Pump supply with installation to municipal corporation qualifies as works contract service under GST Section 2(119)

AAR West Bengal ruled that supply of pumps with installation and commissioning for sewerage treatment plant to Kolkata Municipal Corporation constitutes works contract service under GST Act Section 2(119). The installed pump becomes immovable property being permanently attached for beneficial enjoyment of the civil structure. Supply to local authority for sewerage disposal qualified for 12% GST rate under Notification 11/2017-CT(Rate) read with Notification 20/2017-CT(Rate) until 17 July 2022, after which rate increased to 18% following Notification 03/2022-CT(Rate). Time of supply could not be determined due to insufficient payment and completion details.

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Issues Involved:
1. Whether the transaction is in the nature of a 'works contract'.
2. Whether the supply is being made to a 'local authority'.
3. Whether the supply is for the purpose of 'sewerage treatment or disposal'.
4. Applicability of entry 3(iii) of Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017 read with Notification No. 20/2017-Central Tax (Rate) dated 22nd August 2017.

Summary:

1. Nature of 'Works Contract':
The applicant, engaged in manufacturing and selling pumps, submitted an advance ruling application regarding the supply made to Kolkata Municipal Corporation (KMC) for replacing an old pump with a new one. The applicant contends that the supply is a composite supply of works contract to a local body, involving both goods and services related to immovable property, thus qualifying as a 'works contract' under Section 2(119) of the GST Act. The Authority observed that the pump, once installed, becomes an immovable property as it is essential for the permanent beneficial enjoyment of the civil structure (sewerage pumping station). Therefore, the supply qualifies as a 'works contract service'.

2. Supply to 'Local Authority':
The supply in question is made to KMC, which is a 'Municipality' under Article 243P of the Constitution and thus qualifies as a 'local authority' under Section 2(69) of the GST Act. Therefore, the Notification No. 11/2017-Central Tax (Rate) applies to this case, subject to other conditions being fulfilled.

3. Purpose of 'Sewerage Treatment or Disposal':
The tender issued by KMC's Sewerage and Drainage department specifies the replacement of old pumps at drainage pumping stations. The purpose of the pump is to facilitate sewerage disposal, an integral part of the process. The Authority confirmed that the contract is for sewerage disposal and thus qualifies under the relevant notification.

4. Applicability of Notification No. 11/2017-Central Tax (Rate):
The supply qualifies as a composite supply of works contract services made to a local authority for sewerage disposal. Therefore, it falls under entry 3(iii) of Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017, attracting a 12% tax rate until the entry was omitted on 18th July 2022 by Notification No. 03/2022-Central Tax (Rate). The Authority could not ascertain the time of supply due to insufficient details regarding the extent of payment and supply made by the applicant to KMC.

Ruling:
The supply qualifies as a composite supply of works contract to a local authority for sewerage treatment and is taxable at the rate specified in serial number 3(iii) of Notification No. 11/2017-CT (Rate) dated 28/06/2017, subject to the provisions of section 14 of the GST Act. The ruling is valid until declared void under Section 104(1) of the GST Act.

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