9911796707
TMI Blog2022 (5) TMI 1493X X X X Extracts X X X X X X X X Extracts X X X X ..... South Eastern Coalfields Limited, (SECL), Gevra has awarded to the applicant the work of Earthwork in formation, minor bridges, P. Way Linking work including supply of Track Ballast, PSC sleepers, P.Way Fittings, Points and Crossings, Drain, Road, FOB Geotechnical investigation etc. in connection with the proposed feeder line of East West Rail Corridor within the lease hold boundary of Project for coal evacuation through rail at Gevra Opencast of Gevra Area of SECL . SAC 995421 covers General Construction services of highways, streets, roads, railways, airfield runways, bridges and tunnels which by their very nature relates to work of civil engineering and there exists all plausible reasons to link the same to the aforementioned work awarded to the applicant by RITES LIMITED. Therefore, the instant supply of the applicant gets aptly covered under SAC 9954 in general and more specifically under 995421. Thus, the basic requirement for eligibility t the said exemption as provided under S.no. 3(v) of Notification No. 1 1/2017 Central Tax (Rate) dated 28.06.2017 as amended, of getting covered under SAC 995421 stands fulfilled. Whether the instant supply is a Composite supply? - HELD TH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (the application form for Advance Ruling) along with certain annexure and attachments seeking advance ruling as to- What is the rate of tax for the works contract like supply of goods or services or both pertaining to Railways based on order received from M/S. RITES Ltd. (on behalf of SECL) for construction of railway infrastructure facilities for the proposed feeder line of East West Rail Corridor within the leasehold boundary' of project for coal evacuation through Rail at Gevra Opencast of Gevera Area of SECL; Whether the work awarded can be covered under the definition of Works Contract as defined u/s 19) of the COST Act, 2017; Whether the rate of CST for the construction of rail infrastructure facilities will be under 3. No. OR Sl. No.3(xii) Notification No 11/2017-CT(Rate) dated 28/06/2017 as amended by various notifications as applicable and the said work can be considered as works contract pertaining to railways including monorail and metro? 2. Facts of the case: - 2.1 That the applicant is a private incorporation involved in works contract services. 2.2 That the work has been awarded by M/S Rites Limited, which is a Public Sector Undertaking owned by the Ministry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (x) and (xi) above is taxable @ 1 8% 3.3 That original work, as defined under para 2(zs) of Notification No. 12/201 7-CT (Rate) dated 28/06/201 7, states: (zs) "original works" means- all new constructions; (i) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; (ji) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise; Perusal of the detailed scope of work as per the tender document and brief scope of work indicates that the work awarded to the applicant comprises of laying of track, Box Culverts, Major Bridges, Supply of P-Way Materials work as per layout plan, Construction of side drain cutting area works. Therefore, the applicant is of the understanding that ail the said work as mentioned in the scope of work are in the nature of new work to be executed and, thus, covered under the definition of original work as defined in dause (zs) of said Notification and the work awarded can be considered as original work. Thus, it was the contention of the applicant that the scope of work as outlined by the applicant is that of works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s between, but covers, Government Railway under Section 2(20) and Non-Covernment Railway under Section 2(25) of the Act, Section 2(20)of the Railways Act, 1989:- "Government railway" means a railway owned by the Central Government; Section 2(25)of the Railways Act, 1989:- (25) "non-Government railway" means a railway other than a Government railway; It is concluded that the ambit of the term "railways" is wide under the Railways Act and includes scope for both Government and private administrations. 3.7 That, Article 366(20) of the Constitution states that- 366. Definition in this Constitution, unless the context otherwise requires, the following expressions have I, the meanings hereby respectively assigned to them, that is to say (20) railway does not include (a) a tramway wholly within a municipal area, or (b) any other line Of communication wholly situate in one State and declared by Parliament by law not to be a railway: Article 366(20) of the Constitution clearly states the exemptions under the definition of railways. The Parliament excludes by law, apart from the tramways, the lines of rails mentioned under Section of the Rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant is with regard to railways - Various items of work as per documents pertain to railways only - Conditions stipulated in Entry 3(v)(a) of impugned notification are fulfilled - Impugned activity is works contract involving original work pertaining to railways - Therefore, reduced CST of 12 per cent would be applicable [Paras 13, 16 to 20]. Thus, on the basis of the foregoing submissions, the applicant through the instant application is seeking certainty and clarity with respect to his four questions as mentioned above under the CST Act in order to avoid unnecessary litigation. 4. personal Hearing:- Keeping with the established principles of natural justice, personal hearing in the matter was extended to the applicant in person, as requested by them and accordingly, Shri Sandip Agrawal advocate and legal representative of the Applicant appeared before us for hearing on 09.03.2022 and reiterated their contention. He also furnished a written submission dated 13.01.2022 along with sample copies of work order which has been taken on record. 5. The legal position, analysis and discussion: At the very outset, we would like to make it clear that the provisions for implementing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the issue in hand, as appearing at S.No. 3(v) of Notification No. 11/2017 Central Tax(Rate) dated 28.06.2017 as amended, vide Notification 01/2018 Central Tax(Rate) dated 25.01.2018. In the instant case the eligibility or otherwise of the benefit of said Notification no. 11/2017 Central Tax (Rate) provided under S.no. 3(v) ibid, to the applicant is the subject matter of this proceeding. For the sake of brevity the relevant text of the same is reproduced hereunder. 7.1 Rate of GST on intra-State supply of specific services with Service Code Tariff (SAC) Government of India Ministry of Finance (Department of Revenue) Notification No. 11/2017-CentraI Tax (Rate) New Delhi, the 28th June, 2017 G.S.R......(E).- In exercise of the powers conferred by sub-section (I), [sub-section (3) and subsection I of section 9, sub-section (1) of section Il, sub-section (5) of section sub-section (1) of section 16 [and section 148] 3 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, and on being satisfied that it is necessary in the public interest so to do, hereby notifies that the central tax, on the intra-State supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Classification of Services as provided in the Annexure to Notification No. 11/201 7-C.T.(Rate) dated 28.06.2017 supra, the SAC relating to the works of railways are as under: ANNEXURE : SCHEME OF CLASSIFICATION OF SERVICES S. No. Chapter, Section, Heading or Group Service Code (Tariff) Service Description 1 2 3 4 1 Chapter 99 All Services 2 Section 5 Construction Services 3 Heading 9954 Construction services 4 Group 99541 Construction services of buildings 5 99541 Construction services of single dwelling or multi dwelling or multi-storied residential buildings 6 995412 Construction services Of other residential buildings such as old age homes, homeless shelters, hostels and the like 7 995413 Construction services of industrial buildings such as buildings used for production activities (used for assembly line activities), workshops, storage buildings and other similar industrial buildings 8 995414 Construction services of commercial buildings such as office buildings, exhibition and marriage halls, malls, hotels, restaurants, airports, rail or road terminals, parking garages, petrol and service stations, theatres and other similar buildings 9 99 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llip;…… ………………. 995421 General construction services of highways, streets, roads, railways, airfield runways, bridges and tunnels This service code includes construction services i. for formations of highways, including elevated highways, roads, streets. other vehicular and pedestrian ways and open car parks; ii. footpaths, traffic-calming structures, cycle tracks, etc.; iii. Vehicular and pedestrian underpasses and overpasses; iv. construction or restoration of road surface and parking lots with asphalt, concrete, etc.; v. installation services of crash barriers, low separating walls, traffic signs, etc.; vi. creation, maintenance and signposting of tracks and paths; vii. painting services of markings on roads, parking lots and similar surfaces; viii. railway roadbeds for long-line and commuter rails, street tramways and underground or elevated urban rapid transit systems; ix. railway electrification structures including laying services of ballast and rails; x. installation services of switch gear, points and crossings; xi. construction services of control and safety systems for railway tracks; x ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied in conjunction with each other in the ordinary course of business, one of which is a principal supply; Illustration.- Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply; On perusal of the copy of letter of acceptance dated 25.10.2021 issued by RITES LIMITED supra, furnished by the applicant it is quite evident that the instant work allotted involves supply of goods viz. Supply of Cement & Reinforcement, Supply of P-Way Fittings, Supply of PTS & Crossings, Supply of Sleeperscoupled with supply of services like P-Way work, Railway formation work, Geotechnical Investigation. Thus, there exist all reasonable grounds to hold that natural bundle of supply of goods and services are present and are supplied in conjunction with each other in the ordinary course of business. The supply thereof is construed to be made when the entire supply is made. Thus, we come to the considered conclusion that the second criterion of '"composite supply" stands fulfilled in the case in hand. 7.6 Now we move on the third criterion of the work being " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he subcontractor will charge GST in the tax invoice raised on the main contractor. The main contractor will be entitled to take ITC on the tax invoice raised by his subcontractor as his output is works contract service. However, in case the main contractor provides works contract service (other than for plant and machinery) to a company say in the IT business, the ITC of GST paid on the invoice raised by the works contractor will not be available to the said IT Company. From the definition, a work shall be treated as Works Contract if that work is done for land or earth or for immovable property and there is transfer of property in goods involved in the execution of such contract. Immovable property by its very definition means that it cannot be moved and cannot be detached or dismantled from the land or earth and further that dismantling of the same would render it defunct / redundant. Immovable property would include in its ambit land and the things which are attached to or embedded in the land such as buildings, bridges etc. However not everything that is attached to the land would automatically constitute an immovable property. Whether the particular property is an immovable p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OB Geotechnical Investigation etc. in connection with Project Management Consultancy work for the prpposed feeder line of East West Rail Corridor within the Lease hold boundary of Project for Coal Evacuation through Rail at Gevra Opencast at Gevra Area of SECL". Thus, from the above it appears hat the said work being under taken by the applicant is in connection with project management consultancy work. Accordingly, this authority on the basis of records furnished before us and available on record, is not in a position to conclusively hold that the works, as is forthcoming form the "letter of acceptance" dated 25.10.2021 issued by RITES LIMITED supra, undertaken by the applicant qualifies being treated as 'Works Contract' as per Section 2 (1 19) of CGST Act, 2017. 7.7 The other prerequisite to be satisfied in the instant case is that the supply should be by way of construction, erection, commissioning, or installation of original works' pertaining to railways, including monorail and metro. Original work is defined in Para 2(zs) of the Notification No. 12/2017-C.T.(Rate) dated 28.06.2017 as follows: "original works" means- all new constructions; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Proposal Justification Comments Fitment Committee 4 Hon'ble CM Maharashtra and Secretary, Ministry of Housing and Urban Affairs Request to reduce the GST rate from 18% to 12% for composite supply of works contract supplied by way of construction, erection, commissioning or installation of original works pertaining to Metro rail. Levy of high rate of GST adversely affects the financial position metro companies. The metro companies facilitate easy and quick movement of people and has positive impact on economic growth, apart from reduction in traffic congestion, pollution, road and parking cost. Reduces both cost and time of travel and improves competitiveness of the city. Services provided by way of construction, erection, commissioning, or installation of original works pertaining to monorail or metro were exempt till 1-3-2016. Thereafter, the said services provided under a contract entered into prior to I-32016 were exempt. Exemption to the said services was withdrawn in Budget, 2016 with a view to minimize exemptions in the run up to GST as exemptions break ITC chain, increase cost and result in distorted tax structure. However, GST rate on most of the services provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government Railway under Section 2(20) and Non-Government Railway under Section 2(25) of the Act. It, therefore, includes scope for railways under both Government and private administrations. In the instant case as is forthcoming from the letter of acceptance dated 25.10.202 I furnished by the applicant, issued by RITES the subject of work allotted is mentioned as "e-Tender no. 3!/OT/SECL/CEVRA-Open Cast/Civil &P.Way/PKG-ll/21 dated 1,3.2021 for the work of "Earthwork in formation, Minor bridges, P.Way linking work including supply of Track ballast, PSC Sleepers, P.Way Fittings, Points & Crossings, Drain, Road, FOB Geotechnical Investigation etc. in connection with Project Management Consultancy work for the proposed feeder line of East West Rail Corridor within the Lease hold boundary of Project for Coal Evacuation through Rail at Gevra Opencast at Gevra Area of SECL". Further, the said letter of acceptance mentions that the offer of the applicant has been accepted by the competent authority of RITES LIMITED for & on behalf of SECL (South Eastern Coal Fields Limited). Whether the phrase "'public carriage of passenger or goods" prevents a proposed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsified into planning and consulting services for other infrastructure, including airports, ports, highways and urban planning. As the proposed work involves the works related to railway network, the same can be said to be pertaining to Railways. The term "pertaining to Railways", as appearing at S.no. of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017 as amended, vide Notification 01/2018 Central Tax (Rate) dated 25.01 .2018 is more expansive and includes other establishments other than Indian Railways. Needless to mention here that there is no stipulation in the said entry claimed for exemption supra, that this work must be executed to the Railways but it is sufficient that it must be "pertaining to Railways", meaning therein that the supplier and the recipient is immaterial. Thus, we are of the considered opinion that the work being entrusted to the applicant through the said letter of acceptance dated 25.10.2021 by RITES Limited pertains to railways and accordingly this pre-requisite also stands fulfilled. 7.9 As regards the applicant's reference to the various rulings of Advance Ruling Authorities in their defense, we would again like to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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