The Rajasthan Authority of Advance Ruling (AAR) ruled that Supply of Materials/Equipment and Erection, Testing and Commissioning of Materials/Equipment supplied in a first work order in building of rural electricity infrastructure is a Composite supply of Works Contract, and are liable to be taxed 18% of GST (CGST 9% and SGST 9%).
The Applicant, ARG Electricals Pvt. Ltd. has received work orders from Ajmer Vidyut Vitran Nigam Limited (AVVNL) through a tender process. AWNL is a company incorporated by the Government of Rajasthan for the distribution of electricity in various parts of the Ajmer district.
The work orders are awarded to them through a tender and scope of work is described in respective work orders as submitted with the application. The two work orders were awarded through the tenders.
Firstly, the supply of material/equipment for providing Rural Electricity Infrastructure for Household electrification in selected blocks under ‘Rajiv Gandhi Grameen Vidhyutikaran Yojana’ scheme on a turnkey basis.
Secondly, Erection, testing and commissioning supplied material/equipment for Rural Electricity Infrastructure for Household electrification in selected blocks under Rajiv Gandhi ‘Grameen Vidyutikaran Yojana’ scheme on a turnkey basis”.
The two work orders separately describe each activity to be carried out to complete the work and also rate for each activity is separately mentioned, by adding the amount of each activity total cost is derived. The two work orders have originated from the same tender and moreover we have to accept the whole tender and do not have an option to choose one.
The applicant sought the advance ruling on the issue whether the contract entered into with AVVNL as per the work orders combine of supply, erection, testing and commissioning of materials/equipment for providing rural electricity infrastructure qualifies as a supply for work contract under Section 2(119) of the CGST Act.
The authority consisting of J.P. Meena and Hemant Jain ruled that Supply of Materials/Equipment and Erection, Testing and Commissioning of Materials/Equipment supplied in a first work order in building of rural electricity infrastructure is a Composite supply of Works Contract and is not covered under Entry No. 3(vi)(a) of the Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017 (as amended), and are liable to be taxed 18% of GST (CGST 9% and SGST 9%).
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