classification, Goods and Services Tax - GST

[Bharat Cholleti]

Dear sir,

Dealer supplies electrical items including installation service with portion of goods 75% and installation charges 25%. Whether the above supply is treated as works contract under GST or composite supply... please clarify and HSN/SAC.

Posts / Replies

[KASTURI SETHI]

The following decision of AAR, Odisha will help you in arriving and correct decision :-

2021 (1) TMI 1100 - AUTHORITY FOR ADVANCE RULING, ODISHA IN RE : NEXUSTAR LIGHTING PROJECT PVT. LTD.

[Bharat Cholleti]

okay sir,

Thank you.

As per my understanding it is a composite supply, principal supply is goods which is a movable property and ancillary is service, I should apply the rate of tax on the entire value as per goods rate of tax which is a principal supply and accordingly have to apply HSN code not SAC. Is my understanding is correct sir.

[KASTURI SETHI]

I agree with you.

[Shilpi Jain]

Yes. Under gst works contract applies only if the works are relating to an Immovable property.

[Bharat Cholleti]

Dear shilpi Madam.

Thanks for responding.

Here is a builder gave the supply contract of electrical goods and its installation in a flat, when the para 6 of Sch II read with section 2(119) it is a works contract and composite supply is a "service". So should I apply rate applicable to Service or goods though the principal supply is a goods ancillary is service? please enlighten us.

[Shilpi Jain]

Here the electrical goods which are installed are themselves not immovable. Hence not a works contract. But supply of goods being principal supply

[Amit Agrawal]

It is presumably understood from the query is that subject supply under consideration here is with respect of new flat under construction by the builder and subject supply is with relating to electrical wiring fitting with switch-board, as generally provided to the builder while selling flat to the buyer.

In my view, same is 'Works Contract Services' which is defined u/s 2 (119) of the CGST Act, 2017 as under:

“works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract"

Relevant explanatory notes to scheme of classification of services under GST issued by GOI:

9954: Construction services

995461: Electrical installation services including electrical wiring & fitting services, fire alarm installation services, burglar alarm installation services

This service code includes

i. special trade installation services involving the installation of basic electrical wiring circuits or fittings in buildings and other construction projects;

ii. electrical wiring and fitting services for emergency power supply systems;

iii. electrical services arising from the installation of appliances;

iv. installation services of meters; installation services of fire alarm systems;

v. installation services of burglar alarm systems at the construction site;

vi. installation services of all types of residential antenna including satellite antenna;

vii. installation services of cable television lines within a building; installation services of lightning conductors;

viii. electrical installation services of telecommunications equipment;

ix. electrical installation services of illumination and signalling systems for roads, railways, airports, harbours and similar premises;

x. installation services of heavy electrical equipment;

xi. installation services of telecommunications wiring, including of fibre optic cables;

xii. other electrical installation services n.e.c.

Above views should be taken as strictly personal views of mine and should not be constructed as professional advice in any manner.

[KASTURI SETHI]

Also go through decision of AAR, Maharashtra reported as 2019 (6) TMI 1171 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA in re : NR Energy Solutions India Pvt. Ltd. decided on 8.1.19. Pl. peruse the whole case word for word.

[Shilpi Jain]

Dear Mr. Bharat

Just imagine if your contract was for supply of television and installation in a house. would it still be a works contract service? just because it's an electrical fitting how does the nature of the contract change?

If that is the view taken then anything done in any premises would become a works contract service.

so let's be careful in concluding which transaction is works contract

[Amit Agrawal]

Just to add to my previous reply:

Relevant explanatory notes to scheme of classification of services under GST issued by GOI:

9954: Construction services

This heading includes :

i. General construction services for all complete constructions.

ii. Specialized construction services i.e., services related to parts of buildings or civil engineering works, rather than the complete construction object.

95461: Electrical installation services including electrical wiring & fitting services, fire alarm installation services, burglar alarm installation services

This service code includes

i. special trade installation services involving the installation of basic electrical wiring circuits or fittings in buildings and other construction projects;

and so on...

As said earlier, it is presumably understood from the query is that subject supply under consideration here is with respect of new flat under construction by the builder and subject supply is with relating to electrical wiring fitting with switch-board, as generally provided to the builder while selling flat to the buyer.

“works contract” includes a contract for construction of any immovable property (i.e. flat / building) wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.

And, what is meant by 'Construction' is understood from two highlighted portions from 'explanatory notes to scheme of classification of services'.

Status of supply is 'composite' (with value of goods @ 75% and services @ 25%) as per querist himself and query seems limited to see whether same also falls within the 'Works Contract Services'

In view of definition of 'composite supply' u/s 2 (30) of the CGST Act, 2017 read with Para 6 (a) in Schedule-II (& read with section 7), I am of the view that activities of the querist falls under 'Works Contract Services' as defined u/s 2 (119) of the CGST Act, 2017.

Above views should be taken as strictly personal views of mine and should not be constructed as professional advice in any manner.

P.S. I understand the issue is not free of doubt and I respect contradictory views.

[Amit Agrawal]

I wish to also add the followings to provide some more clarity for my views in given specific situation:

“works contract” includes a contract not just for construction but also completion of any immovable property (i.e. flat / building) wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.

But and as said before, I respect contradictory views.

[Amit Agrawal]

Apologies ..... I meant to say 'contrary / opposite views' and not 'contradictory views'.