GST Applicable on Transportation Charges in Works Contract: AAR Decision

The Authority for Advance Ruling (AAR) ruled that GST is leviable on the transportation charges imposed by the Applicant on PGCIL. The AAR considered the transportation services as part of a composite supply constituting a works contract, subject to GST at a rate of 18% as per relevant notifications.

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Issues Involved:
1. Whether GST is leviable on the transportation charges levied by the Applicant on PGCIL.
2. If GST is payable, what would be the rate of GST to be charged on such charges.

Issue-Wise Detailed Analysis:

1. Whether GST is leviable on the transportation charges levied by the Applicant on PGCIL:

The Applicant, engaged in the power transmission and distribution sector, has entered into two contracts with PGCIL: a Supply Contract and a Service Contract. The Supply Contract involves the supply of various equipment and materials, while the Service Contract covers services such as planning, transportation, loading, unloading, and installation of the transmission line.

The Applicant contends that the transportation services provided to PGCIL should be exempt from GST under Notification 12/2017-Central Tax (Rate) dated 28th June 2017, which exempts services by way of transportation of goods by road, except when provided by a Goods Transport Agency (GTA). The Applicant argues that since they do not issue consignment notes, they do not qualify as a GTA, and thus their transportation services should be exempt from GST.

However, the Authority for Advance Ruling (AAR) examined the contracts and concluded that the Supply Contract and the Service Contract are part of a single, indivisible contract for the complete execution of the Tower Package. The AAR referred to the definition of "composite supply" under Section 2(30) of the GST Act, which includes two or more taxable supplies naturally bundled and supplied in conjunction with each other. The AAR determined that the transportation services are an integral part of the composite supply of works contract, which involves the transfer of property in goods and services.

The AAR also referred to the definition of "works contract" under Section 2(119) of the GST Act, which includes contracts for construction, fabrication, and installation of immovable property. The AAR concluded that the contracts between the Applicant and PGCIL qualify as works contracts and are therefore subject to GST as per Section 7 read with entry 6(a) of Schedule II of the GST Act.

2. If GST is payable, what would be the rate of GST to be charged on such charges:

Since the AAR determined that the transportation services are part of a composite supply in the nature of a works contract, the entire contract is considered a supply of services. According to entry at Sr. no. 3(ii) of the Notification No. 1/2017 of Central Tax (Rate) dated 28/06/2017, and the corresponding notification under the MGST Act, the applicable GST rate for works contract services is 18%.

Order:

The AAR ruled that GST is leviable on the transportation charges levied by the Applicant on PGCIL. The applicable rate of GST on such charges is 18% as per the relevant notifications.

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