Toll Management System supply to private entity attracts 18% GST under Entry 3(xii) of Notification 11/2017-CT(Rate)

AAR Gujarat ruled that supply of Toll Management System (TMS) by contractor to private entity attracts 18% GST under Entry 3(xii) of Notification 11/2017-CT(Rate). The tribunal held that TMS supply to private company rather than government entity, and its commercial toll collection purpose, disqualified it from concessional rates under entries 3(iv) and 3(vi) of the notification. The supply involved only TMS installation on existing highway, not road construction or comprehensive traffic management systems that would qualify for lower rates.

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Issues involved:
Classification of composite supply of works contract under Entry (vi) and Entry (iv) of Notification No. 11/2017-C.T. (R) for GST rate determination, and applicability of GST rate for services rendered by subcontractor to the main contractor.

Analysis:
1. Classification under Entry (vi) of Notification:
- Criteria for eligibility under Entry (vi) includes a composite supply of works contract provided to specific entities for structures meant predominantly for non-commercial use.
- The Toll Management System (TMS) provided by Tecsidel to the contractor does not meet the criteria as it is not intended for non-commercial use, given its toll collection purpose.

2. Classification under Entry (iv) of Notification:
- Eligibility under Entry (iv) requires a composite supply of works contract for specific types of infrastructure for public use.
- The TMS supplied by Tecsidel does not involve the construction of public infrastructure like roads, bridges, tunnels, or terminals, but is solely for toll collection purposes.

3. Applicability of GST rate for subcontractor services:
- Tecsidel, acting as a subcontractor to the main contractor, sought clarification on the GST rate applicable for its services.
- The supply of TMS by Tecsidel to the contractor does not align with the criteria specified under Entry (vi) or Entry (iv) of the Notification.
- The cited Uttar Pradesh Advance Ruling was distinguished as it involved a different scenario with a broader scope of services compared to the present case.
- The ruling pronounced by the Authority is binding only on the respective applicant, thus the cited ruling cannot be relied upon.

4. Final Ruling:
- The Authority ruled that the supply of TMS by Tecsidel does not fall under Entry (vi) or Entry (iv) of the Notification.
- Considering the detailed analysis provided, the GST rate applicable for the services rendered by Tecsidel as a subcontractor is determined to be 18% under a different entry of the Notification.

This comprehensive analysis of the judgment outlines the key issues addressed, the criteria for classification under specific entries of the Notification, and the final ruling provided by the Authority for the GST rate determination in the context of the composite supply of works contract and subcontractor services.

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