Transportation services taxed at 18% under composite works contract. Exemption not applicable. Contracts deemed indivisible.

The Appellate Authority upheld the decision that the transportation services provided by the Appellant were part of a composite works contract and taxable at 18%. The exemption under Notification No. 12/2017 was deemed inapplicable, and the contracts were considered as a single indivisible contract for the supply of goods and services, resulting in immovable property.

---

---

Issues Involved:
1. Applicability of exemption from CGST and SGST on freight charges recovered without issuance of consignment note.
2. Whether the contracts entered into by the Appellant constitute a composite supply.
3. Whether the services provided by the Appellant are in relation to immovable property and qualify as works contract services.

Issue-wise Detailed Analysis:

1. Applicability of exemption from CGST and SGST on freight charges recovered without issuance of consignment note:
The Appellant argued that the freight charges recovered from the customer without issuing a consignment note should be exempt from CGST and SGST under Notification No. 12/2017. They contended that since they did not issue consignment notes, they did not qualify as a Goods Transport Agency (GTA) and thus were eligible for the exemption. However, the Appellate Authority observed that the freight charges were part of a single composite contract involving supply and services, making the exemption inapplicable. The Authority emphasized that the services were naturally bundled and part of an indivisible composite supply, thus taxable as a whole.

2. Whether the contracts entered into by the Appellant constitute a composite supply:
The Appellant maintained that the contracts for supply of goods and services were separate and distinct, with different scopes of work, considerations, and invoices. They argued that the transportation services were independent and should not be treated as part of a composite supply. However, the Authority noted that the contracts were interdependent and naturally bundled, forming a composite supply. The contracts were linked by a cross fall breach clause, indicating that any breach in one contract would affect the others. The Authority concluded that the supply of goods and services were inextricably linked, and thus constituted a composite supply under Section 2(30) of the CGST Act.

3. Whether the services provided by the Appellant are in relation to immovable property and qualify as works contract services:
The Appellant contended that the goods supplied were not permanently attached to the earth and could be removed, thus not qualifying as immovable property. They argued that the services provided did not constitute a works contract. However, the Authority examined the nature of the contracts and the execution of the project, including the civil works involved. It was observed that the entire setup was intended to be permanent and not movable. The Authority referred to various judicial pronouncements and concluded that the project resulted in immovable property. Hence, the contracts were deemed to be a composite supply of works contract services, taxable at 18%.

Conclusion:
The Appellate Authority upheld the Advance Ruling Authority's decision, confirming that the transportation services provided by the Appellant were part of a composite works contract and taxable at 18%. The exemption under Notification No. 12/2017 was not applicable, and the contracts were considered as a single indivisible contract for the supply of goods and services, resulting in immovable property.

---