In re Fly Ash Movers India Private Limited (GST AAR Maharashtra)
Maharashtra Authority for Advance Ruling (AAR) has addressed the Goods and Services Tax (GST) implications for Fly Ash Movers India Private Limited concerning a contract with Central Railway for the development and maintenance of infrastructural facilities at the Kalamboli Goods Shed. The applicant sought a ruling on the classification and applicable GST rate for services encompassing reconstruction, maintenance, housekeeping, and security, where consideration is a 90% share of terminal charges. Additionally, they inquired about the eligibility of Central Railway to claim Input Tax Credit (ITC) on the GST paid for these services.
The AAR observed that the contract involved the construction, development, maintenance, and repair of an immovable property (the goods shed), thus qualifying as a “works contract” as defined under Section 2(119) of the CGST Act, 2017. Furthermore, the AAR noted that the applicant was also providing housekeeping and security services. Examining whether these services constituted a “composite supply” (naturally bundled with a principal supply) or a “mixed supply” (two or more independent supplies for a single price), the AAR relied on the Central Board of Indirect Taxes and Customs (CBIC) guidelines and the erstwhile service tax regime’s Education Guide.
Applying the principles of natural bundling, including the perception of the service receiver, common business practices, and the interdependency of services, the AAR concluded that housekeeping and security services are not naturally bundled with reconstruction and maintenance of a goods shed in the ordinary course of business. These services are often provided separately. Consequently, the AAR classified the entire supply as a “mixed supply” under Section 2(74) of the CGST Act, 2017.
As per Section 8(b) of the CGST Act, the tax liability on a mixed supply is determined by the supply attracting the highest rate of tax. The AAR identified the repair and maintenance aspect of the works contract, classifiable under Heading 995419, as attracting the highest GST rate of 18% (9% CGST + 9% SGST). Therefore, the AAR ruled that the entire mixed supply of reconstruction, maintenance, housekeeping, and security services would be taxed at 18%. The applicant’s contention for a concessional GST rate of 12% applicable to works contracts involving predominantly earthwork was rejected, as the nature of the work (cement concreting, drainage, water supply) did not primarily constitute earthwork, and no evidence was provided to support this claim. Similarly, the argument for classifying the services as freight services taxable at 5% was dismissed, as the applicant was not involved in the transportation of goods by rail.
Regarding the eligibility of Central Railway to claim ITC, the AAR refrained from providing a ruling. It cited Section 97 of the CGST Act, which specifies the scope of advance rulings, stating that it pertains to issues concerning the applicant. The question of ITC admissibility for the recipient (Central Railway) falls outside this scope. Additionally, Section 103(1) states that an advance ruling is binding only on the applicant and the jurisdictional officer concerning the applicant. Allowing a ruling on the recipient’s ITC eligibility would not be binding on them, and Section 100 does not provide the recipient with the right to appeal such a ruling. Therefore, the AAR did not address the second question.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, MAHARASHTRA
