GST Rate for Design & Construction Contract Clarified: 12% for Works Contract

The case involved determining the GST rate applicable to a contract for the design and construction of a Trisonic Wind Tunnel with Ejector System for a government department. The Authority for Advance Rulings, Kerala, ruled that the project constituted a works contract attracting GST at 12% under the relevant notification. The decision emphasized the distinction between supply of equipment and works contract for GST purposes, clarifying the classification based on the nature of the work performed.

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Issues involved:
1. Whether the supply can be considered as supply of equipment eligible for the concessional rate of GST of 5% under Notification No.01/2017-Integrated Tax (Rate).
2. Whether the supply is considered a works contract covered under Entry at SI No. 3 (vi) of Notification No. 08/2017 Integrated Tax (Rate) attracting GST at the rate of 12%.

Analysis:
1. The Authority for Advance Rulings, Kerala, examined a contract between a government department and a private company for the design, fabrication, procurement, and commissioning of a Trisonic Wind Tunnel with Ejector System. The contract involved various components, including civil work and machinery, forming an immovable system for Research and Development purposes. The question arose whether this supply qualified for the concessional GST rate of 5%. The authorized representative clarified that it was a works contract and sought a ruling only on the applicability of GST at 12%.

2. The Authority determined that the work of design, realization, integration, and commissioning of the Trisonic Wind Tunnel constituted a works contract under the CGST Act. As the project involved construction, erection, commissioning, and installation of a civil structure predominantly for non-commercial use, it fell under the category attracting GST at 12% as per the relevant notification. Therefore, the ruling stated that the supply in question was considered a works contract attracting 12% GST as per the specified entry in the notification.

This judgment clarified the classification of the supply contract and the applicable GST rate based on the nature of the work involved, highlighting the distinction between supply of equipment and works contract under the GST regime.

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