GST Rate on Earthwork for Expressway Project: 18% ruling by Advance Ruling Authority

The Advance Ruling Authority in Rajasthan determined that the GST rate applicable to the earthwork carried out by the applicant for a specific expressway project is 18% (CGST 9% + SGST 9%). The ruling clarified that the activity constituted a construction service of site preparation falling under a specific heading, classified under SAC 995432. This decision was based on the nature of the services provided by the applicant, which primarily involved site preparation activities without the supply of goods.

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Issues:
Classification of goods and services, determination of tax liability on goods or services.

Analysis:
The Advance Ruling Authority in Rajasthan addressed the issue raised by an applicant regarding the rate of GST on a sub-contract for earthwork related to the construction of a specific expressway project. The applicant, a registered person, sought clarification on whether the transaction constitutes a supply of service as a composite supply of works contract under the CGST Act, taxable at 12%. The applicant's submission detailed their engagement in earthwork for a designated highway section under a sub-contract. The Authority examined the nature of the work, emphasizing the independent responsibilities and liabilities outlined in the agreement between the parties involved.

The jurisdictional officer highlighted the technical aspects of earthwork, emphasizing the composite nature of services involved in road construction. The Authority considered the agreement between the applicant and the contracting parties, focusing on the scope of work defined, which primarily involved earthwork activities such as excavation, embankment, and sub-grade preparation. The Authority concluded that the applicant's activities were limited to earthwork and related services, distinct from the broader classification of road construction as per the relevant notification.

Regarding the classification of the supply, the Authority delved into the definitions of composite supply, works contract, and principal supply under the GST Act. It was established that the applicant's activities did not involve the supply of goods, thereby ruling out categorization as a composite or mixed supply. The Authority further clarified that since there was no transfer of property in goods, the activity did not fall under works contract services either.

Based on the analysis of the applicant's services and the relevant provisions of the GST Act, the Authority determined that the activity constituted a construction service of site preparation falling under a specific heading. Referring to the relevant notification, the Authority classified the service under SAC 995432, attracting GST at 18% (CGST 9% + SGST 9%). The ruling was based on the nature of the services provided by the applicant, which primarily involved site preparation activities without the supply of goods.

In conclusion, the Advance Ruling Authority in Rajasthan ruled that the rate of GST applicable to the earthwork carried out by the applicant for the specified expressway project would be 18% (CGST 9% + SGST 9%). The detailed analysis considered the specific nature of the services provided, the contractual agreements, and the relevant provisions of the GST Act to arrive at the conclusive ruling.

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