Court rules Wind Tunnel project not eligible for concessional GST rate

The court ruled that the supply under the contract for the design, realization, integration, and commissioning of a 1.2m Trisonic Wind Tunnel did not qualify for the concessional rate of GST. The Wind Tunnel project was considered a works contract attracting GST at the rate of 12% due to its nature as an immovable system integral for Research and Development purposes. The project involved various activities falling under the definition of a works contract and was categorized as an original work predominantly for non-commercial use, leading to the application of 12% GST as per relevant notifications.

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Issues:
1. Whether the supply under the contract can be considered as supply of equipment eligible for concessional rate of GST.
2. If the supply is considered as a works contract, whether it would attract GST at the rate of 12%.

Analysis:

Issue 1: Supply of Equipment Eligible for Concessional Rate of GST
The contract between Vikram Sarabhai Space Centre and Tata Projects Ltd for the design, realization, integration, and commissioning of a 1.2m Trisonic Wind Tunnel raised the question of whether it qualifies for the concessional rate of GST under Sl.No.243B of Notification No.01/2017 Integrated Tax (Rate). The ruling clarified that the concessional rate of 5% is specifically for scientific and technical instruments, apparatus, equipment, parts, and components required for launch vehicles and satellites. It does not extend to the installation, commissioning, or fitting out of civil structures. The final product, the Wind Tunnel, was deemed an immovable system integral for Research and Development purposes, making it ineligible for the concessional rate.

Issue 2: Works Contract and GST Rate
The ruling further delved into whether the design, realization, integration, and commissioning of the Wind Tunnel constituted a works contract attracting GST at the rate of 12%. It was established that the Wind Tunnel project involved various activities such as civil works, engineering, fabrication, procurement, electrical works, and overall system integration. As per Section 2(119) of the CGST Act, 2017, this project fell under the definition of a works contract. Additionally, since the project was awarded by a Central Government Department for research and development purposes, it was categorized as an original work predominantly for non-commercial use. Consequently, the project was subject to 12% GST as per Sl.No.3(vi) of Notification No.08/2017 Integrated Tax (Rate).

In conclusion, the ruling determined that the supply under the contract for the Wind Tunnel project did not qualify for the concessional rate of GST and was classified as a works contract attracting GST at the rate of 12% due to its nature and purpose.

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