GST @18% leviable on works contract services to Indian Railways; 12% on works contract services involving predominantly earthwork

Last updated: 08 February 2023

Court :
AAR, Karnataka

Brief :
The AAR, Karnataka in the matter of M/s S.K. Swami & Company [Advance Ruling No. KAR ADRG 05/2023 dated January 23, 2023] has ruled the rate of Goods and Services Tax ("GST") @ 18% is exigible on works contract services executed to Indian Railways by the assessee either as a main contractor or as a sub-contractor for the construction of railways under-bridge and tunnels and works contract services involving predominantly earth work would attract GST @ 12% as per Notification No. 11/2017 Central Tax (Rate)dated June 28, 2017 ("the Services Rate Notification"). Further, GST @ 5% is exigible for the supply of ballast to railways as per Notification No. 1/2017- Central Tax (Rate) dated June 28, 2017 ("the Goods Rate Notification").

Citation :
Advance Ruling No. KAR ADRG 05/2023 dated January 23, 2023

The AAR, Karnataka in the matter of M/s S.K. Swami & Company [Advance Ruling No. KAR ADRG 05/2023 dated January 23, 2023] has ruled the rate of Goods and Services Tax ("GST") @ 18% is exigible on works contract services executed to Indian Railways by the assessee either as a main contractor or as a sub-contractor for the construction of railways under-bridge and tunnels and works contract services involving predominantly earth work would attract GST @ 12% as per Notification No. 11/2017 Central Tax (Rate)dated June 28, 2017 ("the Services Rate Notification"). Further, GST @ 5% is exigible for the supply of ballast to railways as per Notification No. 1/2017- Central Tax (Rate) dated June 28, 2017 ("the Goods Rate Notification").

Facts

M/s S.K. Swami & Company ("the Applicant") is engaged in executing works contracts to Indian Railways such as construction of rail under bridge works and tunnels; supplying and stacking of ballast; works contract services involving predominantly earthwork and sub contracts of all such works. Further, the Applicant has entered into a contract with Konkan Railway Corporation Limited for supplying and stacking of ballast.

The Applicant has sought advance ruling with respect to the supply of the above-mentioned goods and services.

Issue

What percentage of GST would be charged on the nature of the supply carried out by the Applicant?

Held

The AAR, Karnataka in the matter of Advance Ruling No. KAR ADRG 05/2023 held as under:

Held that, works contract services supplied by the Applicant to Indian Railways such as construction of rail under bridge and tunnels either as a main contractor or as a sub-contractor are covered under Sl. No. 3(xii) of the Services Rate Notification and is exigible to GST at 18%.
Further held that, if the Applicant is engaged in supply of works contract services involving predominantly earth work i.e. constituting more than 75 per cent of the value of the works contract, to Indian Railways, it is covered under Sl. No. 3(vii) of the Services Rate Notification and is exigible to GST at 12% and that if the Applicant is supplying the same service as a sub-contractor then, it will be covered under Sl. No. 3(x) of the Services Rate Notification and will be chargeable to GST at 12%.
Further held that, the supply of ballast to the Konkan Railway Corporation Limited and the Indian Railways is exigible to GST at 5% as per the Sl. No. 126 of Schedule I of the Goods Rate Notification.

Relevant Provisions

Sl. No. 3(vii), (x) & (xii) of the Services Rate Notification

"Sl. No.	Chapter, Section or Heading	Description of Service	Rate (per cent.)	Condition
3	Heading 9954 (Construction services)	(vii)Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, involving predominantly earth work (that is, constituting more than 75per cent. of the value of the works contract) provided to the Central Government, State Government, Union territory or a local authority	6	-
		(x) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017 provided by a sub-contractor to the main contractor providing services specified in item (vii) above to the Central Government, State Government, Union territory or a local authority	6	-
		(xii) Construction services other than (i), (ia), (ib), (ic), (id), (ie), (if), (vii), (viii), (x) and (xi) above. Explanation. - For the removal of doubt, it is hereby clarified that, supply by way of services specified at items (i), (ia), (ib), (ic), (id), (ie) and (if) in column (3) shall attract central tax prescribed against them in column (4) subject to conditions specified against them in column (5) and shall not be levied at the rate as specified under this entry	9"	-

SI. No. 126 of Schedule I of the Goods Rate Notification

"Schedule I- 2.5%

S. No.	Chapter / Heading / Sub-heading / Tariff item	Description of Goods
126	2517	Pebbles, gravel, broken or crushed stone, of a kind commonly used for concrete aggregates, for road metalling or for railway or other ballast, shingle and flint, whether or not heat-treated; macadam of slag, dross or similar industrial waste, whether or not incorporating the materials cited in the first part of the heading; tarred macadam; grenules cheeping and powder of stones heading 2515 or 2516 whether or not heat treated."