2025 (8) TMI 547 - AAR - GST

Artificial turf taxed at 12% GST as goods under chapter 5703; installation with supply taxed at 18% under SAC 995428

The AAR, Karnataka held that artificial turf/artificial grass qualifies as tufted turf under chapter 5703, attracting 12% GST when supplied as goods. When ... Classification of supply - HSN Code and GST rate applicable - pure supply of Artificial Turf/ Artificial Grass and other sports flooring - supply and installation of Artificial Turf/Artificial Grass and other sports flooring which will be in the nature of works contract. Classification of products when supplied as goods and also the classification of the said products when supplied & installed and the applicable rate of GST thereon - HELD THAT:- In the instant case the impugned product is artificial turf/artificial grass. Artificial turf is a surface of synthetic fibres made to look like natural grass, used in sports arenas, residential lawns and commercial applications that traditionally use grass. It is much more durable than grass and easily maintained without irrigation or trimming, although periodic cleaning is required. Stadiums that are substantially covered and/or at high latitudes often use artificial turf, as they typically lack enough sunlight for photosynthesis and substitutes for solar radiation are prohibitively expensive and energy-intensive. Further, disadvantages include increased risk of injury especially when used in athletic competition, as well as health and environmental concerns about the petroleum and toxic chemicals used in its manufacture - It is an admitted fact that the impugned product is meant for use in sports complexes or in a ground/park. Thus the impugned products merits classification as tufted turf of other man-made textile materials under chapter heading 57.03 and specifically 5703.3100. Rate of GST applicable to the impugned product - HELD THAT:- Entry number 144 of Schedule-II to the Notification 1/2017-Central Tax (Rate) dated 28.06.2017, as amended, specifies that the goods with the description “carpets and other textile floor coverings (including Turf), tufted, whether or not made up”, falling under chapter heading 5703 attracts GST @ 12% - the impugned product merits classification under chapter heading 5703 and attract 12% GST in terms of entry number 144 of Notification 1/2017-Central Tax (Rate) dated 28.06.2017, as amended. In the instant case, it is an admitted fact that the artificial Turf/Grass installed is reusable subject to loss of adhesive material and negligible damage to the main item i.e. Turf/Grass, as it is installed on the specific design and dimension requirement of the customer. Thus the reusability of the artificial Turf/Grass is subject to losses. Therefore the impugned service is covered under SAC 995428. Whether the impugned services amounts to works contract or not? - HELD THAT:- In the instant case, the artificial Turf/Grass is attached to the earth (football ground etc.,) through adhesive and thus it becomes immovable property; the impugned service is covered under SAC 995428, being a construction service of immovable property wherein transfer of property in goods is involved in the execution of said contract and thus the impugned service qualifies to be a “Works Contract” Service. Further the composite supply of “works contract” shall be treated as supply of service, in terms of Schedule II to Section 7 of the CGST Act 2017. Rate of GST applicable to the works contract service - HELD THAT:- The impugned service being a construction service, covered under SAC 9954, is exigible to GST @ 18%, in terms of entry No. 3(xii) of the Notification No.11/2017-Central Tax (Rate) dated 28.06.2017, as amended. ISSUES: What is the HSN Code and GST rate applicable on the pure supply of Artificial Turf/Artificial Grass and other sports flooring'What is the HSN Code and GST rate applicable on the supply and installation of Artificial Turf/Artificial Grass and other sports flooring when treated as a works contract'Whether the supply and installation of Artificial Turf/Artificial Grass qualifies as a composite supply of works contract under GST'Whether the installed Artificial Turf/Artificial Grass constitutes immovable property for the purpose of GST classification'What is the applicable GST rate on the works contract service involving supply and installation of Artificial Turf/Artificial Grass? RULINGS / HOLDINGS: The pure supply of Artificial Turf/Artificial Grass and other sports flooring merits classification under chapter heading 5703 and attracts 12% GST in terms of entry number 144 of Notification 1/2017-Central Tax (Rate) dated 28.06.2017, as amended.The supply and installation of Artificial Turf/Artificial Grass and other sports flooring in the nature of works contract merits classification under SAC 995428 and is exigible to GST @ 18% in terms of entry No. 3(xii) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, as amended.The supply and installation of Artificial Turf/Artificial Grass qualifies as a composite supply of works contract as defined under Section 2(119) of the CGST Act, 2017.The Artificial Turf/Artificial Grass, when installed and attached to the earth through adhesive, becomes immovable property within the meaning of Section 3(26) of the General Clauses Act, 1897, and thus the service involves transfer of property in goods in execution of a works contract.The works contract service involving installation of Artificial Turf/Artificial Grass is covered under SAC 995428 for general construction services of outdoor sport and recreation facilities. RATIONALE: The classification of goods follows the First Schedule to the Customs Tariff Act, 1975, and the relevant Section and Chapter Notes, as well as the Harmonised Commodity Description and Coding System (HSN) Explanatory Notes of the World Customs Organisation, applied to determine that Artificial Turf/Artificial Grass falls under chapter heading 5703 (Carpets and other textile floor coverings including turf).Entry No. 144 of Schedule II to Notification 1/2017-Central Tax (Rate) dated 28.06.2017 prescribes GST at 12% on carpets and other textile floor coverings (including turf), thereby applying to pure supply of Artificial Turf.Section 2(119) of the CGST Act, 2017 defines 'works contract' as a contract involving building, construction, erection, installation, or commissioning of any immovable property with transfer of property in goods involved in execution.Section 3(26) of the General Clauses Act, 1897 defines immovable property to include things attached to the earth or permanently fastened to anything attached to the earth; the installation of Artificial Turf by adhesive to the ground satisfies this definition.The supply and installation is a composite supply of works contract service, attracting GST under SAC 995428 for general construction services of outdoor sport and recreation facilities, at the rate of 18% as per entry No. 3(xii) of Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017.Reliance was placed on precedents and rulings establishing that composite supplies involving installation and erection integral to the immovable property qualify as works contracts and are taxable accordingly.The interpretation respects the principle that a contract must be read as a whole to ascertain the intention of parties, and that the supply and installation are integrally connected and interdependent, qualifying as composite supply under GST law.