The West Bengal Authority for Advance Ruling (AAR) in its latest ruling in the case of Vrinda Engineers Private Limited has adjudged that the job work of fabrication of steel structures and delivery thereof at the site and works contract of applying a coat of paint to the steel structures after erection is a mixed supply as they are supplied in conjunction with each other at a single price and are not naturally bundled.
Facts of the Case:
The applicant M/s Vrinda Engineers Private Limited is a supplier of building structure, railway bridge equipment, technical structure, blast furnace shell, civil structure. Apart from supplying items, the applicant does job work on the materials and design belonging to another registered person.
Issue on which ruling was sought:
The applicant wants to know the applicable rate of tax in terms of Sl No. 26 of Notification No. 11/2017- Central Tax (Rate) dated 28/06/2017, amended time to time, (hereinafter “Rate Notification”).
Contention of the Applicant:
- The applicant states that M/s S.P. Singla Construction Pvt Ltd (hereinafter the Principal) is
engaged in the reconstruction of the Majherhat Railway Overbridge (ROB). The Principal has
contracted with the applicant for fabrication, painting and transportation at the site of the
„Viaduct and Cable Stay‟ part of the ROB.
- The applicant submits that the activities in terms of the above contract should be treated as job work.
- According to the contract, the Principal provides all materials and drawing for fabrication.
The painting is done as per guidelines of the PWD, Government of West Bengal.
- The applicant‟s contention is that their job work attracts GST @12% under Sl No. 26(id) of
the Rate Notification.
Submission of the Revenue:
- The concerned officer raises the point that the agreement does not clarify who would supply the paints.
- If the applicant supplies the paint, the activity should be regarded as works contract. On the other hand, if the Principal provides the paint, the agreement should be treated as that of job work.
- The concerned officer also likes to focus on the issue that performance of fabrication, paintings and transportation should come under the ambit of mixed supply and should attract the highest rate of tax.
Order of West Bengal AAR: Deliberations and Ruling
- The contract combines two separate services: (1) the job work of fabrication of steel structures and delivery thereof at the site with incidental supply of paint, and (2) works contract of applying a coat of paint to the steel structures after erection. Although they are supplied in conjunction with each other at a single price, they are not naturally bundled. The job work of fabrication ends with the delivery of the fabricated structures at the site.
- The works contract of applying paint to the erected structures is a separate supply made in conjunction with the job work. It is, therefore, a mixed supply.
- The taxability of the mixed supply depends on the applicable rate of tax on each of the two
supplies. Being supply of the manufacturing service (SAC 9988) to a registered taxable person, the supply of the job work is taxable @ 12% in terms of Sl No. 26 (id) of the Rate Notification. On the other hand, The Principal (M/s S P Singla Construction Pvt Ltd) is the main contractor engaged by the Public Works (Roads) Department of the State Government for the reconstruction of the Majherhat ROB. The applicant‟s works contract service, being that of a
sub-contractor engaged by the main contractor, therefore, is taxable @ 12% in terms of Sl No.
3(ix) of the Rate Notification. The mixed supply is, therefore, taxable @ 12% in terms of the provisions under section 8(b) of the GST Act.
In view of above deliberations the West Bengal AAR ruled that the applicant supplies a mixed supply constituting of the job work of fabrication of steel structures and the works contract of applying paint to the erected steel structures. It is taxable @ 12% in terms of the provisions under section 8(b) of the GST Act.
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
