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TMI Blog2025 (4) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 1. FACTS AND CONTENTIONS - AS PER THE APPLICANT 1.1. Central Railway introduced a scheme under which private players would reconstruct Goods sheds and maintain the same for 10 years. Private players would have to invest the entire capital cost for reconstruction. No upfront payment would be paid by Central Railway for such capital expenditure. The private player also has to maintain and upkeep the goods shed during the entire contract period. 1.2. Thereafter, Terminal charges are collected by Central Railway for inward and outward traffic of goods at the Goods shed in addition to freight charges (for transportation of the goods by rail) applicable to the goods. 1.3. Present rate of Terminal Charges is Rs. 20 per ton. The firm quoting the least share (i.e. lowest bid) on the Terminal Charges is awar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. Illustration: Where goods are packed and transported with insurance. the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply:" * Principal Supply As per Section 2 (90) of the CGST Act, 2017: ""principal supply" means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary" * Works Contract Clause (119) of section 2 of the CGST Act. 2017: ""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:" * Sr. NO. 3 (vii) of Notification no. 11/2017- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification No. 11/2017-Central (Rate) dated 28/06/2017 (as amended), GST Rate applicable is 12% under Sr No. 3(vii) under HSN 9954 for composite supply of works contract involving predominantly earth work that is, constituting more than 75% of the value of the works contract provided to Central/State Govt. * The expression "earthwork' has not been defined in the GST Act or GST Rules or any other notifications. Various dictionary meanings of the same areas under - Wikipedia - as per Civil engineering use Earthworks are engineering works created through the processing of parts of the earth's surface involving quantities of soil or unformed rock ... Typical earthworks include road construction, railway beds, causeways, dams, levees, canals, and berms. Other common earthworks are land grading to reconfigure the topography of a site, or to stabilize slopes Merriam Dictionary 1. an embankment or other construction made of earth especially: one used as a field fortification 2. the operations connected with excavations and embankments of earth 3. a work of art consisting of a portion of land modified by an artist * In the instant case, the agreement copy has detailed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to claim ITC (input tax credit) for the GST payable on the payment made to the Applicant for the said work. Reply to Question No 2: The question relates to Central Railway and not to the applicant. The same does not fall within the purview of sub-section (2) of section 97 or sub-section (1) of section 100. 04. HEARING Preliminary e-hearing in the matter held on 14.11.2024. Mr. Prakash Mehta, C.A., appeared, and requested for admission of the application. Jurisdictional Officer Mr. Gokhru Pravin, Assistant Commissioner of CGST is available. The application was admitted and called for final e-hearing on 13.02.2025. Mr. Pranav Mehta, C.A. (Authorized Representative) appeared made oral and written submissions. Jurisdictional Officer Mr. Ashishkumar Pati, Assistant Commissioner of CGST appeared. We heard both the sides. 05. OBSERVATIONS AND FINDINGS: 5.1. We have gone through the records of the case, the application submitted by the applicant and the views expressed by the applicant and the views submitted by the jurisdictional officer vide letter dated 13.1.2025. 5.2. From the application filed by the applicant and the copy of the agreement dated 10.10.2022 between the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of works contract. Section 2 (119) of the CGST Act, 2017, defines Works Contract as 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 the goods (whether as goods or in any other form) is involved in the execution of such contract. We find that in the instant case, the applicant is constructing, maintaining, modifying, renovating and repairing an immovable property for the Central Railway and the property so developed would be considered to be the property of the Central railway. Thus, it is observed that the said services provided by the applicant would qualify as a works contract as per the CGST Act, 2017. Further, we find that the applicant is providing the services of reconstruction, maintenance, housekeeping and security services at the existing shed at kalamboli. The scheme introduced by the Central Railway is to reconstruct goods shed and maintain the same for 10 years. On detailed examination of the scope of the work, it is seen that the applicant would do the cement concreting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax in respect of the services provided by the applicant, it has to be determined whether the services provided by the applicant is a composite supply or a mixed supply. In order to constitute a composite supply, the services provided by the applicant should be naturally bundled in the ordinary course of business. 5.5. The concept of 'naturally bundled' supplies is not defined under CGST Act. For this, reliance can be placed on the flyer cum FAQ issued by CBIC to explain the concepts of 'composite supply' and 'mixed supply', which also makes reference to the Education Guide issued under service tax regime in determining whether a supply is a composite or a mixed supply under GST regime. The 'Education Guide' issued by the Central Board of Excise & Customs ('CBEC') in the year 2012 explains the 'Bundled service' to mean a bundle of provision of various services wherein an element of one service is combined with an element or elements of any other service or services. Para 9.2.4, the Education Guide discusses whether a bouquet of services is bundled in the ordinary course of business would depend upon the normal or frequent practices f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person in one package. Therefore, we hold that the services provided by the applicant of reconstruction, repairs and maintenance, housekeeping and security of the Kalamboli goods shed to the Central Railway would not qualify as a composite supply of service. It would rather be treated as a mixed supply of service involving supply of various services which can be individually classified as under :- S.No. Nature of Service Classification of service Classification heading under GST Rate of tax 1 Reconstruction Works contract Service 995414 12% 2 Repairs and Maintenance Works Contract Service 995419 18% 3 Housekeeping Services Cleaning Services 9985.39 18% 4 Security services Other security services nowhere else classified 9985.29 18% We find that Section 8 of the CGST Act, reads as under :- Tax liability on composite and mixed supplies- The tax liability on a composite or a mixed supply shall be determined in the following manner, namely :- (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and (b) a mixed supply comprising two or more supplies shall b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmonly known as Earthwork excavation. Earthwork should not be confused with soil only; the engineering processes involving unformed rocks are also termed as earthwork. For the construction of foundations and trenches, earthwork is needed, which includes excavation and backfilling of soil to a required depth. To optimise the operation and avoid safety concerns, excavation and backfilling must be done correctly. While excavating, several soil strata may be encountered which require different types of operations. Because excavation costs make up a significant portion of the foundation, accurate measurement of excavation and backfilling is necessary. 5.9. From the details of the work submitted by the applicant and as can be inferred from the contract, it is seen that the major portion of the work involves cement concreting of rail level platform, cement concreting of approach roads, provision of drainage system, water supply system and hoarding structure, in addition to the maintenance of the said structures. This work would involve some amount of earthwork but by the very nature of the work involved, it would be far-fetched to arrive at a conclusion that 75% of the value of the works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces to the Central Railway which can be considered as a supply of mixed service, with works contract (repairs and maintenance) having the highest rate of tax of 18%. (9% CGST + 9% SGST). In terms of Section 8 of the CGST Act, 2017, the said services are appropriately classifiable under Heading 995419 and chargeable to tax at the rate of 18% i.e. 9% CGST + 9% SGST. 5.12. The applicant has further raised the question whether the Central Railway would be entitled to avail input tax credit on the services provided by the applicant. In this regard, provisions of section 97 are produced below: Section 97 (1) An applicant desirous of obtaining an advance ruling under this Chapter may make an application in such form and manner and accompanied by such fee as may be prescribed, stating the question on which the advance ruling is sought. (2) The question on which the advance ruling is sought under this Act, shall be in respect of,- (a) classification of any goods or services or both; (b) applicability of a notification issued under the provisions of this Act; (c) determination of time and value of supply of goods or services or both; (d) admissibility of input tax credit of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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