earth Work , we find that the said work order qualifies for the benefit of Serial No. 3 of Notification 31/2017 dated 13.10.2017 issued under GST Act, being composite supply of works contract as defined in clause 119 of sec-2 of the CGST Act,2017, involving pre dominantly earth work i.e. constituting more than 75% of the value of work in contract provided to Central Government, State Government, Union Territory, Local authority, a government authority or a Government Entity. Therefore, GST will be applicable at the rate of 5%. As per Serial No. 3, Heading 9954 of the Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017 under the CGST Act, 2017 and as per Notification No. 31/2017-Central Tax (Rate), dated 13.10.2017 under the CGST Act, 2017 and the corresponding State Tax notification under HGST Act, 2017, The work carried by the applicant is a Composite supply of work contract involving pre dominantly earth work provided to a Government Entity and thus attract 5% GST (2.5% CGST 2.5% HGST). Thus, the Serial No. 3 of Notification No. 31/2017-Central Tax (Rate) dated 13.10.2017 under the CGST Act, 2017 is applicable to the applicant.
Issues Involved:
1. Nature of the work contract and its classification under GST. 2. Applicability of Notification No. 31/2017-Central Tax (Rate) dated 13th October 2017. 3. Determination of whether the applicant's work qualifies as predominantly earthwork. 4. Identification of the recipient as a government entity. 5. Applicability of TDS under GST and Income Tax Act. Issue-wise Detailed Analysis: 1. Nature of the Work Contract and Its Classification under GST: The applicant, M/s KSC Buildcon Private Limited, is engaged in providing a composite supply of work contracts, including the mining of various stones and minerals. The work involves drilling, excavation, removal, and dumping of waste material, along with the supply of skilled and unskilled manpower, special purpose vehicles, and construction services. As per Section 2 Clause (119) of the CGST Act, 2017, a "Works Contract" involves building, construction, fabrication, and other activities related to immovable property, where the transfer of property in goods is involved. 2. Applicability of Notification No. 31/2017-Central Tax (Rate) dated 13th October 2017: The applicant sought an advance ruling on whether their work contract qualifies for the GST rate of 5% as per Serial No. 3 of Notification No. 31/2017-Central Tax (Rate). The notification specifies that a composite supply of work contracts involving predominantly earthwork (constituting more than 75% of the value of the work) provided to government entities attracts a GST rate of 5%. 3. Determination of Whether the Applicant's Work Qualifies as Predominantly Earthwork: The nature of the work awarded to the applicant involves significant earthwork, including excavation, removal, and transportation of soil and rocks. The contract specifies that more than 75% of the work involves earthwork. Definitions from various sources, including Webster Dictionary and Collins Dictionary, were considered to conclude that the applicant's work qualifies as predominantly earthwork. 4. Identification of the Recipient as a Government Entity: The Haryana State Industrial & Infrastructure Development Corporation Ltd (HSIIDC) is identified as a government entity. It is a company incorporated under the Companies Act, 1956, with 100% equity held by the State Government of Haryana. As per Section 2, Clause 53 of the HGST Act, 2017, and Section 617 of the Companies Act, 1956, HSIIDC qualifies as a government entity. 5. Applicability of TDS under GST and Income Tax Act: Section 51 of the CGST Act, 2017, mandates TDS at the rate of 1% on payments exceeding ?2,50,000 made to suppliers of taxable goods or services. HSIIDC, being a government entity, deducted TDS under GST, which is reflected in the applicant's Form GSTR-2A. Additionally, TDS under Section 194C of the Income Tax Act, 1961, was deducted for contractual payments, as confirmed by case law references. Conclusion: The applicant's work contract qualifies as a composite supply of work contracts involving predominantly earthwork provided to a government entity. Therefore, as per Serial No. 3 of Notification No. 31/2017-Central Tax (Rate) dated 13th October 2017, the applicable GST rate is 5% (2.5% CGST + 2.5% HGST). The ruling confirms that the applicant is eligible for this reduced GST rate. Ordered accordingly. To be communicated.
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