Works contract classification for integrated transmission line package defeats exemption and makes bundled consideration taxable.

A bundled transmission line package executed under interlinked contracts was treated as an indivisible arrangement for construction, erection and commissioning of immovable property. Applying the statutory meaning of goods, works contract and immovable property, the AAR found the package attached to the earth and intended for permanent beneficial enjoyment, so the supply was works contract service rather than a mere ex-factory sale of goods. Because the supply was characterised as works contract service, the exemption under serial no. 18 of Notification No. 12/2017-Central Tax (Rate) was held inapplicable, and the entire bundled consideration remained taxable.

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Issues: (i) Whether the tower package executed under the two linked contracts constituted immovable property and therefore a works contract; (ii) whether the supply qualified for exemption under serial no. 18 of Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017.

Issue (i): Whether the tower package executed under the two linked contracts constituted immovable property and therefore a works contract.

Analysis: The contractual arrangement was examined as a whole and found to be a single bundled arrangement for construction, erection and commissioning of a transmission line package, with supply of goods, transportation, insurance, foundation work, erection and commissioning all forming one integrated execution. Applying the statutory concept of goods under Section 2(52) and works contract under Section 2(119) of the Central Goods and Services Tax Act, 2017, together with the meaning of immovable property under allied enactments, the package was held to be attached to the earth and intended for permanent beneficial enjoyment. The interdependence of the two contracts and the absence of independent executability supported the conclusion that the arrangement was not a mere ex-factory supply of goods but a composite works contract.

Conclusion: The tower package was held to be an immovable property, and the applicant was held to be supplying works contract service.

Issue (ii): Whether the supply qualified for exemption under serial no. 18 of Notification No. 12/2017-Central Tax (Rate) dated 28/06/2017.

Analysis: Since the entire arrangement was characterised as works contract service, the value of supply necessarily included the consideration for materials, transportation, in-transit insurance, erection and commissioning. The exemption provision relied upon was therefore found inapplicable to the bundled works contract supply. The cited circular on separate taxation of goods and services was also held to be irrelevant on the facts because the supplies were not separable into independent taxable components.

Conclusion: The exemption under serial no. 18 was held not applicable.

Final Conclusion: The ruling determined that the applicant's execution of the transmission line package was taxable as works contract service on the full bundled value, with no exemption available under the cited notification.

Ratio Decidendi: Where a contract, read as a whole, is an indivisible and interdependent arrangement for construction, erection and commissioning of an immovable property, the supply is works contract service and the entire bundled consideration is taxable as such.

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