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

Debate on GST Rate: Is Sand Excavation a 5% Natural Sand Supply or 18% Excavation Service? A discussion on the applicable Goods and Services Tax (GST) rate for the excavation and loading of sand into lorries centers on whether the service falls under a 5% tax rate for natural sands or an 18% rate for excavation services. Participants debated whether the transaction is a composite supply, potentially qualifying for a 5% rate, or a service subject to 18% GST. The complexity arises from the classification of the activity and its implications on tax rates, with suggestions to seek professional advice due to potential significant financial impacts.