GST AAR: Moving Electrical Utilities Can’t Be Considered as Composite Supply

The West Bengal Authority for Advance Ruling (AAR) ruled that activities that have been performed via subcontractors for the movement of electrical utilities for road constructions would not be treated as a composite supply of works contracts.

The two-member bench of Brajesh Kumar Singh and Joyjit Banik found that furnishing the services of the movement of only electrical utilities cannot be treated as furnishing the services via the method of road construction.

The petitioner is engaged in the business of furnishing several works contract services concerned with the modification, construction, renovation, and maintenance of roads and highway projects, along with the works linked to that and incidental thereto. The petitioner would provide a sub-contract from M/s KCC Buildcon Private Limited for the movement of electrical items for the construction of the proposed 4-Laning of the Baras at Krishnagar Section of the NH-34 Project in EPC mode.

The applicant seeks an advance ruling for the problem of whether the movement activity of the electrical utilities comes under Heading 9954, Entry No. 3(iv) (a), of Notification No. 11/2017-CT(R), and is responsible for 12% GST.

The petitioner mentioned that the activity has been asked to be performed via the petitioner would be treated as a works contract in terms of Section 2(119) of the CGST Act 2017 as the supply comprises the transfer of the goods including the constructions services along with the supply would provide the outcome in the formation of the immovable property.

AAR found that the services furnished via the petitioner for its limited extent for the transfer of the electrical items shall not be counted as the supply through the method of construction of the road. The agreement’s terms and conditions created between NHAI and the contractor specify that the transfer cost would be reimbursed via the heads to the contractor which shows that the kind of work is independent.

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AAR sees that as the activity cost would be the bearing via the authority or through the entity who owns these utilities, the activity of payment excludes being the portion of the main contract via NHAI. Hence, there is no connection between the main contract granted for the road construction via NHAI and the work proposed to function via the petitioner.