#GSTCase-93- Contracts for filling compound, tank, low land with silver sand and earthwork in layers, including spreading and compacting the same would be works contract services
Ashis Ghosh  106 taxmann.com 381 (AAR-WEST BENGAL)
Whether contracts for filling in the compound, tank, low land etc. with silver sand and earthwork in layers, including spreading and compacting the same would be classifiable as supply of sand (HSN 2505) or fall under Works Contract Services.
Applicant procured two contracts from M/s Mackintosh Burn Ltd. (hereinafter MBL) for filling in the compound, tank, low land etc. with silver sand and earthwork in layers, including spreading and compacting the same at the district Correction Home, Baruipur.
- Contention by the Applicant
Applicant argues, his supply is that of goods and predominantly of sand which forms approximately 80-90% of the contract value, and therefore should be classifiable under HSN 2505.Alternatively, applicant referred to Order No. JHR/AAR/2018-19/01 dated 03/11/2018 of the Authority for Advance Ruling, Jharkhand (hereinafter the AAR) in the matter of M/s P K Agarwala.
- Observation by AAR
Applicant is 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 involves 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. It is, therefore, 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 New Central Correctional Home at Baruipur. It, therefore, amounts to improving and modifying land – an immovable property and is works contract, as defined under section 2(119) of the GST Act.
The Applicant’s reference to the order of the AAR is not relevant. 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. As evident from the table in para no. 2.2, the earthwork constitutes less than 25% of the value of the Applicant’s contracts with MBL. Moreover, the State Government holds only 51.01% of the shares of MBL, which qualifies it as a State Government Company for the purpose of the Companies Act, 2013, but does not make it a government authority or a government entity, as defined in Explanation 4(ix) and 4(x) respectively.
Applicant’s supply to M/s. Mackintosh Burn Ltd. is works contract service, classifiable as site preparation service (SAC Group 99543) and taxable @ 18% under Sl. No. 3(xii) of Notification No. 11/2017 – Central Tax (Rate) dated 28/06/2017 (corresponding State Notification No. 1135-FT dated 28/06/2017), as amended from time to time. Being a service, the Applicant’s supply is not classifiable under HSN 2505.