Works contract classification for pipeline construction denies export treatment and applies the ordinary 18% GST rate

Construction of a pipeline for an Indian contracting entity was treated as works contract service because the contract involved construction activity in relation to immovable property. The supply was not an export of service, since the recipient was in India and the statutory place-of-supply rule fixed performance in India, so export or deemed export treatment was unavailable. The applicable tax rate was the residuary works contract rate of 18%, as the concessional Government-entity entry did not apply. Input tax credit was admissible only on GST actually paid on eligible inward supplies used for execution of the contract, and no credit arose for procurement in Bangladesh where no GST payment was shown.

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Issues: (i) whether the applicant's supply is works contract service; (ii) whether the supply is an export of service; (iii) whether the applicant's service is taxable at 18% under the rate notification; (iv) whether input tax credit is admissible on GST paid on procurement.

Issue (i): whether the applicant's supply is works contract service.

Analysis: The contract was for construction of a pipeline and involved construction activity in relation to immovable property. On that basis, the supply answered the statutory description of works contract service.

Conclusion: The supply is works contract service, in favour of the assessee.

Issue (ii): whether the supply is an export of service.

Analysis: The recipient of the service was the Indian contracting entity, which paid the consideration and was the person to whom the service was supplied. The place of supply for construction of immovable property followed the statutory rule and was in India. The conditions for export of service were therefore not satisfied, and the supply could not be treated as deemed export for services.

Conclusion: The supply is not an export of service, against the assessee.

Issue (iii): whether the applicant's service is taxable at 18% under the rate notification.

Analysis: Once the supply was held to be a taxable supply within India, the concessional entry for a Government entity was found unavailable. The applicable entry under the rate notification was therefore the residuary works contract entry attracting 18% tax.

Conclusion: The service is taxable at 18%, against the assessee on the concessional-rate claim.

Issue (iv): whether input tax credit is admissible on GST paid on procurement.

Analysis: Credit was held admissible on GST paid on inward supplies procured in India for use in execution of the works contract, subject to the statutory conditions. As to procurement in Bangladesh, no GST payment thereon was shown, so credit on such procurement did not arise.

Conclusion: Input tax credit is admissible only to the extent GST was actually paid on eligible procurement, partly in favour of the assessee.

Final Conclusion: The ruling treats the contract as a taxable works contract supply in India, denies export treatment, applies the 18% rate, and allows input credit only on eligible GST-paid inward supplies.

Ratio Decidendi: For construction of immovable property, the place of supply is determined by the statutory rule applicable to the recipient's location, and where the recipient is in India the service is neither export of service nor deemed export; the applicable rate and input tax credit then follow the ordinary GST scheme.

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