In re Gantrex India Crane Rails Private Limited (GST AAR Maharashtra)
Maharashtra Authority for Advance Ruling (AAR) has held that erection and commissioning services provided without the supply of goods by the same entity do not qualify as a “works contract” under the Goods and Services Tax (GST) regime. In the case of In re Gantrex India Crane Rails Private Limited, the AAR classified the services provided by the company to the Satish Dhawan Space Centre (SDSC), a unit of the Indian Space Research Organisation (ISRO), as a “pure service,” attracting a GST rate of .
The ruling clarifies the critical distinction between a composite supply of works contract and a pure service, emphasizing that the legal identity of the supplier of goods and services is paramount in determining the nature of the transaction for tax purposes.
Background of the Case
The applicant, M/s. Gantrex India Crane Rails Private Limited (Gantrex India), sought an advance ruling on the classification and applicable GST rate for services it rendered to ISRO’s Satish Dhawan Space Centre at Sriharikota. The project involved the erection, testing, and commissioning of a specialised rail track system designed for moving assembled rocket stages from an assembly building to the launch pad.
The contractual arrangement was structured under a single purchase order issued by SDSC. However, this order was bifurcated into two distinct parts. The first part, for the supply of essential goods like rails, fish plates, and clips, was awarded to an overseas entity, M/s. Gantrex SRP, Belgium. The second part, for the services of erecting and commissioning this rail track, was awarded to the applicant, Gantrex India.
Gantrex India approached the AAR to determine if its services could be classified under Serial No. 3(vi)(a) of Notification No. 11/2017-Central Tax (Rate), which pertains to a composite supply of works contract provided to the Central Government or its entities. This classification, before its amendment, carried a concessional GST rate.
AAR’s Observations and Findings
The AAR conducted a detailed examination of the contract and the relevant provisions of the Central Goods and Services Tax (CGST) Act, 2017. The authority’s findings pivoted on the definitions of “composite supply” and “works contract.”
Not a Composite Supply
The AAR first analysed whether the transaction constituted a “composite supply.” Under of the CGST Act, a composite supply involves two or more taxable supplies of goods or services that are naturally bundled and supplied by a single taxable person.
The authority observed that in this case, the supply of goods and the supply of services were made by two different and distinct legal entities. The goods were supplied by Gantrex SRP, Belgium, while the services were provided by Gantrex India. The AAR noted, “In the instant case, the goods are being supplied by an overseas entity and the service is being provided by a different entity and therefore both the supplies cannot be combined together to classify the service provided by the applicant as a composite service.” Since the fundamental condition of the supply being made by a single taxable person was not met, the transaction could not be treated as a composite supply.
Not a Works Contract
Next, the AAR evaluated if the service qualified as a “works contract” as defined under of the CGST Act. A works contract is defined as a contract for building, construction, erection, commissioning, etc., of any immovable property where the transfer of property in goods is involved in its execution.
The authority highlighted two essential conditions for a supply to be considered a works contract:
