Shifting electrical utilities under highway sub-contract not considered road construction services under GST Notification 11/2017

AAR West Bengal ruled that shifting of electrical utilities under a sub-contract for highway construction does not qualify as "construction of road" services under Entry 3(iv)(a) of Notification 11/2017-CT(R) attracting 12% GST. The applicant was sub-contracted solely for shifting electrical utilities, which constitutes an independent activity separate from main road construction work. The ruling emphasized that limited scope utility shifting services cannot be categorized as road construction services, following precedent from Rajasthan AAR. The work lacks nexus with the main construction contract as shifting costs are reimbursed separately by the Authority.

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Issues Involved:
1. Whether the activity carried out by the applicant falls under Heading 9954: Entry No. 3(iv)(a) of Notification No. 11/2017-CT(R) and is liable to tax at 12%.

Issue-wise Detailed Analysis:

1. Admissibility of Application:
The applicant has made an application under Section 97(1) of the GST Act, seeking an advance ruling on whether their activity falls under Heading 9954: Entry No. 3(iv)(a) of Notification No. 11/2017-CT(R). The application was admitted as it met the criteria under Section 97(2)(a) and (b) of the GST Act, and there were no objections from the revenue officer.

2. Applicant's Submission:
The applicant is engaged in works contract services related to road and highway projects and has been subcontracted by M/s KCC Buildcon Private Limited for shifting electrical utilities for the NH-34 project. They argue that their work should be classified under Heading 9954: Entry No. 3(iv)(a) of Notification No. 11/2017-CT(R), which pertains to construction services for roads, and should attract a GST rate of 12%.

The applicant contends that:
- NHAI, an agency of the Central Government, is responsible for the development of National Highways.
- The applicant's work of shifting electrical utilities is directly connected to the highway construction.
- The scope of work involves significant construction activities, making it a "works contract" under Section 2(119) of the GST Act.
- Based on the GST Council's intent and relevant case laws, the concessional rate applicable to the main contractor should also apply to the sub-contractor.

3. Revenue's Submission:
The revenue officer contends that the applicant's work of shifting electrical utilities does not fall under the concessional rate for works contracts related to road construction as specified in Notification No. 11/2017-CT(R). They reference an advance ruling from the Rajasthan Authority for Advance Ruling (RAJ/AAR/2019-20/34) to support their argument.

4. Observations and Findings:
The authority examined the submissions and documents provided by both parties. They noted that:
- The applicant has been subcontracted by M/s KCC Buildcon Private Limited for shifting electrical utilities, which is a specific part of the main contract for highway construction.
- The work of shifting utilities is ancillary to the main project but does not itself constitute road construction.
- The recipient of the applicant's services is M/s KCC Buildcon Pvt Ltd, not NHAI, as per Section 2(93) of the GST Act.
- The authority referred to the Rajasthan AAR ruling, which held that shifting/erection of electrical lines does not qualify as road construction services under Entry No. 3(iv)(a) of Notification No. 11/2017-CT(R).

5. Ruling:
The authority ruled that the applicant's activities of shifting electrical utilities for the NH-34 project do not qualify as composite supply of works contract by way of construction of road under Entry No. 3(iv)(a) of Notification No. 11/2017-CT(R). Therefore, the concessional GST rate of 12% does not apply to the applicant's services.

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