Turnkey electrical transmission infrastructure construction attracts 18% GST as composite supply under Section 2 CGST Act

The AAR MP ruled on GST classification for construction services involving electrical transmission infrastructure. The applicant's turnkey contract for constructing 33/220 kV pooling sub-station with transmission lines constituted composite supply under Section 2 of CGST Act, 2017, attracting HSN Code 9954/995423. The Authority determined that no special exemption exists for solar power infrastructure construction under existing GST provisions. Consequently, CGST and MPGST rates of 9% each apply per Notification 11/2017-Central Tax (Rates) and corresponding state notification under MPGST Act, 2017.

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Issues:
1. Classification of services for construction of new 33/220 kV Pooling Sub-station and associated works under GST.
2. Applicable rate of CGST and SGST for the supply under the contract.

Detailed Analysis:
1. Classification of Services:
The applicant, engaged in construction projects for Solar Parks, sought clarification on the Harmonized System of Nomenclature (HSN) code for their services. The applicant contended that the work involved a composite supply of goods and services, falling under Works Contract as per the CGST Act. The Authority analyzed the agreements and determined that the work indeed constituted a composite supply within the meaning of the CGST Act. The services provided by the applicant were classified under Group 99542, specifically under service code 995423 for general construction services of long-distance underground/overland/submarine pipelines, communication and electric power lines, among others.

2. Applicable Rate of CGST and SGST:
Regarding the applicable GST rate, the applicant referred to Notification No. 11/2017-Central Tax (Rates) for the rate of GST on Works Contract services. The Authority noted that the rate for such services was 18% as per the notification. However, the applicant argued for a lower rate based on the nature of the work being part of evacuation infrastructure exclusively for Solar Power. The Authority clarified that no provision existed under the CGST and SGST Acts for a reduced rate in such cases. The determined rate for CGST and SGST on the supply under the contract was 9% each, as per the relevant notifications issued under the CGST and MPGST Acts.

In conclusion, the Authority classified the services provided by the applicant under the Works Contract category and specified the applicable HSN code. Additionally, the Authority established the rate of CGST and SGST for the supply made under the contract, emphasizing the absence of provisions for a reduced rate based on the nature of the infrastructure being developed.

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