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The supply of goods or services for "setting up of network" would qualify as a Composite supply of works contract

Shanti Prime Publication Pvt. Ltd.

Classification of Supply — Authority for Advance Ruling — Taxability on Turnkey Contract – The applicant engaged in manufacture of telecom products such as optic fiber optic fiber cable etc., laying these optic fiber cables to create a network and any other ancillary activity which are necessary for creation of network infrastructure for its customers. The scope of these activities is contractually stipulated and is typically recognized as a ‘turnkey contract’ in the industry. The Indian Navy intends to establish a countrywide IP/MPLS based multi-protocol converged network and has entrusted the setting up of these networks to BSNL who in turn has floated a tender. The applicant is desirous of applying for the tender. The applicant sought an advance ruling as to (i) whether the supply of goods or services for setting up of network would qualify as ‘works contract’ as defined in Section 2(119) of the CGST Act (ii) if supplies contemplated as per the contract with BSNL are not treated as works contract, can these continue to qualify as composite supply, if yes what is the principle supply and (iii) what is the rate of tax applicable to the supplies made under the contract.
Held that:- The Hon’ble Authority for Advance Ruling held the the supply of goods or services for setting up of network would qualify as a Composite supply of works contract as defined in section 2 (119)of the Act and the rate of tax applicable to the supplies will be 18% GST.—Sterlite Technologies Limited., In Re… [2019] 10 TAXLOK.COM 106 (AAR-Maharashtra)