Contract for locomotive TCAS equipment design and installation classified as composite supply under GST, not works contract

The AAR Telangana ruled that a contract for design, supply, installation, testing and commissioning of onboard TCAS equipment in locomotives constitutes a composite supply, not a works contract under GST law, since locomotives are movable property. The principal supply being electrical signalling equipment attracts 9% CGST and SGST. The AMC component was deemed a separate contract, also classified as composite supply with the same tax rate. The applicant must obtain separate registration in other states where supplies are made. The executing partner of the joint venture bears identical tax liability as the joint venture firm awarded the contract.

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Issues Involved:
1. Classification of the subject work as a Works Contract.
2. Applicable rate of GST for the contract.
3. Classification and GST rate for AMC services.
4. Requirement for separate registration in other states.
5. Applicability of CGST & SGST or IGST on the supply of goods to different states.
6. Applicable rate of GST for sub-contractors and sub-suppliers of goods.

Detailed Analysis:

1. Classification of the Subject Work as a Works Contract:
The contract for the design, supply, installation, testing, and commissioning of onboard Train Collision Avoidance System (TCAS) equipment does not qualify as a works contract under GST law. The definition of works contract under Section 2(119) of the CGST Act is restricted to supplies pertaining to immovable property. Since the equipment is installed on locomotives, which are movable property, it does not fall under the category of a works contract. Instead, it is classified as a composite supply.

2. Applicable Rate of GST for the Contract:
The supply of TCAS to South Central Railway is considered a composite supply, where the principal supply is electrical signaling equipment classified under HSN code 8530. As per Notification No. 1/2017 dated 28.06.2017, amended by Notification No. 41/2017 dated 14.11.2017, the applicable rate of GST for this equipment is 9% under CGST and 9% under SGST.

3. Classification and GST Rate for AMC Services:
The Annual Maintenance Contract (AMC) is considered a separate contract from the original contract, even though it is mentioned in the original contract. The AMC involves the maintenance of TCAS systems and is also classified as a composite supply. The GST rate applicable to the principal supply, which is the maintenance service of electrical signaling equipment, is 9% under CGST and 9% under SGST.

4. Requirement for Separate Registration in Other States:
The applicant is required to take separate registration under CGST and the respective SGST in the states where they make supplies. This is in accordance with the place of supply rules enumerated under Sections 10 and 12 of the IGST Act.

5. Applicability of CGST & SGST or IGST on the Supply of Goods to Different States:
The supply of goods like components, parts, and spares to South Central Railway as part of the whole contract is considered a composite supply. The principal supply is electrical signaling equipment, and as per Section 10 of the IGST Act, the place of supply is the place where the goods are delivered by the supplier. If the goods are delivered to another state, the place of supply will be that state, and the liability to pay tax will arise in the state where the delivery is made.

6. Applicable Rate of GST for Sub-Contractors and Sub-Suppliers of Goods:
The executing partner of the Joint Venture will have the same GST liability as the Joint Venture firm that was awarded the contract by South Central Railways. The applicable rate of GST for sub-contractors and sub-suppliers will be the same as that for the principal supply, which is 9% under CGST and 9% under SGST.

Ruling:
1. The subject work is a composite supply and not a works contract under GST.
2. The applicable rate of GST for the contract is 9% CGST and 9% SGST.
3. The AMC contract is a separate contract from the original contract.
4. The rate of GST for supply of goods and services under AMC is 9% CGST and 9% SGST.
5. Separate registration is required in other states where supplies are made.
6. The place of supply for goods delivered to other states will be the state where the delivery is made, and the tax liability will arise in that state.
7. The executing partner of the Joint Venture will have the same GST liability as the Joint Venture firm.

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