The Maharashtra Authority of Advance Ruling (AAR) which consists of the members Ranji Magoo and T.R. Ramnani, has directed that the GST would be subjected to pay upon the composite supply of work contracts consisting of earthwork.
The petitioner is the owner of M/s. Mahalakshmi BT Patil Honai Constructions JV, a GST registered company, which is engaged in the business of construction of infrastructure projects, and was made to do the construction of Jeur Tunnel Under the Krishna Marathwada Irrigation Project. This is a work allotted by the Executive Engineer, Lift Irrigation Division, Osmanabad Project, awarded by Godavari Marathwada Irrigation Development Corporation (GMIDC), Aurangabad.
Read Also: GSTN Enables Geolocation for Existing & New GST Registration
The work order comprises earthwork like the excavation of the tunnel, removing excavated stuff, fabrication, transporting, providing steel support, rock bolting, reinforcement, fixing of chain link, cement concreting, furnishes an arrangement related to drainage and others of which the total earthwork was nearly 91% and the construction work was nearly about 9% which consists of the property transfer.
The applicant sought an advance ruling on the issue of whether the contract under earthwork is exempted under SI No. 3A-Chapter No. 9954 as per Notification No. 12/2017-C.T. (Rate) dated 28.06.2017, as amended by Notification No. 2/2018-C.T. (Rate) dated 25.01.2018, w.e.f. 25.01.2018.
Sr. No. 3A of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017 consists of the supply of goods and services where the value of supply of goods comprises less than 25%, of the value of the composite supply given to the Central Government, State Government, or Union territory or local authority or governmental authority or a Government Entity through the method of any activity concerning to any operation given to the Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.
The petitioner specified that the work order is mentioned with the earthwork like excavation for a tunnel, removing of excavated stuff, fabrication, transporting, providing steel support, rock bolting, reinforcement, fixing of chain link, cement concreting, providing drainage arrangement, and others. While the total earthwork is nearly 91% and left 9% is the construction work in which the property transfer is engaged. As per the petitioner, the activity consists of the composite supply of works contract as mentioned in clause (119) of section 2 of the CGST Act 2017, in which this supply is a governmental authority or the government entity.
AAR specified that the main need beneath Sr. No. 3A is that the supply should be in the form of a “composite supply of goods and services”. but, the activity of earthwork comes under a “composite supply work contract as described in clause (119) of section 2 of the CGST Act, 2017. Sr. No. 3A does not cover the activity as it consists of a composite supply work contract.
