Pumping stations and reservoirs construction contracts classified as works contract services under GST, not pure services involving labor and materials.

AAR Karnataka ruled that applicant's future contracts for pumping stations and reservoirs construction constitute works contract services, not pure services, as they involve both labor/manpower and material supply. The services do not qualify for exemption under Notification No. 12/2017-Central Tax (Rate) as amended. The application was rejected as non-maintainable under GST Act 2017 since questions related to past supplies to contractee cannot be subject to advance ruling.

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Issues Involved:
1. Admissibility of the application for advance ruling.
2. Applicability of Notification No. 12/2017-Central Tax (Rate) to the concluded supply.
3. Applicability of the same notification to future supplies.

Summary:

1. Admissibility of the Application:
The applicant sought an advance ruling on whether their concluded supply of Operation & Maintenance (O&M) services to BWSSB was covered under Notification No. 12/2017-Central Tax (Rate). The Authority for Advance Rulings (AAR), Karnataka, initially rejected the application, stating it was beyond their jurisdiction as it pertained to a completed supply. The High Court of Karnataka quashed this rejection, directing the AAR to reconsider the application with the opportunity for the applicant to present additional arguments.

2. Applicability of Notification No. 12/2017-Central Tax (Rate) to Concluded Supply:
The AAR examined the applicant's argument that the term "transaction" should be interpreted broadly. However, the AAR concluded that the term "advance ruling" as defined under Section 95(a) of the CGST Act 2017 pertains to supplies "being undertaken or proposed to be undertaken," not to concluded supplies. Therefore, the application concerning the concluded supply was deemed inadmissible and rejected under Section 98(2) of the CGST Act 2017.

3. Applicability of Notification No. 12/2017-Central Tax (Rate) to Future Supplies:
For future supplies, the applicant amended their application to seek a ruling on whether similar future contracts would be covered under the same notification. The AAR found that the nature of the future contracts, involving civil and electromechanical works for pumping stations and reservoirs, constituted works contract services and not pure services. Consequently, these services do not fall under any exemption entries of the Notification No. 12/2017-Central Tax (Rate), as amended.

Ruling:
a) The application for advance ruling on the concluded supply was rejected under Section 98(2) of the CGST Act 2017.
b) The works contract services for future construction of pumping stations and reservoirs are not covered under the exemption Notification No. 12/2017-Central Tax (Rate), as amended.

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