2020 (8) TMI 249 - AAR - GST

Rate of tax - works contract - contract for construction of channels across Hokersar Wetland along the old alignment from RD 13182m to RD 16713m of flood spill channel, including its side slope protection and dredging of drainage flowing into Hokersar Wetland - Applicability of Sl No. 3 (vii) of Notification No 08/2017 Integrated Tax (Rate) dated 28/06/2017 - HELD THAT - The concerned Executive Engineer has issued a letter dated 19/03/2020 where he certifies that total value of the works contract constitutes mainly of dredging and earthwork excavation and involvement of material is less than 15 per cent of the total value of the work - The work is aimed at the improvement of immovable property and involves the supply of various services and goods in the course of its execution. It is works contract within the meaning of section 2 (119) of the GST Act, where earthwork exceeds more than 75% of the contract value. The recipient being a Union Territory, all the conditions of Entry No. 3 (vii) of the IGST Notification are satisfied.

Summary

Issues:
1. Admissibility of the application
2. Submissions of the Applicant
3. Submission of the concerned Officer
4. Observations and findings of the Bench

Admissibility of the application:
The applicant was awarded a contract by the Irrigation and Flood Control Department, Govt of Jammu and Kashmir, for construction work. The applicant sought a ruling on the applicability of a specific notification related to the supply. The application was found admissible under the relevant sections of the GST Act and the IGST Act, as the question raised was not pending or decided elsewhere, and no objections were raised by the Revenue officer. Therefore, the application was admitted.

Submissions of the Applicant:
The applicant submitted documents related to the work order, emphasizing that the supply involved works contract services with earthwork exceeding 75% of the contract value. The applicant argued that after the constitutional amendment, the recipient of the supply was now the Union Territory of Jammu and Kashmir. Based on these submissions, the applicant contended that the supply should be taxed at 5% as per the relevant notification.

Submission of the concerned Officer:
The concerned officer expressed difficulty in determining the percentage of materials involved in the contract based on the available information. Due to this lack of clarity, the officer refrained from providing a detailed comment on the matter.

Observations and findings of the Bench:
The Bench noted that the contract awarded to the applicant primarily involved earthwork excavation, as evidenced by the allotment order and related documents. The Executive Engineer confirmed that the value of the works contract mainly constituted dredging and earthwork excavation, with material involvement less than 15% of the total value. Considering the nature of the work and the percentage of earthwork involved, the Bench concluded that the supply fell under the definition of a works contract as per the GST Act. As all conditions of the relevant notification were met, the Bench ruled that the applicant's supply to the Irrigation and Flood Control Department, Govt of Jammu and Kashmir, was taxable under the specified notification.

This ruling remains valid unless declared void under the provisions of the GST Act.