Works contract classification for mining activity supports concessional GST where earthwork predominates and the recipient is a government entity.

A mining-related contract covering drilling, excavation, waste removal, manpower, machinery, road and ramp construction, transportation and related supply was treated as a single naturally bundled composite supply constituting a works contract under the CGST Act because property in goods was transferred in execution. The Authority also found the work to be predominantly earthwork, with more than 75% of the value attributable to earthwork, and held the recipient to be a government entity as a wholly State-owned government company entrusted with the function. The contract therefore qualified for the concessional GST rate under Serial No. 3 of Notification No. 31/2017-Central Tax (Rate), attracting 5% GST.

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Issues: Whether the applicant's mining-related work order constituted a composite supply of works contract involving predominantly earthwork and supplied to a government entity so as to attract the concessional GST rate under Serial No. 3 of Notification No. 31/2017-Central Tax (Rate) dated 13.10.2017.

Analysis: The work awarded involved drilling, excavation, removal and dumping of waste material, supply of manpower, machinery and equipment, construction and maintenance of access roads, ramps and benches, transportation, and supply of stones. The supply was treated as a single naturally bundled composite supply, with transfer of property in goods involved in execution of the contract, thereby answering the definition of works contract under section 2(119) of the CGST Act, 2017. The Authority also found that the work was predominantly earthwork, with more than 75% of the value attributable to such work. HSIIDC was held to be a government entity because it was wholly owned by the State Government and was a government company under section 617 of the Companies Act, 1956, while the work had been entrusted to it by the Government of Haryana.

Conclusion: The contract qualified for Serial No. 3 of Notification No. 31/2017-Central Tax (Rate) dated 13.10.2017 and was taxable at 5% GST.

Final Conclusion: The advance ruling granted the concessional GST treatment sought by the applicant for the impugned works contract.

Ratio Decidendi: A contract comprising inseparable mining, construction, supply and transportation elements is taxable as a works contract where transfer of property in goods occurs in execution of the contract, and the concessional rate applies when such contract is predominantly earthwork supplied to a government entity entrusted with the relevant public function.

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