2021 (8) TMI 353 - AAR - GST

Rate of GST - Composite supply or mixed supply - works contract services doing original works with South Western Railways - services of repairs maintenance renovation and alterations of residential complex meant for use of the Railway employees - HELD THAT - The Railways Department is a Central Government Department and hence it is clear that the services provided to them if it is for a purpose other than for business then the same would be covered under entry 3(vi). Since the Railways is undertaking the transportation services of goods and passenger the services provided cannot be covered under entry 3(vi)(a). However the services of repairs maintenance renovation and alterations of residential complex meant for use of the Railway employees are covered under entry 3(vi) of the Notification and hence eligible for tax at 6% CGST. Rate of tax - HELD THAT - On the question whether this contract amounts to a composite supply or mixed supply or a bunch of separate supplies it is seen that the same cannot be a composite supply of works contracts as there is no principal supply and the works are not naturally bundled. It cannot be a mixed supply also because the valuations of each of the supply of works are valued separately and they would amount to separate contracts. Hence there is no common price for all the contracts. Hence it can be safely decided that each of the works mentioned in a schedule is a separate contract in itself and this is bolstered by the fact that the works are not in the same place and also are different in nature. Thus new constructions involved in the contract are liable to tax at 12% as per entry no.3(v) of N/N. 11/2017 -Central Tax (Rate) dated 28.06.2017 as amended by N/N. 20/2017 - Central Tax (Rate) dated 22.08.2017 - services of repairs maintenance renovation and alterations of residential complex meant for use of the Railway employees are covered under entry 3(vi) of the Notification and hence eligible for tax at 12% - Other repair works of old construction involved in the contract are liable to tax at 18% as per entry no. 3 (xii) of Notification No. 11/2017 -Central Tax (Rate) dated 28.06.2017 as amended from time to time.

Summary

Issues:
Applicability of GST rates for works contract services doing original works with South Western Railways.

Analysis:
The applicant, engaged in executing works contract services for South Western Railways, sought an advance ruling on the GST rates for original works. The Authority found the question admissible under Section 97(2)(b) of the CGST Act 2017. The applicant highlighted that they were executing works based on a lumpsum contract with South Western Railway, involving new works, repair works, and additions to existing structures. The applicant contested the Railway's interpretation of GST rates and relied on Notification No. 11/2017 for a 12% GST rate for original works related to Railways.

During the personal hearing, the applicant reiterated their stance. The Authority clarified that the CGST Act and KGST Act have similar provisions unless specifically mentioned. The works executed by the applicant were categorized into new constructions and repairs of old structures. The dispute revolved around the definition of "original works" as per the notifications. The Authority analyzed the definitions and determined that only additions or alterations to abandoned or damaged structures qualify as original works eligible for reduced tax rates.

The Authority further discussed the nature of structures and clarified that only those services making unusable buildings usable again constitute original works. The tender documents provided by the applicant were examined to differentiate between maintenance/repair works and original works. Services related to residential complexes for Railway employees were also analyzed under a separate entry for tax rates. The Authority concluded that the applicant's contract consisted of separate works, each attracting different tax rates based on the nature of the work involved.

In the ruling, the Authority decided that new constructions were subject to 12% GST, while services for repairs and maintenance of residential complexes for Railway employees were eligible for 6% tax. Other repair works of old constructions were deemed liable for an 18% GST rate. The ruling provided clarity on the tax rates applicable to different types of works contract services executed by the applicant for South Western Railways.