1. Facts of the case
-Taxpayer- M/s. Methodex Systems Private Limited
-Nature of Business- Supply of furniture and automation products
-Transaction-The taxpayer had charged GST at the rate of 18% on the supply and installation of furniture in the government department. However, the government department contention is that GST at the rate of 12% should be charged construing it as “Work Contract Service”
Whether the work relating to “supply, installation and fixing of customized furniture in a building is a composite supply or works contract and what is the applicable GST rate.
3. Argument of Taxpayer
The taxpayer submitted that the supply is a composite supply wherein supply of furniture is the principal supply and accordingly the service to be taxed at 18%
4. Argument of Government Department
The contention of the government department is that the service rendered is of the nature of works contract as per sec 2(119) of the CGST Act and the concessional rate of tax 12% is applicable as per Notification No. 11/2017-Central Tax (Rate) dated, 28.06.2017 and the Notification No. 20/2017-Central Tax (Rate) dated, 22.08.2017.
The government department emphasized upon the fact that above contention is also supported by the definition of ‘original works’ as given in the rate notification which includes installation of plant, machinery and equipment
5. AAR Ruling
The AAR noted the fact that one of the important conditions for a service to be construed as a works contact is that the supply must result into an immovable property. As installation of furniture can be easily separated, the same cannot be construed as an immovable property and hence cannot be treated as works contract service. The AAR agreed with the contention of the taxpayer that supply made is a composite supply and principal supply is of sale of furniture. Accordingly, GST at the rate of 18% should be charged on the supply, which is the rate applicable on sale of furniture.