Whether Drilling & Blasting For Tunnel Construction Will Be Considered As Goods Or Services? And At What Rate Will It Be Taxable?

Facts:

• There’s an agreement for construction of two tunnels as a part of expressway project.
• The Appellant is engaged as a sub-contractor for blasting & drilling work with respect to the tunnel construction.

Legal Precedence

In M/s Kapil Sons Explosives LLP- (AAR – MAHARASHTRA) [08-02-2022]

If an entity is engaged in a contract for blasting & drilling for tunnel construction, then this activity will be classified as a composite supply attracting 12% GST.

Points Discussed:

• The Appellant engaged in the activity of blasting & drilling shall be classified as composite supply of works contract for construction of tunnel.
• As various goods including explosives, tools & other material are used in the process of blasting, thus this will constitute an element of goods in the activity that the applicant is engaged in.
• Supply of service is in the form of drilling, blasting & clearing of rubble. As service of blasting & drilling cannot be conducted without the use of explosives, thus the impugned activity will be classified as composite supply attracting 12% GST.

Judgement:

It was ruled that that the activity conducted for tunnel construction through blasting & drilling will be classified as composite supply of work contract for construction of tunnel & GST rate of 12% will be applicable as per section 2(30) of CGST ACT, 2017/ sec 2(30) of Maharashtra Goods & Services Tax Act, 2017.

Hrithik Sachdeva, Audit Associate, SW India