Classification of contractor services for state corporation: CGST, SGST rates disputed.

The case involved the classification of services provided by a contractor for a state corporation and the determination of the applicable tax rate. The Central Tax Member considered the services as a "composite supply" with excavation of sand as the principal supply, while the State Tax Member viewed it as a works contract due to the formation of ramps and roads. Regarding the tax rate, the Central Tax Member suggested 9% CGST + 9% SGST, while the State Tax Member proposed 2.5% CGST + 2.5% SGST for goods transportation. Due to conflicting opinions, the matter was referred to the Appellate Authority for Advance Ruling for a final decision.

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Issues Involved:
1. Classification of the combination of services provided by the applicant.
2. Determination of the applicable rate of tax for the services rendered.

Issue-wise Detailed Analysis:

1. Classification of Services:

The applicant, a contractor for Telangana State Mineral Development Corporation Limited (TSMDC), sought a ruling on whether their services constitute a "Works Contract" or "Composite Supply." The services include excavation of sand, transportation to a stockyard, and loading into lorries, along with the formation and maintenance of ramps and roads.

Opinion of Central Tax Member:
- The agreement specifies that the contractor must excavate sand, transport it to a stockyard, and load it into lorries. The contractor is responsible for the equipment and manpower required.
- The formation of roads/ramps is incidental and not part of the main contract.
- The services provided constitute a "composite supply" with "excavation of sand" as the principal supply, as defined under Clause (30) of Section 2 of the CGST Act.
- The claim that the services fall under "works contract" is not tenable.

Opinion of State Tax Member:
- The tender document and agreement detail the breakdown of charges for various services, including loading, formation of ramps and roads, transportation, and loading at the stockyard.
- The formation of ramps and roads involves the supply of goods and services, constituting a works contract as defined under Section 2(119) of the Act.
- The contract is a composite supply but not exclusively a works contract, as the primary intent is the transportation of sand.

2. Applicable Rate of Tax:

Opinion of Central Tax Member:
- The services are classifiable under "Excavating and Earthmoving Services" under Heading 995433 of the GST tariff.
- The applicable tax rate is 9% CGST + 9% SGST.

Opinion of State Tax Member:
- The principal supply in the composite contract is identified as "transportation of goods."
- As per Notification No. 11/2017, the applicable rate for "Goods Transporting by Vessel" is 2.5% CGST + 2.5% SGST, subject to conditions regarding input tax credit.

Conclusion:
Due to differing opinions between the Central Tax and State Tax members on the classification and applicable tax rate, the application is referred to the Appellate Authority for Advance Ruling for the State of Telangana for a final decision.

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