Composite supply and works contract treatment defeated GST exemption for transportation charges in an integrated project arrangement.

Transportation services under the services contract were held not to qualify for exemption under Serial No. 18 of Notification No. 12/2017-Central Tax (Rate), because the transportation element was part of a larger, interdependent cable package arrangement. The Authority treated the supply contract and services contract as linked and not separately taxable on the facts, noting that the transportation activity formed one component of a broader execution package involving insurance, installation, testing and commissioning. It held that the arrangement was in substance a composite supply in the nature of a works contract, so splitting out transportation charges for a separate exemption was not legally sustainable. The exemption for standalone transportation service was therefore inapplicable.

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Issues: Whether the transportation services rendered under the services contract were exempt from GST under Serial No. 18 of Notification No. 12/2017-Central Tax (Rate), and whether the arrangement was in substance a composite works contract supply rather than a separate exempt transportation service.

Analysis: The application arose from a contract structure containing a supply contract and a services contract, both linked by a cross fall breach clause. The transportation component was not an isolated supply: the facts showed that the transportation activity formed part of the larger execution of the cable package project along with other services such as insurance, installation, testing and commissioning. The Authority accepted the departmental view that the two contracts were interdependent and could not be treated as separate and independent supplies. It held that the arrangement was a composite supply in the nature of a works contract, and that the attempt to split out transportation charges for exemption was not legally sustainable. On that basis, the exemption under Serial No. 18, which applies to transportation of goods by a supplier other than a goods transport agency or courier agency, was held inapplicable on the facts.

Conclusion: The transportation services were not exempt under Serial No. 18 of Notification No. 12/2017-Central Tax (Rate); the answer was against the applicant.

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