Indian Filling compound, tank, low land etc. with silver sand and earthwork in layers classifiable as site preparation service under GST and taxable @ 18%
ABCAUS Case Law Citation:
ABCAUS 3037 (2019) (06) AAR
The Applicant had procured two contracts for filling in the compound, tank, low land etc. with silver sand and earthwork in layers, including spreading and compacting the same. The applicant sought a ruling from the GST Authority for Advance Ruling (AAR) on whether it was classifiable as a supply of sand (HSN 2505)?
The AAR observed that in terms of the description of the work, contained in the work orders, the Applicant was required to fill in the foundation or plinth by silver sand in layers and consolidating the same by saturation with water ramming. The work also involved earth work for filling in the compound, tank, low land, ditches etc. with good earth spread in layers, including breaking clods and consolidating the same by ramming and dressing.
According to the AAR is was not a contract for the supply of goods, but the transfer of property in such goods in the course of preparing the site for construction of the Home. lt, therefore, amounted to improving and modifying land – an immovable property and is works contract, as defined under section 2(119) of the GST Act.
The AAR pointed out that Sl No. 3 (vii) of Notification No.39/2017-IGST dated 13/10/2017 applies to works contracts, where the earthwork constitutes more than 75% of the value of the contract.
However, the earthwork constituted less than 25% of the value of the Applicant’s contracts. Moreover, the State Government held only 51.01% of the shares of the contractee company, which qualified it as a State Government Company for the purpose of the Companies Act, 2013, but did not make it a government authority or a government entity, as defined in Explanation 4(ix) and 4(x) respectively.
The AAR held that the applicant’s supply was classifiable as site preparation service (SAC Group 99543) and taxable @ 18% under Sl No. 3(xii) of Notification No. 11/2017-CT(Rate) dated 28/06/2017.