GST on IIT Water Pipeline Works: West Bengal AAR Fixes SAC and 18% Rate

In re Jaypee Projects Limited (GST AAR West Bengal)

Summary: The West Bengal Authority for Advance Ruling considered an application filed by Jaypee Projects Limited, a works contractor engaged in civil works, concerning two contracts awarded by the Indian Institute of Technology, Kharagpur for revamping the water pipeline distribution network at the Hall Area and setting up a new main water pipeline for the upcoming South East Campus. The contracts involve both goods and services, with the material component stated to constitute approximately 75% and the service component approximately 25% of the contract value. The applicant had been classifying the supplies under SAC 995479 as composite works contract services and discharging GST at 18%, and sought a ruling on the correct SAC and applicable GST rate. The Authority examined the work orders and held that the activities constitute works contracts within Section 2(119) of the CGST Act because goods become part of immovable property. It rejected SAC 995479, observing that the works are construction services under heading 9954 and group 99542, with SAC 995422 applicable to setting up the new main water pipeline and SAC 995429 applicable to revamping of the existing water pipeline as repair and maintenance service. The Authority then examined exemption under items 3, 3A and 3B of Notification No. 12/2017-Central Tax (Rate). It found that item 3 was unavailable because the supplies were not pure services and IIT Kharagpur was not the Central Government, State Government, Union territory or local authority; item 3A was unavailable because the value of goods exceeded 25% of the composite supply; and item 3B was unavailable because the activity was not the actual supply of water but civil engineering, repair and pipeline works relating to water supply. IIT Kharagpur was nevertheless held to be a Governmental Authority because it was established under an Act of Parliament, applying the principle explained by the Supreme Court in Commissioner, Customs, Central Excise and Service Tax, Patna Vs M/s. Shapoorji Pallonji and Company Pvt. Ltd.. The Authority further applied the strict interpretation principle relating to exemption notifications stated in Commissioner of Customs (Import), Mumbai Vs M/s Dilip Kumar and Company & Ors.. Since none of the exemption entries applied, the supplies were held taxable at 9% CGST plus 9% SGST under serial no. 3(ii) of Notification No. 11/2017-Central Tax (Rate). The ruling therefore fixes the SACs at 995422 and 995429 and confirms an effective GST rate of 18% on both works.