In re New Horizon Development Company Private Limited (GST AAR Karnataka)
The Karnataka Authority for Advance Ruling (AAR) has issued a decision regarding the GST treatment of artificial turf and sports flooring supplied by M/s New Horizon Development Company Private Limited. The company, which offers both the standalone sale of these products and their installation, sought clarification on the applicable Harmonized System of Nomenclature (HSN) codes and corresponding GST rates for both scenarios. The ruling distinguishes between the “pure supply” of goods and a “works contract” involving both supply and installation, outlining different tax liabilities for each business model.
For the pure supply of goods—specifically artificial turf, artificial grass, and other sports flooring—the AAR determined the products fall under Chapter Heading 5703 of the Customs Tariff Act, 1975. This classification, which covers “carpets and other textile floor coverings (including turf), tufted,” is supported by explanatory notes that explicitly include artificial turf used for sports surfaces. The ruling concluded that the pure supply of these products is subject to a GST rate of 12%, as specified under Entry No. 144 of Notification No. 1/2017-Central Tax (Rate).
The second part of the ruling addressed the more complex scenario of a works contract, where the company not only supplies the materials but also installs them. The AAR classified this activity as a “composite supply of works contract” under SAC 9954, which pertains to construction services. The authority referenced Section 2(119) of the CGST Act, 2017, which defines a works contract as a service involving the transfer of goods in the execution of a contract for the construction, installation, or alteration of any immovable property. The AAR reasoned that because the artificial turf is attached to the ground with adhesive, it becomes part of an immovable property, thereby fulfilling the definition of a works contract.
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