supply to Goverment

[NILESH PITALE]

Respected Concern Authority

Our Client received Contract of ( Work Design, Fabrication,Supply, Installation,Testing,& Commissioning Heavy Duty Back Rake type Mechanical Screen) from Goverment Authority,

Question No-1: Can we consider it Composit Supply and Changed it 12% , if Not then 18% ?

Question No: 2: If we awarded said contact to Sub -contractor then he will charged us 12% As per Notification No. 1/2018-Central Tax (Rate) dated 25.1.2018

Question 3: If As per above notification tax Rate 12% then , I guess Our contact is chargeable at 18%

Please Guide us what we should charged to the Goverment

[KASTURI SETHI]

Query-wise reply is here:-

1. It is a composite supply but not Works Contract Service as Works Contract Service pertains construction of immovable property. GST@12%.

2. Yes.

3. 12% is applicable. How you want to arrive at 18% ? Must express.

[KASTURI SETHI]

2019 (2) TMI 834 - AUTHORITY FOR ADVANCE RULING, RAJASTHAN IN RE: MR. KAILASH CHANDRA (M/S. MALI CONSTRUCTION)

Classification of supply - Supply of goods or supply of services - activity of supply, design, installation, commissioning and testing of reverse osmosis plant - rate of GST - composite supply of works contract - CBEC Circular 58/1/2002-CX dated 15/1/2002 - Held that:- The supply of Reverse Osmosis plant along with its installation, commissioning and operation and maintenance is a single supply.

According to definition of works contract under GST regime, the supply of goods and services are done by the supplier simultaneously which is for immovable property. Hence in works contract supply of goods and services together is compulsory - Thus, based on above facts and concept such contract shall be a single supply and cannot be treated as distinct supplies. Since all the conditions of composite supply are satisfied, it is a composite supply.

The activity proposed to be undertaken is a composite supply of works contract, the rate of tax in given service shall be determined in accordance with the Notification No 11/2017-CT (Rate) dated 28.06.2017, as amended from time to time.

Thus, the activity of supply, design, installation, commissioning and testing of reverse osmosis plant and O &M work by the applicant is a Works Contract of Composite Supply. This composite supply is a mixed of goods and services and predominant supply is supply of services. Since this supply is undertaken for a Government Department viz. PHED which is a Government of Rajasthan Department, hence the rate of tax applicable on given service (as it is a works contract service) shall fall under Entry 3(iii) with HSN Code 99544 and it should be IGST @ 12% (CGST @ 6%, SGST @6%).

AI Summary

Composite supply classification leads to a reduced GST rate for combined supply-installation contracts with government clients. The contract for supply, installation, testing and commissioning of the mechanical screen is treated as a composite supply rather than a works contract tied to immovable property, and the consolidated tax rate applicable to such composite supplies applies; subcontractors should charge tax at that consolidated rate. An Authority for Advance Ruling on a reverse-osmosis plant concluded a similar integrated supply was a single composite works contract with services as the predominant element, and that the government-facing consolidated tax rate under the relevant notification applies.