2018 (5) TMI 370 - AAR - GST

Railway track maintenance service deemed composite supply of labor and goods taxed at 18%.

In Re : Sreepati Ranjan Gope & Sons

The Authority classified the applicant's works contract service for maintaining railway tracks, involving labor and goods, as a composite supply of labor ... Works contract service - maintaining railway track - rate of tax - N/N. 12/2017-CT (Rate) dated 28/06/2017 under the CGST Act, 2017 (1136-FT dated 28/06/2017 under the WBGST Act, 2017) - Held that: - the condition for being exempted from GST under this amendment requires the composite supply (wherein the value of the goods supplied is not more than 25% of the total value of the supply) to be provided, inter alia, to Central Government by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. The works contract service of maintaining railway track as per the above LOA is, therefore, taxable @ 18% under the Serial no. 3 (ii) of the Rate Notification. Ruling:- The Applicant supplies works contract service, as defined under Section 2(119) of the GST Act, of maintaining existing railway tracks, which is taxable @ 18% under serial no. 3(ii) of Notification No. 11/2017-CT (Rate) dated 28/06/2017 under the CGST Act, 2017 (1135-FT dated 28/06/2017 under the WBGST Act, 2017). The appropriate SAC (Service Code Tariff) is as follows: Heading 9954, Group 99542, Sub-group 995429. Issues: Classification and Rate of Tax for maintenance work of railway tracks by providing contractor's labor and materials.Issue 1: Classification and Rate of Tax for maintenance work with contractor's labor only when Railways supply materials free of cost.The applicant, an enlisted contractor for railway maintenance work, sought an advance ruling on the classification and tax rate when providing labor without materials supplied by Railways. The Authority found the work to involve repair, maintenance, and fitting of immovable property, classifying it as a composite supply of labor and goods under a works contract. The service was categorized under SAC Heading 9954, Group 99542, Sub-group 995429, taxable at 18% under the Rate Notification.Issue 2: Classification and Rate of Tax for maintenance work with both contractor's material and labor.In cases where the contractor provides both materials and labor for railway track maintenance, the Authority determined the service to fall under the same classification as above, subject to a tax rate of 18% as per the Rate Notification. The ruling specified the applicable SAC and confirmed the tax treatment for this scenario.Issue 3: Applicability of specific amendments and exemptions to the tax rate.The applicant referenced amendments and exemptions during the Personal Hearing, including reduced rates for specific types of construction services and exemptions for supplies to the Central Government. The Authority examined the details provided in the Letter of Acceptance and concluded that the conditions for reduced rates or exemptions did not apply to the nature of work outlined in the LOA. Therefore, the standard tax rate of 18% was upheld for the works contract services related to railway track maintenance.Conclusion:The Authority ruled that the applicant's works contract service for maintaining railway tracks, involving labor and goods, is taxable at 18% under the specified category of the Rate Notification. The ruling's validity is subject to the provisions of the GST Act unless declared void under the relevant sections. The detailed analysis considered the specific nature of the work, classification under the SAC system, and the applicability of tax rates and exemptions based on the provided documentation and arguments during the proceedings.