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2018 (9) TMI 854 - AAR - GSTRate of tax - sub-contractor - Works Contract Services (WCS) pertaining to railways original works contract - What Tax rate to be charged by the sub-contractor to main contractor on Works Contract Services (WCS) pertaining to railways original works contract? - Whether to charge tax rate of 12% GST or 18% GST? Held that - The WCS provided by them is the same or a part of the main contract entered into between the main contractor and the Railways. It also appears that works contract service is civil works performed by the sub-contractor for the Railways and the property in goods (materials used in the supply of Works Contract Service) also gets transferred to the Railways directly - In such a case as per the abovementioned clause (v) of Notfn No. 20/ 2017-CentraI Tax (Rate) dated 22.10.2017, the works contract service provided by the sub-contractor to the main contractor would be supply of Works Contract pertaining to Railways and therefore chargeable to tax @ 12% (6% of CGST and SGST each). However, the benefit of 12% tax rate would be available to the applicant only if the Works Contract services provided by them are 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, or installation of original works pertaining to railways. In respect of Sr. No. 3 of Notification No. 11/2017 dated 28.06.2017 as amended uptill today, even the sub-contractor providing services of composite supply of works Contract in respect of original works pertaining to railways would be covered for concessional rate of GST @ 12% as given under Sr. No. 3 of Notification No. 11/2017 as amended Ruling - The tax rate to be charged by the sub-contractor to the main contractor would be @ 6% of CGST and SGST each, in the present case - The tax rate to be charged would be 12% in the present case.
Issues Involved:
1. Tax rate to be charged by the sub-contractor to the main contractor on Works Contract Services (WCS) pertaining to railways original works contract. 2. Whether to charge a tax rate of 12% GST or 18% GST. Issue-Wise Detailed Analysis: 1. Tax Rate to be Charged by the Sub-Contractor to Main Contractor on Works Contract Services (WCS) Pertaining to Railways Original Works Contract: Applicant's Contention: - The applicant, a sub-contractor, provides works contract services for original railway works. - As per Notification No-20/2017-Central Tax (Rate) dated 22-08-2017, the GST rate is 12% for composite supply of works contract for railways. - The applicant believes that the tax rate applicable to the main contractor should also apply to the sub-contractor, citing SR.No-12 in the press release of the 25th GST council meeting held on 18-01-2018. - The applicant seeks clarification due to conflicting interpretations from Notification No-01/2018-Central Tax (Rate) dated 25-01-2018, which does not specify services provided by sub-contractors for railway original works. Authority's Observations: - Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 specifies the rate of central tax on intra-state supply of services, including works contract services. - Clause (v) of the said notification, as amended by Notification No. 20/2017-Central Tax (Rate) dated 22.10.2017, states that composite supply of works contract for railways is taxed at 12% (6% CGST and 6% SGST). - The authority noted that the applicant's works contract services are part of the main contract between the main contractor and the Railways, and the property in goods used in the works contract is transferred directly to the Railways. - Therefore, the works contract service provided by the sub-contractor to the main contractor is considered a supply of works contract pertaining to railways and is chargeable to tax at 12%. Conclusion: - The tax rate to be charged by the sub-contractor to the main contractor for works contract services pertaining to railways original works contract is 12% (6% CGST and 6% SGST). 2. Whether to Charge Tax Rate of 12% GST or 18% GST: Applicant's Contention: - The applicant argues that the tax rate should be 12% for sub-contractors providing services for original works contracts pertaining to railways, similar to the main contractor's rate. Authority's Observations: - The authority examined the relevant notifications and concluded that the works contract services provided by the sub-contractor to the main contractor for railways are covered under the concessional rate of 12% GST. - This conclusion is based on the interpretation that the sub-contractor's services are part of the composite supply of works contract for railways, as defined in clause (119) of section 2 of the CGST Act, 2017. Conclusion: - The tax rate to be charged by the sub-contractor for works contract services pertaining to railways original works contract is 12% GST. Final Order: - Q. No. 1: The tax rate to be charged by the sub-contractor to the main contractor would be 12% (6% CGST and 6% SGST). - Q. No. 2: The tax rate to be charged is 12% GST in the present case.
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