Cable shifting and underground installation services classified as works contract services under Section 2(119) taxable at 18%

The AAAR held that the appellant's supply of cable shifting and underground installation services constituted works contract services under Section 2(119) of CGST Act, 2017, as it involved construction, erection, and installation of immovable property with transfer of goods. The appellant was not eligible for 12% concessional tax rate under entry 3(iv) of Notification 11/2017 as the services fell under residual entry 3(xii). Services to SCR were classified as works contract services taxable at 18% under entry 3(xii), not qualifying for exemption under entry 3(vi) as they were predominantly for business purposes. The appeal was disposed of confirming the classification and tax liability.

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Issues Involved:
1. Exemption of tax on the services provided by TS Transco to GHMC.
2. Tax liability for supply of works contract service by the applicant to South Central Railway.
3. Rate of tax applicable to services procured by the appellant from 3rd party contractor in providing services to GHMC and I&CAD.

I. Exemption of Tax on Services Provided by TS Transco to GHMC:

The appellant, TS Transco, undertook the replacement of overhead cables with underground cables for GHMC. The core issue was whether this service qualifies as a "works contract" or "pure service." The State Member opined that the contract does not involve the transfer of property in goods and thus qualifies as a "pure service" under Entry 3 of Notification 12/2017 CT(R), making it exempt from tax. Conversely, the Central Member held that the significant material involvement makes it a "works contract service," taxable at 18%. Due to this difference in opinion, no advance ruling could be issued as per Section 101(3) of the Act.

II. Rate of Tax Applicable to Services Procured by TS Transco from 3rd Party Contractors for GHMC and I&CAD:

The appellant contended that these services should be taxed at a concessional rate of 12% under Entry 3(vi) of Notification 11/2017-CT(R). However, the Appellate Authority determined that the services are "works contract services" and taxable at 18% under Serial No. 3(xii) of Notification 11/2017-CT(R). The Authority found that the services provided by private contractors involved the transfer of property in goods, classifying them as works contract services.

III. Tax Liability for Supply of Works Contract Service by the Applicant to South Central Railway (SCR):

The appellant claimed that the services provided to SCR were "pure services." However, the Authority found that the work involved construction, fabrication, erection, installation, and commissioning, resulting in immovable property. As such, these services were classified as "works contract services" and taxable at 18% under Serial No. 3(xii) of Notification 11/2017-CT(R).

Order:

1. No advance ruling issued for the exemption of tax on services provided to GHMC due to a difference of opinion.
2. Services procured by TS Transco from private contractors for GHMC and I&CAD are taxable at 18%.
3. Services provided by TS Transco to SCR are taxable at 18%.

The subject appeal is disposed of accordingly.

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