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2019 (10) TMI 1134 - AAR - GSTRate of tax - sub-contractors who executes the works contract work like supply of goods or services or both pertaining to Railways based on the order received from the main contractor who got the work order directly from Railways - composite supply or not - applicability of N/N. 11/2017- Central Tax dated 28.06.2017 as amended - relevant date of applicability of the notification. HELD THAT - The main contractor has obtained the contract from M/s Dedicated Freight Corridor Corporation of India Limited ( DFCCIL ) and then subcontracted to the applicant. The work is related to supply and installation testing and commissioning of automatic signaling equipment of Indoor and Outdoor LC Gates as per the requirement of DFCCIL - Since this involves the works related to railway network the contract can be said to be pertaining to Railways. The term pertaining to Railways is more expansive and includes other establishments other than Indian Railways. Hence the contract is pertaining to Indian Railways. Hence the sub-contract work is covered under the entry 3(v) of the Notification No.11/2017-Central Tax (Rate) dated 28.06.2017 as amended by Notification No.20/2017- Central Tax (Rate) dated 22.08.2017 and is liable to tax at 12% (6% CGST 6% SGST or 12% IGST) w.e.f. 22.08.2017. Prior to 22.08.2017 it was taxable at 18% under entry 3(ii) of Notification No.11/2017-Central Tax (Rate) dated 28.06.2017.
Issues Involved:
Rate of tax for sub-contractors in works contract related to Railways based on orders from main contractor, applicability of 6% tax rate as per Notification No. 11/2017, effective date of tax rate. Analysis: 1. Rate of Tax for Sub-Contractors: The applicant, a Limited Company, sought an advance ruling on the tax rate applicable to sub-contractors executing works contracts related to Railways. The main contractor, who receives work orders directly from Railways, sub-contracted the works to the applicant. The contract involved supply and installation of signaling equipment for railways. The main issue was whether the contract pertained to Railways, as per the relevant tax notification. 2. Applicability of 6% Tax Rate: The Authority examined the nature of the contract between the main contractor and the applicant. The contract included supply and installation of signaling equipment, which constituted a composite supply of works contract involving construction, erection, and installation of original works related to Railways. The contract satisfied the conditions under Entry No. 3(v) of Notification No. 11/2017, making it eligible for the reduced tax rate of 12% (6% CGST + 6% SGST or 12% IGST) effective from 22.08.2017. 3. Effective Date of Tax Rate: The Authority ruled that the contract work of the applicant to the main contractor, related to Railways, was liable to tax at 6% under CGST Act and 6% under KGST Act or 12% under IGST Act, as per Entry No. 3(v) of Notification No. 11/2017. The effective date of the 12% tax rate was determined to be from 22.08.2017, superseding the previous tax rate of 18% prior to the amendment. In conclusion, the Authority clarified the tax implications for sub-contractors in works contracts related to Railways, emphasizing the applicability of the reduced tax rate and specifying the effective date of the revised tax rate.
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