Works contract service classification applies where a contract creates immovable property and qualifies for the related concessional GST entry.

A contract for supply, installation and commissioning of machinery, plant, electrical works and overhead electrification for an electric loco shed was treated as a composite supply of works contract service because, on a holistic reading, the project resulted in immovable property permanently embedded and not intended to be moved. Once characterised as works contract service relating to immovable property, the supply fell within the relevant concessional entry for railway-related works. The advance ruling was therefore overturned on both issues, and the notification benefit under Sl. No. 3(v)(a) of Notification No. 11/2017-Central Tax (Rate), as amended, was held applicable.

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Issues: (i) Whether the work awarded to the appellant was a composite supply of works contract service; (ii) Whether the appellant was entitled to the benefit of Sl. No. 3(v)(a) of Notification No. 11/2017-Central Tax (Rate), as amended by Notification No. 20/2017-Central Tax (Rate).

Issue (i): Whether the work awarded to the appellant was a composite supply of works contract service.

Analysis: The contract had to be read as a whole and not in isolation. The scope of work covered supply, installation and commissioning of machinery, plant, electrical works and overhead electrification for an electric loco shed. The decisive question was whether the resulting project was immovable property. Applying the statutory definition of works contract and the principles governing immovable property, the project was found to be permanently embedded and not intended to be moved. The contract therefore involved transfer of property in goods along with supply of services in the execution of a contract for immovable property.

Conclusion: Yes. The work awarded to the appellant was a composite supply of works contract service.

Issue (ii): Whether the appellant was entitled to the benefit of Sl. No. 3(v)(a) of Notification No. 11/2017-Central Tax (Rate), as amended by Notification No. 20/2017-Central Tax (Rate).

Analysis: Once the activity was held to be works contract service in relation to immovable property, the applicable concessional entry for the subject works became available. The nature of the project and the scope of supply brought it within the notified category for railway-related works.

Conclusion: Yes. The appellant was entitled to the benefit of Sl. No. 3(v)(a) of Notification No. 11/2017-Central Tax (Rate), as amended.

Final Conclusion: The appeal succeeded and the advance ruling was overturned on both questions, with the subject contract treated as works contract service and the related notification benefit held applicable.

Ratio Decidendi: A contract for supply, installation and commissioning will be treated as works contract service only where, on a holistic reading of the contract, the execution results in immovable property permanently attached to the earth.

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