GST UPDATE No 191 ON TAXABILITY OF REPLACEMENT OF SLEEPERS FOR RAILWAYS

In this update we will discuss about recent West Bengal AAR ruling in case of UTAKARSH INDIA LIMITED on the issue as to whether dismantling of existing sleeper fixing and/or installation of new (H-Bean Steel sleepers) amounts to execution of original works contract and the GST rate applicable on the same. The assessee was awarded contract by railways for execution work for dismantling of existing bridge timber/steel channel sleepers on bridge including removal of all fittings of sleepers and removing footpath, tie bar lacing/angle lacing etc. and fabrication, manufacture and supply of H- beam steel sleepers and installation of the same. Applicant was concerned about the issue whether the same will be considered as original works contract and he will be liable to pay 12% GST on the same as per Notification No 20/2017-IGST dated 22.08.2017. The applicant charged 12% GST in the invoices by arguing that contract is being carried out by way of construction, erection, commissioning or installation of original works. Since it is not a case of completely new construction and the work is not in the nature of repair and maintenance, the instant work can only be considered under the category of original works. He contended that that though the work order refers the term renewal, it cannot be the decisive factor for ascertaining the nature of contract. However, at the insistence of Railway authorities he charged balance tax amount and paid tax @18%. The applicant further submits that the term “original works’’ has been defined in clause 2 (zs) of Notification No. CA. PRADEEP JAIN ??www.capradeepjain.com??pradeep@capradeepjain.com??5 12/2017-Central Tax (Rate) dated 28.06.2017 which reads as under :- “original works” means- all new constructions (i) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable (ii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise; The applicant thus put his argument that the work being undertaken by the applicant is undoubtedly not in the nature of repair and maintenance to make something workable but in the nature of doing new construction work which otherwise can be called as original work. Once it is accepted that the above work is in the nature of original work, therefore he is eligible for the benefit of the said Notification No. 20/2017-Integrated Tax (Rate) dated 22.08.2017. However, the department has not shown any view on this matter. AAR ruled that the applicant doesn’t construct a new bridge nor is the applicant entrusted to lay a new railway track. The applicant, as we find, undertakes the work of replacing the old sleepers with new one which essentially requires dismantling as well as removal of existing sleepers first therefore work essentially involves replacing the existing sleepers only. As the work involve supply of goods as well as services which will result in immovable property therefore supply by assessed will be covered in work contract as per Sec 2(119) of CGST Act but the same cannot be considered as supply of original work contract as per clause 2 (zs) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and assessee cannot take benefit of serial number 3(v) of Notification No. 20/2017 Integrated Tax (Rate) dated 22.08.2017. Therefore, same will be liable for 18% GST.

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GST UPDATE No 191 ON TAXABILITY OF REPLACEMENT OF SLEEPERS FOR RAILWAYS

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