Polymer protective coating services for bridges classified as works contract services under section 2(119) taxable at varying rates

AAR Kerala ruled that polymer protective coating services for bridges constitute works contract services under section 2(119) of CGST Act 2017, classified under Service Code 995473. The services are taxable at 18% (01.07.2017-21.08.2017), 12% (22.08.2017-17.07.2022), and 18% thereafter (from 18.07.2022). The composite supply qualifies as construction/maintenance of bridges for road transportation used by general public, attracting 12% tax rate during the applicable period. Recipient's status is immaterial for tax rate determination. Exemption under Notification 12/2017 was deemed irrelevant.

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Issues Involved:
1. Classification and SAC code for the application of polymer protective coating for bridges.
2. Rate of tax applicable under Notification 11/2017-Central Tax (Rate) as amended from time to time for the period 01-07-2017 till date.
3. Eligibility for any exemption from the whole or part of the tax leviable under Notification 12/2017-Central Tax (Rate).

Issue-wise Detailed Analysis:

1. Classification and SAC Code for the Application of Polymer Protective Coating for Bridges
The applicant, a partnership firm engaged in works contract services, sought clarification on the classification and SAC code for applying polymer protective coating to bridges. The ruling determined that the services provided by the applicant fall under the definition of "works contract" as per Section 2(119) of the CGST Act, 2017. The polymer coating is considered an improvement of immovable property, involving the transfer of goods in the form of paint. Consequently, the service is classified under Service Code (Tariff) 995473, which includes painting services for building interiors, exteriors, railings, gratings, doors, windows, and other engineering structures.

2. Rate of Tax Applicable Under Notification 11/2017-Central Tax (Rate)
The rate of tax applicable to the works contract services provided by the applicant was analyzed based on the amendments to Notification 11/2017-Central Tax (Rate). The ruling outlined the following tax rates for different periods:

- 01-07-2017 to 21-08-2017: Taxable at 18% (CGST @ 9% and SGST @ 9%).
- 22-08-2017 to 17-07-2022: Taxable at 12% (CGST @ 6% and SGST @ 6%) as per the amended entry 3(iv)(a) of Notification 11/2017, which covers works contract services for the construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a bridge for road transportation for use by the general public.
- From 18-07-2022 onwards: Taxable at 18% (CGST @ 9% and SGST @ 9%) due to the removal of the specific entry related to works contract by way of construction of a bridge for road transportation for use by the general public.

The time of supply for determining the applicable tax rate was to be ascertained in accordance with Section 14 of the CGST Act, 2017, which deals with changes in the rate of tax.

3. Eligibility for Exemption Under Notification 12/2017-Central Tax (Rate)
The ruling concluded that the question of exemption under Notification 12/2017-Central Tax (Rate) was irrelevant based on the determination of the applicable tax rates provided in the ruling for question no. 2. Therefore, no exemption from the whole or part of the tax was considered.

RULING:
1. Classification and SAC Code: The application of polymer protective coating for bridges is classified under Service Code (Tariff) 995473-painting services under the composite supply of Works Contract (9954).
2. Rate of Tax:
- 01-07-2017 to 21-08-2017: 18% (CGST @ 9% and SGST @ 9%).
- 22-08-2017 to 17-07-2022: 12% (CGST @ 6% and SGST @ 6%).
- From 18-07-2022 onwards: 18% (CGST @ 9% and SGST @ 9%).
3. Exemption Eligibility: The question is irrelevant based on the ruling for question no. 2.

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