Highway lighting installation services denied concessional GST rates under Entry 3(iv)(a) Notification 11/2017-C.T.

The AAR-Chhattisgarh held that highway lighting system installation services do not qualify for concessional GST rates under Entry 3(iv)(a) of Notification 11/2017-C.T. The applicant's work involved supply and installation of electrical equipment for highway lighting but was classified as electrical installation services rather than construction services under Heading 9954. The AAR determined this constituted a composite supply combining goods and services, qualifying as a works contract for immovable property. However, the concessional rate benefit was denied as the services did not meet the specific criteria for construction services of roads, being limited to electrical installation work only.

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Issues Involved:
1. Classification of the supply made by the applicant.
2. Applicability of concessional GST rate under Entry 3(iv)(a) of Notification No. 11/2017-C.T. (Rate).

Issue-wise Detailed Analysis:

1. Classification of the Supply:

The applicant, HPL Electric and Power Ltd., engaged in the manufacture, sale, and installation of electrical equipment, sought a ruling on whether their supply to AIIL could be classified under Entry 3(iv)(a) of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017, which would allow them to avail a concessional GST rate of 12%.

The applicant entered into an agreement with AIIL for the design, engineering, supply, testing, erection, installation, commissioning, and trial run of a Highway Lighting System for the Bilaspur to Pathrapali section of NH-111 (NH-130) under the Bharatmala project. The scope of work included various activities related to lighting works at different locations along the highway, including the supply and installation of electrical materials as per BOQ, and ensuring all fixtures and materials conformed to MoRTH specifications.

The applicant contended that their work was essential for the completion of the road project and thus should be classified under Entry 3(iv)(a) of Notification No. 11/2017-C.T. (Rate), attracting a GST rate of 12%.

2. Applicability of Concessional GST Rate:

The Authority for Advance Ruling (AAR) examined the relevant provisions and definitions under the CGST Act and the classification of services. The AAR noted that for the benefit of the concessional GST rate under Entry 3(iv)(a) of Notification No. 11/2017-C.T. (Rate) to apply, the service must fall under "Construction services" under Heading 9954, and it must be a composite supply of works contract involving construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a road for use by the general public.

The AAR analyzed the scope of work awarded to the applicant and determined that the work involved in the Highway Lighting System was classified as "Installation services" under SAC 995461, which includes electrical installation services of illumination and signaling systems for roads. The AAR found that the applicant's work did not fall under "General construction services of civil engineering works" but rather under "Installation services."

The AAR further noted that the scope of work included civil works necessary for the completion of the electrical installation services, but these were ancillary to the primary service of electrical installation. The AAR concluded that the applicant's supply did not qualify as "Construction services" under Heading 9954, and thus, the benefit of the concessional GST rate under Entry 3(iv)(a) was not applicable.

Conclusion:

The AAR ruled that the supply made by HPL Electric and Power Ltd. to AIIL is classified as "Installation services," specifically electrical installation services of illumination for roads. Consequently, the applicant is not eligible for the concessional GST rate of 12% under Entry 3(iv)(a) of Notification No. 11/2017-C.T. (Rate), as the supply does not fall under "Construction services" under Heading 9954.

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