Composite supply and works contract limits deny concessional GST treatment to separate wet-leasing and maintenance services.

Separate contractual supplies cannot be merged into a single composite supply for concessional GST treatment unless they are naturally bundled and satisfy the statutory definition of works contract. Wet-leasing of machinery under Schedule V was treated as a distinct leasing arrangement, not works contract, because the agreements, consideration structure and transfer of title showed a separate service. The comprehensive annual maintenance contract under Schedule VI was also outside the concessional entry, as it was a post-warranty maintenance service and did not qualify under the alternative Government works-contract entry. Concessional rate relief was therefore confined to the construction-related works and did not extend to the separate leasing or maintenance arrangements.

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Issues: (i) whether the activities of wet-leasing of machinery under Schedule V formed part of a composite supply of works contract eligible for concessional rate under Notification No. 11/2017-Central Tax (Rate); (ii) whether the comprehensive annual maintenance contract under Schedule VI was eligible for the concessional rate under the same notification, including the alternative claim under the entry for works contract supplied to Government for use other than commerce or industry.

Issue (i): Whether the activities of wet-leasing of machinery under Schedule V formed part of a composite supply of works contract eligible for concessional rate under Notification No. 11/2017-Central Tax (Rate).

Analysis: The contract was examined as a whole, but the supplies comprised distinct activities with different legal character and timing. The construction, installation and commissioning works under Schedules I to III were naturally bundled and constituted works contract, but the wet-leasing arrangements under Schedule V were separate leasing transactions governed by their own agreements, with consideration assessed through NPV and transfer of ownership only at the end of the lease period. A lease of machinery does not satisfy the statutory definition of works contract merely because title ultimately passes. The wet-leasing activity was therefore classifiable as leasing or rental services and not as works contract.

Conclusion: The wet-leasing under Schedule V was not eligible for concessional treatment as works contract, and the decision was against the assessee.

Issue (ii): Whether the comprehensive annual maintenance contract under Schedule VI was eligible for the concessional rate under Notification No. 11/2017-Central Tax (Rate), including the alternative claim under the entry for works contract supplied to Government for use other than commerce or industry.

Analysis: The maintenance arrangement was a separate post-warranty service and not covered by the entry applicable to construction, erection, commissioning or installation of original works pertaining to railways. The alternative entry for works contract supplied to Government or a governmental authority was also found inapplicable because the factory was a production unit engaged in manufacture and the activity was not undertaken in the capacity of a public authority. On that basis, the maintenance service did not qualify for the claimed concessional rate.

Conclusion: The comprehensive annual maintenance contract under Schedule VI was not eligible for concessional treatment, and the decision was against the assessee.

Final Conclusion: The appeal failed, and the ruling of the lower authority was left undisturbed; the concessional rate was confined to the construction-related works and did not extend to the separate wet-leasing and maintenance arrangements.

Ratio Decidendi: Separate contractual supplies that are not naturally bundled and do not satisfy the statutory definition of works contract cannot be aggregated into a single composite supply for concessional GST treatment, and maintenance or leasing services do not qualify under a works-contract entry merely because they are connected to a larger project.

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