Dismantling Of Existing Sleeper And Installation Of New Sleepers For Railways Attracts 12% GST: West Bengal AAR

The applicant, Utkarsh India Limited, was awarded a contract by East Coast Railways, Khurda Road Division, Orissa for execution work for the dismantling of existing bridge timber/steel channel sleepers on the 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. According to the Letter of Acceptance, the applicant was awarded work for the renewal of existing 466 nos. of steel channel sleepers with H-Beam sleepers inclusive of all fixtures fastened over Br. No 66 (Dn), 13 (Up), and 63 (Up) under the jurisdiction of the Assistant Divisional Engineer, Track, Khurda Road.

The applicant has sought an advance ruling on the issue of whether the dismantling of existing sleeper fixings and/or installation of new (H-Beam Steel sleepers) amounts to the execution of original work and would attract IGST @12% in terms of Notification No. 20/2017-Integrated Tax (Rate) dated 22.08.2017.

The applicant contended that the scope of work in terms of a Letter of Acceptance (LoA, for short) clearly shows that the applicant is required to fabricate, manufacture, and supply galvanised H-Beam steel sleepers made out of the materials as per specification after dismantling of the existing bridge/steel channel sleepers on the bridge. The applicant, therefore, for the purpose of executing the instant work, will dismantle the existing one and install a new one.

The applicant submitted that he has raised invoices charging tax at 12% according to the rate applicable vide Notification No. 20/2017 Integrated Tax (Rate) dated August 22, 2017. However, at the insistence of the Railway Authorities, the applicant subsequently charged a balance tax amount calculated at the rate of 18% by way of a debit/credit note, though the applicant does not accept the same.

The applicant submits that the term "original works" has been defined in clause 2 (zs) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The term "original works" means all new construction, including all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; and the erection, commissioning, or installation of plant, machinery, or equipment, or structures, whether pre-fabricated or otherwise.

The applicant dismantled the existing bridge timber/steel channel sleeper on the bridge, including the removal of all fittings from the sleeper and removing footpath, tie bar lacing/angle lacing etc., leading and stacking at the nearest bridge and removing bearing plates from the release bridge sleeper after dismantling the same. The applicant has also undertaken fabrication, manufacture, and supply of galvanised "H" beam steel sleepers made out of materials as per the specifications given as per the approved drawings and fixing the same as per the instruction of the engineer. The scope of work includes not only the fixing of sleepers after completion of the manufacture and fabrication, but also the laying of rails on the sleepers. The rails were provided by the Railway Authorities.

The AAR observed that the applicant does not construct a new bridge nor is the applicant entrusted with laying a new railway track. The applicant undertook the work of replacing the old sleepers with new ones, which essentially requires dismantling as well as removal of the existing sleepers first. The work order has been issued in which "unit" has been specified as "per sleeper" and the rate has been determined based on the number of sleepers to be dismantled and removed and the number of sleepers to be supplied and installed, which also establishes the fact that the applicant has been awarded the contract to replace the existing sleepers only.

"The instant supply is found to be a composite supply of works contract as defined in clause (119) of section 2 of the GST Act, but the supply cannot be regarded as composite supply of "original work" as defined in clause 2 (zs) of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The instant supply, therefore, shall not be covered under serial number 3(v) of Notification No. 20/2017 Integrated Tax (Rate) dated 22.08.2017, as amended, to attract tax @ 12%," the AAR ruled.

Applicant's Name: Utkarsh India Limited

Citation: Advance Ruling Order No. 01/WBAAR/2022-23

Dated: 07/04/2022

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