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Issues: Whether a sub-contractor executing composite works contract services for original works pertaining to railways is entitled to the concessional GST rate applicable to railway works contract services, or whether the higher rate applies.
Analysis: The Advance Ruling Authority examined the service classification under Heading 9954 and the relevant rate notification, under which composite supply of works contract services by way of construction, erection, commissioning or installation of original works pertaining to railways is taxable at the concessional rate. It noted that the applicant, though engaged as a sub-contractor, was executing the same railway original works forming part of the main contract and that the works and property in goods were effectively transferred in the same chain of railway construction. On that basis, the Authority held that the service remained a composite supply of works contract pertaining to railways and was covered by the concessional rate entry.
Conclusion: The sub-contractor is entitled to GST at 12%, being 6% CGST and 6% SGST, and the higher 18% rate is not applicable to the present supply.
Ratio Decidendi: A sub-contractor performing composite supply of works contract for original works pertaining to railways falls within the concessional railway works contract entry in the rate notification when the supply is substantively the same railway original works service.
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