Data center setup qualifies as 'works contract' under GST Acts with applicable 9% CGST and 9% SGST rates.

The proposed activity of setting up data center facilities qualifies as a 'works contract' under Section 2(119) of the CGST Act, 2017 and Section 2(119) of the KGST Act, 2017. The applicable rate of GST for the activities is 9% CGST and 9% SGST as per Entry No. 3(ii) of Notification 11/2017 - Central Tax (Rate) dated June 28, 2017.

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Issues Involved:
1. Whether the proposed activity of setting up data center facilities qualifies as a 'works contract' under Section 2(119) of the CGST Act, 2017 and Section 2(119) of the KGST Act, 2017.
2. The applicable rate of GST on the proposed activities.

Issue-wise Detailed Analysis:

1. Qualification as 'Works Contract':

The applicant, a private limited company engaged in the sale of IT products and services, sought an advance ruling on whether their proposed activity of setting up data center facilities qualifies as a 'works contract' under Section 2(119) of the CGST Act, 2017 and Section 2(119) of the KGST Act, 2017.

The applicant detailed the activities involved in setting up the data centers, including civil, mechanical, electrical works, and obtaining statutory approvals. They argued that these activities involve both supply of goods and services, making it a composite supply related to immovable property, thus qualifying as a 'works contract'.

The applicant cited several judicial pronouncements, including decisions from the Supreme Court and High Courts, to support their argument that the term 'works contract' encompasses a wide range of activities involving both goods and services related to immovable property. They referred to cases like State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd and Kone Elevator India Pvt. Ltd. v. State of Tamil Nadu, which held that works contracts involve a composite supply of goods and services.

The applicant also emphasized that the activities proposed are in relation to immovable property, as defined under Section 2(36) of the General Clauses Act, 1987 and Section 3 of the Transfer of Property Act, 1882. They argued that the fixtures and installations involved are attached to the earth and meant to be permanent, thus qualifying as immovable property.

The Authority agreed with the applicant's arguments, noting that the activities involved in setting up data centers include extensive civil, mechanical, and electrical works that result in a fully functional data center. These activities involve both supply of goods and services and are related to immovable property, thus qualifying as a 'works contract' under Section 2(119) of the CGST Act, 2017.

2. Applicable Rate of GST:

The applicant sought clarification on the applicable rate of GST for the proposed activities. They referred to Notification 11/2017 - Central Tax (Rate) dated June 28, 2017, which specifies the rates of GST for various supplies. As per SI.No.3 of the Notification, composite supply of works contract is liable to GST at 18%.

The Authority confirmed that since the proposed activities qualify as a 'works contract', they are subject to GST at the rate of 18% (9% CGST and 9% SGST) as per Entry No. 3(ii) of Notification 11/2017 - Central Tax (Rate) dated June 28, 2017.

Ruling:

1. The proposed activity of setting up data center facilities qualifies as a 'works contract' under Section 2(119) of the CGST Act, 2017 and Section 2(119) of the KGST Act, 2017.
2. The applicable rate of GST for the proposed activities is 9% CGST and 9% SGST as per Entry No. 3(ii) of Notification 11/2017 - Central Tax (Rate) dated June 28, 2017.

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