2023 (1) TMI 79 - AAR - GST

Classification of services - Job-work - works contract services - welding services are provided on railway tracks - goods falling under Heading 9988 or not - HELD THAT - In the case at hand, there can be no dispute in this regard that the intention of annexation of railway tracks involves significant degree of permanence and for this very characteristic of it, railway tracks are also called as permanent way - The railway tracks, for its permanent characteristic and in absence of mobility like other goods, would be regarded as immovable property and therefore fail to qualify to be goods. As a result, the work of conversion of Short Welded Rails (SWR) to Long Welded Rails (LWR) by Flash Butt Welding process cannot be treated as job work since we have already discussed that to qualify any treatment or process to be job work, the same has to be undertaken on goods only. The definition of job work is restricted to any treatment or process only i.e., the activities of a job worker is to undertake any treatment or process on goods which belongs to another registered person - In the case in our hand, we find that the contract awarded to the applicant is not limited to any treatment or process (the process of welding for the instant case) on goods belonging to another person. The scope of work as it is noticed from the work order covers the entire job for conversion of SWR to LWR including replacement of existing AT welds for a total distance of 54.03 km by flash butt welding. The work requires pulling back of rail, unfastening of fittings, lifting of rail with wooden block, opening out PSC sleepers either side of joints, removing of ballast, squaring, re-spacing and reinsertion of sleepers, putting back ballast, checking of joint sleeper, re-fixing of fittings etc. The instant services, therefore, falls under Tariff Code 995429 and to be taxed @ 18% vide serial number 3(xii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended from time to time corresponding West Bengal State Notification No.1135 F.T. dated 28.06.2017 .

Summary

Issues Involved:
1. Whether the services provided by the applicant fall under the category of a works contract.
2. Whether the services provided by the applicant qualify as job work.
3. Classification and GST rate applicable if the services do not fall under the above categories.

Detailed Analysis:

Issue 1: Whether the services provided by the applicant fall under the category of a works contract.
The applicant contended that their services should not be treated as a works contract because the welding services are provided on railway tracks, which can be easily detachable from the earth without any damage, and no goods are transferred in the services involved. According to clause (119) of section 2 of the GST Act, a "works contract" involves a contract for building, construction, fabrication, etc., of any immovable property wherein the transfer of property in goods is involved. The Authority held that even if the first condition (relation to immovable property) is set aside, the supply does not satisfy the second condition (transfer of property in goods). Thus, the services provided by the applicant do not qualify as a works contract.

Issue 2: Whether the services provided by the applicant qualify as job work.
The applicant argued that the services should be considered as job work under clause (68) of section 2 of the GST Act, which defines job work as any treatment or process undertaken on goods belonging to another registered person. The Authority analyzed that for any treatment or process to qualify as job work, it must be undertaken on movable property. The Authority concluded that railway tracks, due to their permanent characteristic and lack of mobility, are considered immovable property. Therefore, the services provided by the applicant do not qualify as job work.

Issue 3: Classification and GST rate applicable if the services do not fall under the above categories.
The Authority determined that the services provided, including welding and labor, are naturally bundled and supplied in conjunction, thus considered a composite supply. The services fall under the category of "General construction services of civil engineering works" under Group 99542. Specifically, the services fall under Tariff Code 995429, which includes services involving repair, alterations, additions, replacements, renovation, maintenance, or remodeling of constructions. The applicable GST rate is 18% as per serial number 3(xii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended.

Ruling:
The work undertaken by the applicant for the conversion of Short Welded Rails (SWR) to Long Welded Rails (LWR) by Flash Butt Welding process on railway tracks, along with the supply of labor services, is treated as a composite supply of services falling under Tariff Code 995429. This composite supply is taxable at the rate of 18% as per serial number 3(xii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended.