GST on excavation of Sand and Loading into Lorries

[ABHISHEK Kumar]

Dear Sir,

What is GST rate on GST on excavation of Sand and Loading into Lorries. The assessee has won contract for mining of sand.Whether GST applicable is 5%, which is applicable in case of Natural Sands Of All Kinds HSN- 2505 or 18% applicable in case of EXCAVATING AND EARTHMOVING SERVICES SAC- 995433.

[CA Hemanth Kumar]

Dear ABHISHEK K,

Excavation services will cover under SAC 995433 and rate of tax as per residual entry will be 18%.

995433 Excavating and earthmoving services

This service code includes

i. large-scale earthwork, excavation, sloping and earthmoving services involving making of embankments or cuttings, prior to highway construction (roads, motorways, railways, etc.);

ii. digging of trenches, for utilities, urban drainage, various roadworks, etc.;

iii. digging of conventional ditches for various constructions;

iv. land recreation work services;

v. contaminated top soil stripping work services;

vi. other excavating and earthmoving work services

[Punit Agarwal]

Hi,

What i can understand from your Query is the following:

1 The Taxpayer has its own Sand Mines and is involved in extraction of sand from the mines and loading into lorries for supply to its clients.

Now this can be classified as composite supply as it is naturally bundled supply and Tax rate of 5% can be applied.

[Shilpi Jain]

In general, the sand is considered to belong to the Government (please correct me if I am wrong). In such case, the contract given to the contractor will be that of only service, i.e. excavation and transportation of sand.

There have been disputes in this under ST and now would continue under GST as well. Please take an opinion which will examine your specific transaction and give a suitable course since the amounts involved could be significant.

[ABHISHEK Kumar]

The transaction between mine owner and buyer is for Supply of Goods i.e sand and not for supply of Service of Excavation Service. Therefore in my opinion also tax should be @ 5%.

If we treat it as Excavation service then problem of inverted tax would also arise since the buyer can only charge 5% GST of further sale whereas he has paid 18% on its purchase.

[KASTURI SETHI]

Yes.It is a composite supply.

[Shilpi Jain]

Generally what happens is that the sale of sand is regulated in the State. The State get the contractors appointed who do the excavation.

Sand is sold by the State. So the transaction of sale is between the State and the buyer and not the contractor. Suggest to get the facts validated before adopting any view.

[Ganeshan Kalyani]

Thanks Ms. Shilpi Ji for elaborating your reply in detail and clearing the doubt.

AI Summary

GST classification of sand supply: whether treated as sale of goods or excavation service determines applicable tax treatment. GST treatment depends on whether the transaction is a sale of sand (goods) or a contract for excavation services: sale of sand follows the goods classification and respective lower rate, whereas excavation and earthmoving services fall under SAC 995433 and attract the residual rate. State ownership of sand and the contractual chain are decisive factual matters that determine whether the contractor supplies goods or only services, and thus the applicable tax characterisation and rate.