The Madras High Court has held that track doubling & infrastructure works for southern railway under Rail Vikas Nigam Limited (RVNL) are taxable at 12% Goods and Service Tax (GST).
The bench of Justice Mohammed Shaffiq has quashed the orders and the contract for doubling of track between Vanchi Maniyachchi to Nagercoil, construction of roadbed, minor bridges, platforms, buildings, water and effluent treatment facilities, wagon / coaching maintenance infrastructure, supply of ballast, installation of tracks and other electrical, signalling and telecommunication infrastructure in Madurai and Thiruvananthapuram Divisions of Southern Railway, between the petitioner and RVNL would be covered by the Notification dated 28-06-2017 issued by Central Government and liable to tax at 12%.
The petitioner, STS-KEC(JV) is a joint venture of M/s.Stroytechservice LLC, Russia and KEC International Limited, formed for executing various railway projects in India.
The petitioner was assigned the works contract for a total value of INR 712.48 Crores by RVNL for“Doubling of track between Vanchi Maniyachchi to Nagercoil, construction of roadbed, minor bridges, platforms, buildings, water and effluent treatment facilities, wagon / coaching maintenance infrastructure, supply of ballast, installation of tracks and other electrical, signalling and telecommunication infrastructure in Madurai and Thiruvananthapuram Divisions of Southern Railway”.
During the period April 2018 to March 2019, the petitioner paid GST at the rate of 12%, on the above contract. The petitioner had discharged taxes at the rate of 12% on the premise that the said contract constitutes works contract services of original works pertaining to Railways.
As per the notifications, a composite supply of original works as defined in clause (119) to Section 2 of the CGST Act, other than that covered by items (i), (ia), (ib), (ic), (id), (ie) and (if), by way of construction, erection, commissioning or installation, pertaining to railways, including monorail and metro is liable to be taxed at 12%.
The petitioner was served with an intimation in Form GST DRC-01A dated 21.12.2022. The said notice proceeds on the premise that the subject contract between the petitioner and RVNL is liable to tax at 18%, instead the petitioner had erroneously discharged taxes at lower/concessional rate of 12% on the works contract executed by the petitioner.
The court held that the definition of Railway under the Indian Railway Act, 1989, may not be relevant in construing the subject notification. In any view, even applying the definition of Railway as defined under the Indian Railway Act, 1989, to the contract between the petitioner and M/s. RVNL which is for doubling of track between Vanchi Maniyachchi to Nagercoil, construction of roadbed, minor bridges, platforms, buildings, water and effluent treatment facilities, wagon / coaching maintenance infrastructure, supply of ballast, installation of tracks and other electrical, signalling and telecommunication infrastructure in Madurai and Thiruvananthapuram Divisions of Southern Railway, it appears to me from the discussion supra that it would still constitute original work pertaining to Railway for the purpose of the subject notification and thus covered under Sl.No.3(v)(a) of the notification.
Case Details
Case Title: STS-KEC(JV) Versus State Tax Officer
Case No.: W.P.(MD).Nos.3938 to 3942 of 2024 and W.M.P.(MD).Nos.3819, 3820, 3822, 3823, 3893, 3895 and 3897 to 3900 of 2024
Date: 28.01.2025
Counsel For Petitioner: Abishek A.Rastogi
Counsel For Respondent: R.Sureshkumar
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