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The applicant who is supposed to execute an independent work cannot be treated as sub-contractor of the main contractor.

Classification of ServiceIn the present case, the work to be undertaken is described below:

“Four Laning of Dangiywas (km 96..595 of NH-112) to Jajiwal (km 283.500 of NH 65 Nagaur road) section- Package-I (Design length 74.619 km) of Jodhpur Ring Road (In Principally declared NH) in the State of Rajasthan under NHDP Phase VII on design, build, operate and transfer (the “DBOT Annuity” or Hybrid Annuity”) basis”

This contract has been awarded to a private entity (“Contractor”), wherein the Contractor has entered into an agreement with a Special Purpose Vehicle ‘Sadbhav Jodhpur Ring Road Private Limited’ (“SPV”) for the development of a four-lane highway as a part of the NHDP. The aforementioned SPV has been granted a 17-year concession by NHAI for the four-laning of the specified highway. Under this agreement, the scope of work of the Contractor involves the four-laning of the highway, as well as highway facilities that are listed in Schedule C of the Agreement.

QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT

Whether in the facts and circumstances of the case, does the activity carried out by the Applicant falls under Entry No. (iv)(a) of Notification No. 11/ 2017-CT(R)?

Alternatively, whether in the facts and circumstances of the case, does the activity carried out by the Applicant falls under Entry No. (ix) of Notification No. 11/ 2017- CT(R)?

Ruling—
In the instant case we observe that the proposed activity carried out by the applicant is of shifting /erection of 11 KV< lines only. We further, observe that the cost of the above said activity will be borne by the Authority or by the entity owning such utility as such payment of above mentioned activity is not the part of the main contract which is evident from the lines “The cost of such shifting shall be borne by the Authority or by the entity owning such utility” written in the Article XI of the main contract (concession agreement) awarded to main contractor by NHAI. Thus, there establish no nexus between the main contract awarded for construction of road by the NHAI and the work proposed to be undertaken by the applicant.

The activity to be undertaken by the applicant cannot be treated as a part of main contract of NHAI thus the applicant who is supposed to execute an independent work cannot be treated as sub-contractor of the main contractor. — Gaurish Sharma (G.K. Enterprises), In Re… [2020] 22 TAXLOK.COM 110 (AAR-Rajasthan)

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