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 supplied with installation, the service constitutes a works contract involving immovable property under SAC 995428, attracting 18% GST. The turf is reusable subject to adhesive loss, confirming the composite supply as a works contract service. Hence, supply of artificial turf alone is taxable at 12%, while supply with installation is taxable as a works contract service at 18%.

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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.

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