2021 (11) TMI 433 - AAR - GST

Classification of goods - rate of tax - various items and equipments which are used in the construction of Poultry Farm on immovable property - HSN code on transferred of poultry farm equipment and others involved execution of works on immovable property - Composite supply or not - input tax credit - HELD THAT - On perusal of the definitions given for immovable property it has been noticed that prime property under the term of immovable property is land or earth. Further permanently fastened or attached to land or benefits to arise out of land are also treated as immovable properties - the applicant transferring all goods and service which are narrated in Para 9.1 falls under the purview of the definition of term composite supply as per section 2 (30) of the CGST/KGST Act 2017 means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. Input tax credit - HELD THAT - The applicant is constructing poultry farm on immovable property by using above stated input supplies is not eligible to claim Input Tax Credit. As per Section 17 (5) (d), Input Tax Credit shall not be available in respect of goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business - the claim of Input Tax Credit is restricted in terms of Section 17 (2) of the CGST/KGST Act 2017 on goods and service which are used for construction of farm on immovable property. Since the contract is an EPC contract, the activity carried out by the applicant is a composite supply of works contract as defined in clause 119 of section 2 of Central Goods and Services Tax Act, 2017 i.e., transfer of Poultry farm including equipments, machineries and other items involved in the execution of the said works. Composite supply of works contract on immovable property for the construction of poultry farm is classified under HSN 9954 and rate of tax at the rate of tax @ 18%, as per serial number 3 of item number (ii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.

Summary

Issues:
1. Rate of tax on items and equipments used in the construction of a poultry farm on immovable property.
2. HSN code for the transfer of poultry farm equipment and works executed on immovable property.

Analysis:
1. Admissibility of the application:
The application sought clarification on the classification and liability to pay tax on goods and services, making it admissible under Section 97(2)(a) and 97(2)(e) of the CGST Act 2017.

2. Brief Facts of the case:
The applicant, a poultry company, breeds parent birds for commercial broiler chicks. They inquired about the tax rates and classification of various items needed for constructing a poultry farm on immovable property.

3. Findings & Discussion:
The Authority noted that the applicant engages in composite supply of works contract services on immovable property for poultry farm construction. The term "immovable property" was analyzed based on legal definitions, highlighting that the activity falls under the definition of composite supply.

4. Interpretation of Law:
The activity of constructing a poultry farm on immovable property constitutes a composite supply of works contract service under the CGST/KGST Act 2017. The applicant's procurement of goods and services for the construction is considered a composite supply, treated as a supply of services as per Schedule II to the CGST Act.

5. Input Tax Credit (ITC) & Tax Rate:
The applicant, constructing the farm on immovable property, is ineligible to claim ITC as per Section 17(5)(d) of the CGST Act. The ruling specified that the composite supply of works contract for poultry farm construction is classified under HSN 9954, attracting a tax rate of 9% CGST and 9% KGST.

6. Ruling:
1. The EPC contract for poultry farm construction on immovable property is taxed at 9% CGST and 9% KGST.
2. The transfer of poultry farm equipment and works executed for the construction is classified under HSN 9954.

This detailed analysis of the judgment provides insights into the legal interpretation and application of tax laws concerning the construction of a poultry farm on immovable property.