Order Date – 13 January 2023

Facts –

• The Applicant, Reach Dredging Limited, has been rewarded work order by the Water Resources Department, Government of Andhra Pradesh for desilting of the foreshore of Prakasam Barrage from KM 7.500 to KM 8.400 in Krishna River and the applicant has entered into a contract with the concerned department of Government of Andhra Pradesh for the execution of above-mentioned Works Contract.

Issue –

• Whether the supply is covered under Serial No. 3 for the item (vii) of the Notification No. 39/2017 dated 13-10-2017 Integrated Tax (Rate)?

Order –

• The AAR observed that the work, as from the documents produced, is aimed at the improvement of immovable property which involves both supply of services and goods in the course of its execution. The instant supply therefore qualifies as “works contract” as defined in clause (119) of section 2 of the GST Act.
• On due consideration of the cost of the materials involved in the instant supply, as certified by the Executive Engineer the work being undertaken by the applicant is a composite supply of works contract which predominantly involves earth work i.e., constituting more than 75 percent of the value of the works contract as specified under serial number 3(vii) of Notification No. 39/2017- Integrated Tax (Rate) dated 13.10.2017.
• It appears from Question No. 7 of the FAQ on Government Services, issued by the Central Board of Indirect Taxes & Customs, that a department of Central/ State Government shall be regarded as Central/State Government and therefore, supply being provided by the applicant to the Water Resource Department of Government of Andhra Pradesh qualifies as a supply to the State Government.