2018 (10) TMI 684 - AAR - GST

Determining GST Rate & HSN Code for Water Supply Composite Service

The case involved determining the GST rate and HSN code for a composite supply related to water extraction, iron contaminant removal, and lifting using ... Composite supply of works contract - works contract services - water treatment and water supply - construction, erection, commissioning, installation of pipeline, conduit or plant for water supply - applicability of Notification No. 11/2017-Central Tax (Rate) - HSN 9954Composite supply of works contract - water treatment and water supply - HSN 9954 - applicability of Notification No. 11/2017-Central Tax (Rate) - Classification of the turnkey contract for design, construction, supply and commissioning of mini piped water supply schemes (solar powered pumps and iron removal treatment plants) and the GST rate/HSN applicable - HELD THAT: - The Authority found that the contract awarded by the Public Health Engineering Department was for supply of water after removal of excess iron and required the applicant to perform a sequence of activities - drilling tube wells, civil plinth work, erection/assembly of prefabricated steel staging and GI enclosures, assembly and interconnection of solar panels and treatment plant, pipe laying and house to house connections - such that the overall transaction constitutes a composite supply in the nature of a works contract. The activities fall within the scope of construction, erection, commissioning, installation and completion of a pipeline/conduit/plant for water supply and water treatment. Accordingly, the Authority applied the Entry at Sr. No. 3, Heading 9954 of Notification No. 11/2017 Central Tax (Rate) (as amended), which covers composite supply of works contract for pipeline/conduit/plant for water supply or water treatment, and concluded that the contract attracts the tax rate specified therein.The contract is classifiable under Heading 9954 as composite works contract for water treatment/supply and attracts GST at 12% (6% CGST + 6% SGST); HSN reference: 9954.Final Conclusion: The Advance Ruling holds that the turnkey composite contract for extraction, treatment (iron removal) and supply of drinking water using solar powered systems is a composite works contract covered by Heading 9954 under Notification No. 11/2017 and is taxable at an overall GST rate of 12% (6% CGST + 6% SGST) with effect from 1st July 2017. Issues Involved:1. Determination of the rate and HSN code of GST applicable for a composite supply involving extraction of water, treatment to remove iron contaminants, and lifting to an overhead tank using solar power.Detailed Analysis:Nature of Work:The applicant is involved in the 'Design, Construction, Supply & commissioning of 200 mini piped water supply schemes with solar operated pumps and suitable treatment plants for removal of excessive Iron in Iron affected habitations of nine districts in Bihar.' The scheme includes various components such as drilling tube wells, solar panels, iron removal treatment plants, mild steel staging, RCC plinth, prefabricated GI sheet enclosures, distribution lines, and house-to-house connections.Composite Supply:The work is categorized as a composite supply involving both goods and services. The main intention is to provide drinking water to villages after removing excess iron impurities. The applicant argues that the work performed is a 'water treatment scheme' and not a 'water purification scheme.'Relevant Notification:The work falls under Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, specifically under Sr. No. 3, Column 3 (iii), which pertains to composite supply of works contract supplied to the government for water supply or treatment.Tax Rate and HSN Code:The applicable HSN code for the composite supply is TSH 9954. The tax rate for such composite supply, as defined in clause (119) of section 2 of the CGST Act, 2017, is 12% (6% CGST and 6% SGST). This classification is based on the nature of the work, which includes construction, erection, commissioning, installation, completion, and fitting out of pipeline, conduit, or plant for water supply or treatment.Contract Specifics:The contract issued by the Public Health Engineering Department (PHED) of Bihar involves several activities such as:- Digging of Tube Well: Involves inserting PVC pipes and ensuring smooth water flow.- RCC Plinth: Civil work involving the laying of foundations.- Mild Steel Structural Staging: Prefabricated steel structures assembled on-site.- GI Sheet Enclosure: Assembly and fixing around the treatment plant.- Solar Panel Assembly: Installation and interconnection of solar panels.- Treatment Plant: Prefabricated and assembled on-site, connected with interconnecting piping.- Pipe Laying and House Connections: Laying GI pipes and providing house-to-house connections using CPVC pipes.Observations:The applicant has been awarded a contract for the supply of water after removing excess iron, involving various functions such as drilling tube wells, installing solar panels, and setting up treatment plants. The entire contract is a composite supply aimed at providing drinking water to villages, which falls under the specified notification for water supply and treatment.Conclusion:Based on the detailed analysis and submissions, the composite supply of works contract for extracting water, passing it through a treatment plant, and lifting it to an overhead tank using solar power falls under HSN code TSH 9954 and attracts a GST rate of 12% (6% CGST and 6% SGST).Order:For reasons discussed, the applicable HSN code for the contract is TSH 9954, and the GST rate is 12% (6% each of CGST and SGST).