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THE SCHEME OF GST
2 EVOLUTION OF ‘WORKS CONTRACT’ PRE-GST 10
CHAPTER 3
DEFINITION OF ‘WORKS CONTRACT’ UNDER GST 27
CHAPTER 4
OVERVIEW OF TREATMENT OF CONSTRUCTION CONTRACTS UNDER INTERNATIONAL VAT/GST REGIMES FOR A COMPARATIVE PERSPECTIVE 33
CHAPTER 5
‘WORKS CONTRACT’ MUST PERTAIN TO ‘IMMOVABLE PROPERTY’ - WHAT IS ‘IMMOVABLE PROPERTY’? 38
CHAPTER 6
FOR A CONTRACT TO QUALIFY AS ‘WORKS CONTRACT’, IT MUST INVOLVE ‘TRANSFER OF PROPERTY IN GOODS’WHAT IS ‘TRANSFER OF PROPERTY IN GOODS’? 50
CHAPTER 7
‘COMPOSITE’ AND ‘MIXED’ SUPPLY - RELEVANCE UNDER ‘WORKS CONTRACT’ 53
CHAPTER 8
INTERPLAY BETWEEN COMPOSITE SUPPLY, MIXED SUPPLY AND WORKS CONTRACTS 69
CHAPTER 9
CLASSIFICATION OF SERVICES UNDER GST AND ‘WORKS CONTRACTS’ 78
CHAPTER 10
INPUT TAX CREDIT FOR ‘WORKS CONTRACT’ 83
CHAPTER 11
CASE STUDIES TO PRACTICALLY UNDERSTAND WHETHER A CONTRACT WOULD QUALIFY AS ‘WORKS CONTRACT’
CHAPTER 12
REGISTRATION FOR WORKS CONTRACTOR UNDER GST
CHAPTER 13
TIME OF SUPPLY AND ISSUANCE OF INVOICE (POINT OF TAXATION)
CHAPTER 14
IMPACT OF GST ON ADVANCES/ SECURITY DEPOSITS ETC. 136
CHAPTER 15
VALUATION AND ‘FREE OF COST’ SUPPLIES BY THE CUSTOMER
CHAPTER 16
PLACE OF SUPPLY
CHAPTER 17 LIQUIDATED DAMAGES UNDER WORKS CONTRACTS & GST
CHAPTER 18
GST RATES AS APPLICABLE ON VARIOUS TYPES OF WORKS CONTRACTS
CHAPTER 19
SUMMARIZING THE KEY DIFFERENCES IN ‘WORKS CONTRACT’ IN THE PRE AND POST GST ERA
CHAPTER 20
TRANSITION PROVISIONS UNDER GST FOR WORKS CONTRACT
CHAPTER 21
DEDUCTION AT SOURCE (“TDS”)
CHAPTER 22
WORKS CONTRACT AND IMPLICATIONS IN OIL & GAS SECTOR
CHAPTER 23
WORKS CONTRACT AND IMPLICATIONS IN REAL ESTATE
CHAPTER 24 WORKS CONTRACT AND IMPLICATIONS FOR ROADS/ HIGHWAYS
CHAPTER 25
WORKS CONTRACTS AND IMPLICATIONS ON PORTS
CHAPTER 26
WORKS CONTRACT AND IMPLICATIONS ON THERMAL POWER
CHAPTER 27 WORKS CONTRACT AND IMPLICATIONS ON SOLAR
CHAPTER 28
WORKS CONTRACT AND IMPLICATIONS ON LARGE MANUFACTURING PLANTS
CHAPTER 29
WORKS CONTRACT AND IMPLICATIONS ON LARGE WATER SUPPLY PROJECTS
CHAPTER 30
GST AND ANTI-PROFITEERING
CHAPTER 31
PRACTICAL STRATEGIES VIS-A-VIS STRUCTURING OF VARIOUS TYPES OF WORKS CONTRACT UNDER GST 364
CHAPTER 32
WHAT HAPPENS TO ‘NO-INCOME TAX’ POSITION FOR OFFSHORE SUPPLIES UNDER A SINGLE EPC CONTRACT, POST GST? 375
CHAPTER 33
BEST PRACTICES FOR TAX CONTROVERSY MANAGEMENT UNDER GST 380
ANNEXURES
ANNEXURE 1 - RELEVANT CGST RATE SCHEDULE FOR SERVICES 393
ANNEXURE 2 - MAHARASHTRA GST ACT - NEW COMPOSITION SCHEME FOR BUILDER AND DEVELOPER 403
ANNEXURE 3 - RELEVANT EXPLANATORY NOTES TO THE SCHEME OF CLASSIFICATION OF SERVICES 408
’WORKS CONTRACT’ MUST PERTAIN TO ‘IMMOVABLE PROPERTY’ - WHAT IS ‘IMMOVABLE PROPERTY’?
5.1 DEFINITIONS OF IMMOVABLE PROPERTY
immovable property
Section 2 of the General Clauses Act, 1897:
‘Immovable property shall include land, benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth.
Section 3 of the Transfer of Property Act, 1882 : Immovable property does not include standing timber, growing crop or grass. “Attached to the earth” means ( ) rooted in the earth, as in the case of trees and shrubs; ( ) embedded in the earth, as in the case of walls or buildings or
( ) attached to what is so embedded for the permanent beneficial enjoyment of that to which it is attached.’
i The degree of attachment
ii The object and intent of the attachment
5.2 UNDERSTANDING THE DEGREE OF ATTACHMENT
Understanding ‘degree or extent of attachment’ - Whether dismantling of the chattel from the attachment would lead to damage: judicial precedents.
a Municipal Corporation of Greater Bombay v. Indian Oil Corporation Ltd.
“32. The tanks, though, are resting on earth on their own weight without being fixed with nuts and bolts, they have permanently been erected without being shifted from place to place. Permanency is the test. The chattel whether is movable to another place of use in the same position or liable to be dismantled and re-erected at the later place? If the answer is yes to the former it must be a movable property and thereby it must be held that it is not attached to the earth. If the answer is yes to the latter it is attached to the earth……….”
CCE Josts Engineering Co. Ltd.
“13. We have considered the rival submissions. The case of the parties have been fully understood. As stated in the earlier portion of the order the photograph of the plant clearly shows that the outside portions of the structure are embedded to the earth. It can never be dismantled without damaging the portion and the system which is touching the earth and the system cannot work thereafter…..
14. The Counsel has attacked the findings on the basis of the fact that they have filed classification lists in a proper way as well as the decision of the Supreme Court in Mittal Engineering Co. case. When we compare the nature of the goods as at page 63 of the Paper book we find a huge metal structure which is having elevated side portion which are embedded to earth by means of bolts which are guinted or permanently fixed to earth by concrete. If this is not immovable property what is a immovable property?...........”
c CCE Mumbai Hutchison Max Telecom
9. The facts on record would indicate that the equipments erected are embedded in the earth or on a building. The Tribunal noted that revenue does not contest or dispute the fact that whenever BTS/BSC site has to be relocated, all the equipments like BTS/BSC, Microwave Equipment, batteries, control panels, air-conditioners, UPS, tower antennae are required to be dismantled into individual components, then they are to be moved from the existing site and reassembled at new site. This involves damages to certain parts like cable trays, etc. which are embedded/fixed to the Civil structure as also the BTS microwave equipment itself. All the components of the new product cannot be shifted as an illustration the room housing the equipment. This act of dismantling from the permanent site would render such goods not marketable. Apart from that the goods cannot be re-erected as in the previous place as the requirement of each place is different.”
Gallagher Pvt. Ltd.
“6.1 Our view is that the solar powered electric fence cannot be called either as a machine or equipment or appliance. We can only call it as a system containing various components which are connected with each other for a specific purpose. It is only a system. The individual component like energizer, battery, insulators, wires, steel rod, etc., may fall under different Chapters of the Central Excise Tariff but together they form only a fence. In any case, a fence is specific to a particular area. The way a fence is erected depends upon the geometry of the said area. If a fence is formed in a particular area, the same thing cannot be shifted and used in another area without dismantling and also without adding some more components or diminishing the original components. That is so, because the geometries of two areas may not be identical. At this stage, we have to refer to Para 4(vi) of the Board’s Circular dated 15-1-2002. We reproduce the last sentence “if the goods are incapable of being sold, shifted and marketed without first being dismantled into component parts, the goods would be considered as immovable and therefore not excisable to duty”. If an electric fence has to be shifted, then the entire thing cannot be just removed without being dismantled into component parts. This is obvious from the various components of the electric fence. We cannot say that only for ease of transportation, the components are removed. It is very clear that the corner posts are grouted to the earth. These posts are also part of the electric fence. Grout means a thin liquid mortar for filling gaps and in tiling. The verb grout means to provide or to fill with grout. When something is grouted, it is obvious that it is permanently fixed to earth.”
Given the above jurisprudence, it becomes clear that if items assembled or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as movable.
a CCE Ahmedabad Solid and Good Construction Works per se
“19.…… Attachment of the plant in question with the help of nuts and bolts to a foundation not more than 1½ feet deep intended to provide stability to the working of the plant and prevent vibration/wobble free operation does not qualify for being described as attached to the earth under any one of the three clauses extracted above. That is because attachment of the plant to the foundation is not comparable or synonymous to trees and shrubs rooted in earth. It is also not synonymous to imbedding in earth of the plant as in the case of walls and buildings, for the obvious reason that a building embedded in the earth is permanent and cannot be detached without demolition. Embedding of a wall in the earth is also in no way comparable to attachment of a plant to a foundation meant only to provide stability to the plant especially because the attachment is not permanent and what is attached can be easily detached from the foundation………”
b Sirpur Paper Mills Ltd. CCE, Hyderabad machine was capable of being sold after being dismantled from its base.
c Essar Telecom Infrastructure Pvt. Ltd. Union of India
“11. Though an opinion is formed by the Bombay High Court based on Triveni Engineering’s case that the erection of towers cannot be treated as mobile and it is fixed to the earth, in my opinion, it cannot be accepted in the context to treat it as immovable property to contend that it is only in the form of service rendered and not transfer of right to use the goods. The definition provided under the provisions of S. 3 of the Transfer of Property Act or under the Sale of Goods Act if interpreted in so far as this type of equipment fixed to the earth or on the building, definitely it can be dismantled and replanted elsewhere. Except the civil work of putting up a platform to fix the equipment/tower, the structure does not acquire
the character of immovable goods to detract the application of the VAT Act. Though it appears, for outward appearance, a semblance of service is being rendered but, factually it is a super structure in the form of movable.…..”
Vodafone Mobile Services Commissioner of Service Tax-
d National Radio & Electronics Co. Ltd. CCE, Bombay
e CBEC Circular: 58/1/2002-CX dated 15-1-2002 -
“( ) If any goods installed at site (example paper making machine) are capable of being sold or shifted as such after removal from the base and without dismantling into its components/parts, the goods would be considered to be movable and thus excisable. The mere fact that the goods, though being capable of being sold or shifted without dismantling, are actually dismantled into their components/parts for ease of transportation etc., they will not cease to be dutiable merely because they are transported in dismantled condition. Rule 2(a) of the Rules for the Interpretation of Central Excise Tariff will be attracted as the guiding factor is capability of being marketed in the original form and not whether it is actually dismantled or not, into its components. Each case will therefore have to be decided keeping in view the facts and circumstances, particularly whether it is practically possible (considering the size and nature of the goods, the existence of appropriate transport by air, water, land for such size, capability of goods to move on
self propulsion ships- etc.) to remove and sell the goods as they are, without dismantling into their components. If the goods are incapable of being sold, shifted and marketed without first being dismantled into component parts, the goods would be considered as immovable and therefore not excisable to duty.”
5.3 UNDERSTANDING THE TEST OF ‘OBJECT OF ATTACHMENT’
Understanding the test of ‘Object of attachment’ - Whether the object of the attachment of the chattel is the beneficial enjoyment of the land or the chattel itself
a CCE, Hyderabad Solid and Good Construction Works supra -
“23. The courts in this country have applied the test whether the annexation is with the object of permanent beneficial enjoyment of the land or building. Machinery for metal-shaping and electro-plating which was attached by bolts to special concrete bases and could not be easily removed, was not treated to be a part of structure or the soil beneath it, as the attachment was not for more beneficial enjoyment of either the soil or concrete. Attachment in order to qualify the expression attached to the earth, must be
Para 5.3
for the beneficial attachment of that to which it is attached. Doors, windows and shutters of a house are attached to the house, which is imbedded in the earth. They are attached to the house which is imbedded in the earth for the beneficial enjoyment of the house. They have no separate existence from the house. Articles attached that do not form part of the house such as window blinds, and sashes, and ornamental articles such as glasses and tapestry fixed by tenant, are not affixtures.”
b Sirpur Paper Mills Ltd. CCE, Hyderabad supra
c Perumal Naicker T. Ramaswami Kone
4. ……..we are of opinion that by the very nature of things, it is not possible, to our minds, to regard the Fetter Engine as immovable property merely because for the beneficial enjoyment of it during its use, it is fixed to the earth in that manner, the engine cannot be used except by fixing it to the earth. Therefore, it cannot be said that the intention, as disclosed by the fixture, is to make it a permanent part of the earth and so it is immovable property. The nature of the engine and the purpose of its fixtures, both show that it cannot be regarded as immovable property. No doubt, the evidence in this case is that the Fetter engine stood affixed to the earth from 1952. But this is because during that period the engine was used for that purpose the fixture was necessary. On that account, the fixture cannot be viewed as a permanent one.”
d Jnan Chand Chugh Jugal Kishore Agarwal
11………. It cannot be said that they are rooted in the earth nor can it be said that they are imbedded in the earth. It may be that the legs of one or two of the machines in this case look as if they have become imbedded in the earth as a result of the raising of the floor but there is no evidence before me that the idea or intention of the mortgagor in this case was to imbed them in the earth so that they could not be removed without breaking the concrete
foundation. Except in the case of the furnace which appears to have been built in the soil itself all the other machinery appear to me to have been put on the floor of the factory on beds of concrete prepared for them and fastened down to the concrete bed by bolts and nuts, the bolts being firmly fixed in the concrete and passed through and projected beyond the holes in the machines. The object of the fastening was only to prevent the machines from vibrating inasmuch as they have to be worked by electric power conveyed to them from exterior sources. Nor, in my opinion, can it be said that the machines were attached to the concrete foundation laid in the earth for the permanent beneficial enjoyment either of the concrete foundation or of the soil in which the same was laid. The object of fastening the machinery to the land was not for the permanent beneficial enjoyment of the land but for the purpose of obtaining steadiness in the machinery while working for polishing and shaping things and earning profit thereby. ………….”
e Bamadev Panigrahi Monorama Raj
On a careful consideration of the entire facts and circumstances, we are of the firm view that the intendment, object and purpose of installing the cinema equipment in question, was only to have the beneficial enjoyment of the very equipment during the period of the lease or mortgage. That apart, the diesel oil engine and the cinema projector are not rooted in the earth as in the case of trees and shrubs, or imbedded in the earth as in the case of walls or buildings, or attached to what is so imbedded for the permanent beneficial enjoyment of that to which they are attached. In the circumstances, the equipment or machinery must be held to have not been attached to the earth within the meaning of the expression “attached to the earth” under Section 3 of the Transfer of Property Act. The machinery is not only not attached to the earth, but also not permanently fastened to anything attached to the earth. Hence, the machinery in question must be held to be movable property but not immovable property.’
f I.G.E. India Ltd. Collector of Central Excise
47. It is contended that since X-ray table floor to ceiling column, tube stand, X-ray generators and other things are fastened to the
earth and the X-ray tube units and high voltage cable are fitted the X-ray equipment is immovable property and, therefore not excisable goods.
50. From the above it follows, by nature, if the property is movable and for its beneficial use or enjoyment it is necessary to fix it on earth though permanently when it is in use, it is not immovable property. In the instant case the components/parts both essential and non-essential are fixed to earth for its beneficial enjoyment and by fixing it to the earth it does not become part of the earth, and therefore, it is not immovable property. It is also not disputed that X-ray equipment can be dismantled and shifted. From the records we find that the dismantling charges were also collected from one of the customers.
51. Therefore, we are of the view that X-ray equipment is not immovable property.”
g ABB India Ltd
Giriraj Renewables Private Limited
“It may be true that the solar power plant can be moved from one place to other but for the enjoyment of the equipment or for the smooth generation of electricity, the panel is required to be affixed to the earth. Also of paramount importance here is the ‘object of annexation’. Is there an intent to move the plant from one place to other? Of course not. There is no feasibility in moving the plant from one place to another. There can be no intention of both the parties to move the plant from one place to another. The fact that it can be moved is immaterial.”
Sterling and Wilson Private Limited v. Joint Commissioner and Others [TS-07-HC(AP)-2025-GST]/[2025] 170 taxmann.com 539 (AP)
the property, attached to a structure embedded in the earth, would become immovable property only when such attachment is for the permanent beneficial enjoyment of the structure, embedded to the earth.