The Hon’ble AAR Haryana in M/s. KSC Buildcon Private Limited [Advance Ruling No. HAR/HAAR/R/2019-20/26 decided on August 28, 2020] observed that major part of the contract involves earthwork (more than 75%) provided to a Government Entity. Hence, the said work order qualifies for the benefit of Serial No. 3(vii) of the Notification No. 11/2017-Central Tax (Rate), dated June 28, 2017 (Services Rate Notification) as amended by Notification No. 31/2017-Central Tax (Rate), dated October 13, 2017 (NN 31/2017- CTR) issued under Central Goods and Services Tax Act, 2017 (CGST Act) being composite supply of works contract as defined in Section 2(119) of the CGST Act. Therefore, GST @5% will be applicable.
M/s. KSC Buildcon Private Limited (“the Applicant”) is engaged in the business of providing composite supply of work contract including sale of goods and also indulged in the mining of various stones and minerals, etc., in the state of Haryana. The Applicant also transfers the property in goods so produced during the process of works contract to various government entities engaged in the business of mining and private firms in trading of the said goods.
A works contract was allotted to the Applicant by Haryana State Industrial & Infrastructure Development Corporation Limited (“HSIIDC”) involving predominantly earth work viz drilling, excavation, removal, and dumping of waste material along with supply of skilled & unskilled manpower, special purpose vehicles & equipment, supply of stones, construction including haul roads/ramp/benches on the mining site and transportation of the excavated goods. Such type of work is related to mining development and generally is done on earth surface to excavate stones as per requirement of contract.
The Applicant stated that he was providing composite supply of works contract as defined in Section 2(119) of the CGST Act, involving predominantly earth work (more than 75% of the value of works in contract) to HSIIDC which is a Government entity. Further stated that, the consideration provided by HSIIDC would be subject to tax deduction at source (“TDS”) under Section 194C (i.e. TDS on payment to contractor) of Income Tax Act, 1961 (“IT Act”)
Whether the services provided by the Applicant will be taxable @5% GST under the benefit of Serial No. 3(vii) of the Services Rate Notification as amended by NN 31/2017-CTR.
The Hon’ble AAR Haryana in Advance Ruling No. HAR/HAAR/R/2019-20/26 decided on August 28, 2020 has held as under:
|S. No.||Heading||Description of Service||Rate||Condition|
|3||Heading 9954 (Construction services)||(vii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, involving predominantly earth work (that is, constituting more than 75 per cent. of the value of the works contract) provided to the Central Government, State Government, Union territory, local authority, a Governmental Authority or a Government Entity.||2.5||Provided that where the services are supplied to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union territory or local authority, as the case may be|
Section 2(119) of CGST Act:
“works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.
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