In re Purple Distributors Pvt Ltd (GST AAR West Bengal)
Welding of railway tracks along with labour services is a ‘Composite Supply’ taxable at 18% GST
The AAR, West Bengal in the matter of M/s Purple Distributors Pvt. Ltd. [Advance Ruling No. WBAAR 18 of 2022 dated December 22, 2022] has ruled that welding process on the railway tracks along with supply of labour services shall be treated as ‘Composite Supply’ of services falling under Tariff 995429 and shall be taxable at the rate of 18% vide serial number 3(xii) of Notification No. 11/2017-Central Tax (Rate) dated June 28, 2017 (“the Services Rate Notification”).
Facts:
M/s Purple Distributors Pvt. Ltd. (“the Applicant”) was awarded a sub-contract from M/s Patil Rail Infrastructure Pvt. Ltd. (“the Principal Contractor”) wherein the work was to convert Short Welded Rails (“SWR”) to Long Welded Rails (“LWR”) by Flash Butt Welding process on the tracks. The work also included supply of all assistance of labour for welding of rail joints.
The Applicant contended that their work was only of welding services using Flash Butt Welding Machine on railway tracks which can be easily detachable from the earth without any damage and no goods are transferred in the services involved. Therefore, the services provided by the Applicant should not be treated as works contract as defined under Section 2(119) of the Central Goods and Services Act, 2017 (“the CGST Act”) and hence not classifiable under any of the entries under Heading 9954 of the Services Rate Notification.
The Applicant further submitted that, the services provided by them would qualify as ‘Job Work’ as defined in Section 2(68) of the CGST Act as both the Principal Contractor and the Indian Railways are registered under the CGST Act. The Applicant further submitted that the supply of labour services provided by them along with the job work services should be considered as a ‘Composite Supply’ as these supplies are naturally bundled in this industry. Hence, the rate of Goods and Services Tax (“GST”) would be the same as that of job work i.e 12% vide SI. No. 26(i)(id) of the Services Rate Notification.
Issues:
1. Whether the services provided by the Applicant is that of a works contractor or a Job Worker, falling under any of the entries under Heading 9954 and Heading 9988 respectively?
2. If the services do not fall under any of the above categories, what should be the HSN code and GST rate?
Held:
The AAR, West Bengal in the matter of Advance Ruling No. WBAAR 18 of 2022 held as under:
