Retrospective GST notification interpretation cannot override supply characterisation; assessment set aside for fresh determination of the taxable supply.

An explanatory amendment to a GST rate notification could not be treated as a compulsory retrospective deeming fiction for all composite supplies; the text and circular indicated a regulatory valuation change from 01.01.2019 rather than an absolute retrospective levy. The assessment also failed because it did not first determine the essential character of the supplies, including whether they were works contracts creating immovable property or composite supplies relating to movable goods and services, or quantify the pre-01.01.2019 turnover. The assessment was therefore set aside and remanded for fresh consideration, while the challenge to the vires of the explanation was left open.

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Issues: (i) Whether the explanation added to Sl. No. 234 of Notification No. 1/2017-Central Tax (Rate) could be treated as a mandatory deeming fiction giving retrospective effect to the revised tax treatment of composite supplies. (ii) Whether the assessment order could stand without determining whether the petitioner's supplies were works contracts resulting in immovable property or composite supplies involving movable goods and services.

Issue (i): Whether the explanation added to Sl. No. 234 of Notification No. 1/2017-Central Tax (Rate) could be treated as a mandatory deeming fiction giving retrospective effect to the revised tax treatment of composite supplies.

Analysis: The explanation introduced by Notification No. 24/2018 operated from 01.01.2019 and was intended to regulate the valuation of supplies covered by the entry. The circular relied upon by the authority did not extend the amendment as an absolute retrospective levy, but only indicated an option available to the taxpayer. The explanation could not, therefore, be read as imposing a compulsory retrospective tax structure on all composite supplies covered by the entry.

Conclusion: The explanation could not be treated as a mandatory retrospective deeming fiction against the assessee.

Issue (ii): Whether the assessment order could stand without determining whether the petitioner's supplies were works contracts resulting in immovable property or composite supplies involving movable goods and services.

Analysis: The assessment order did not examine the essential character of the supplies, namely whether they resulted in immovable property or were merely supplies of goods and services in relation to movable property. It also failed to determine the turnover attributable to the period before 01.01.2019. Since these questions were necessary to decide the applicable tax treatment, the assessment required fresh consideration on the relevant factual and legal aspects.

Conclusion: The assessment order could not be sustained and had to be set aside with a direction for fresh assessment.

Final Conclusion: The assessment was annulled and the matter was sent back for reconsideration on the nature of the supplies and the applicability of the notification framework, while the challenge to the vires of the explanation was left open.

Ratio Decidendi: An explanatory amendment to a rate notification cannot be applied as a compulsory retrospective deeming provision unless its text clearly so provides, and a tax assessment must first determine the true legal character of the supply before applying the notified rate.

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