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Issues: (i) Whether the supply and installation contract for the air-conditioning project was a works contract under section 2(119) of the GST law; (ii) whether the transaction was a composite supply with the air-conditioner units as the principal supply, taxable at the rate applicable to air-conditioners.
Issue (i): Whether the supply and installation contract for the air-conditioning project was a works contract under section 2(119) of the GST law.
Analysis: The contract involved supply, installation, testing and commissioning of VRF indoor and outdoor units, piping, cabling, supports and allied electrical works. The contract materials could be identified and removed as separate goods and the arrangement did not result in an immovable property. On the facts, the installed system was not treated as a works contract for GST purposes.
Conclusion: The issue was answered against the applicant and in favour of Revenue.
Issue (ii): Whether the transaction was a composite supply with the air-conditioner units as the principal supply, taxable at the rate applicable to air-conditioners.
Analysis: The goods and services were supplied together in a bundled manner, and the principal supply was found to be the supply of air-conditioner units. Since the principal supply was goods, the tax liability followed the rate applicable to the principal goods, namely air-conditioners.
Conclusion: The issue was answered in the affirmative and in favour of Revenue.
Final Conclusion: The contract was held to be a composite supply and not a works contract, with GST payable at the rate applicable to the principal supply of air-conditioner units.
Ratio Decidendi: A contract for supply, installation, testing and commissioning of air-conditioning equipment is not a works contract unless it results in immovable property, and where the supplies are naturally bundled with goods as the principal supply, tax is determined by the rate applicable to that principal supply.
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