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30th January 2019

Construction of private railway siding amounts to construction of Railways

  In a recent Advance Ruling sought by M/s Rites Ltd reported in 2019 (20) G.S.T.L. 657 (A.A.R. - GST); (2018) 100 taxmann.com 452 (AAR-WEST BENGAL), West Bengal Advance Ruling Authority held that construction of railway siding for carriage of coal and oil fuel to a thermal power station by Applicant is a composite supply of works contract covered under "construction of railway" and thus, taxable @ 12% under Serial No 3(v)(a) of Notification no. 11/2017 - Central Tax (Rate) dated 28 June 2017.

In the present case, Damodar Valley Corporation (DVC), has appointed Applicant as project management consultant for construction of railway infrastructure, including commissioning of the railway system to handle coal and oil fuel traffic. The scope of work between Applicant and DVC include construction of private railway siding between different stations that enables carriage of coal and oil fuel to Raghunathpur Thermal Power Station.

The question raised by the Applicant was whether reduced tax rate of 12% as per S. No. 3(v)(a) of Notification no 11/2017 - Central Tax (Rate) dated 28 June 2017 shall be applicable to this transaction or the general rate of 18% GST given under S. No. 3(xii) of the said notification will be attracted?

While holding that tax rate of 12% as per S. No. 3(v)(a) ibid. shall be applicable to this transaction, it was observed by the West Bengal AAR that phrase "public carriage of passenger or goods" mentioned in definition of 'railways' as given under Section 2(31) of Railways Act, 1989 cannot be construed as to exclude the railway sidings built & owned by other than government organizations. It was held that construction of private railway siding is squarely covered under the definition of 'railways'.