GST Classification of Land Filling and Compacting Contracts
The Appellate Authority for Advance Ruling ruled that land filling and compacting is a works contract service, not a supply of goods.
- Ruling
- Appeal Case No. 10/WBAAAR/APPEAL/2019 dated 26.08.2019 (Order dated 21.11.2019)
- Authority
- Appellate Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- The company asked if supplying sand for land filling is a goods supply.
- The authority ruled the activity is a works contract service.
- Filling, spreading, and compacting land are considered site preparation services.
- The nature of the work overrides the value of the materials supplied.
In short
The company asked the West Bengal Appellate Authority for Advance Ruling (WBAAAR) if providing silver sand and earth for land filling should be taxed as a supply of goods under HSN 2505. The authority examined whether this was a simple sale of sand or a broader service involving site preparation.
What has changed
How it worked before
Businesses often assumed that if the cost of the sand was the largest part of the contract, the entire transaction should be taxed as a supply of goods.
What has changed
The authority decided that because the contract requires spreading, compacting, and water ramming to prepare land for construction, it is a works contract service. This means the entire project is taxed as a service, regardless of how much the sand itself costs.
Who this affects
Contractors and construction firms involved in land development, site preparation, or earthwork projects.
An example
A construction firm is hired to fill a low-lying plot with soil and compact it for a new building foundation. They might wonder if they should charge GST as if they are just selling soil. Based on this ruling, they must treat the entire project as a works contract service because the labor of compacting and preparing the site is essential to the contract.
What you should do
If you perform similar land preparation work, you should classify your contracts as works contract services. Remember that this ruling only binds the specific company that asked; it is not a law that automatically applies to your business or your specific tax officer.
If you do nothing
If you misclassify your services as a supply of goods, you may face a tax shortfall if the service tax rate is higher. A tax officer could issue a notice for unpaid tax, interest, and penalties. Relying on a ruling that does not apply to you provides no legal protection during an audit.
The terms explained
- Works contract
- A contract for building, construction, or improvement of immovable property where both goods and services are provided together.
- Composite supply
- A transaction where two or more taxable supplies are naturally bundled together and provided in the ordinary course of business.
- HSN 2505
- A specific code under the Harmonized System of Nomenclature used to classify natural sands.
The ruling in detail
Appellate Authority for Advance Ruling
Sri. Ashis Ghosh
Appeal Case No. 10/WBAAAR/APPEAL/2019 dated 26.08.2019 (Order dated 21.11.2019) · West Bengal
Questions before the authority
- Whether the supply of silver sand and earthwork for filling in the compound, tank, and lowland can be classified as supply of sand (HSN 2505).
Facts
The Appellant was awarded contracts by M/s Mackintosh Burn Limited for filling and compacting land at the New Central Correctional Home, Baruipur, using silver sand and earth. The Appellant sought an advance ruling on whether this activity constitutes a supply of goods (sand) under HSN 2505. The original authority ruled that the activity is a works contract service rather than a supply of goods.
Ruling
| Question | What the authority ruled |
|---|---|
| Classification of supply | Works contract service (SAC 99543) Taxable at 18% under Serial No. 3(xii) of Notification No. 11/2017-CT(Rate) |
The Appellate Authority upheld the original ruling, concluding that the activity is not a composite supply of goods but a works contract service. The authority determined that the activities of filling, spreading, and compacting constitute site preparation for construction, which is a service.
Reasoning
The authority reasoned that the contract involves more than just the supply of sand, as it requires the Appellant to perform site preparation activities like spreading, compacting, and water ramming to make the land fit for construction. Under Section 2(119) of the GST Act, this constitutes a works contract. The authority rejected the Appellant's argument that the supply is a composite supply with sand as the principal supply, noting that the activities represent a transfer of property in goods in the course of site preparation.
Provisions relied on
- Section 2(119) of the GST Act
- Section 2(30) of the GST Act
- Notification No. 11/2017-CT(Rate) dated 28.06.2017
For the practitioner
This ruling clarifies that contracts involving the supply of materials combined with significant site preparation activities, such as filling and compacting for construction, are classified as **works contract services** rather than a supply of goods. Practitioners should note that the **predominant nature of the activity**—preparing land for construction—overrides the high value of the material component in determining the classification.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/2024-02/wb_aaar_10_2019_26.08.2019.pdf
Legibility of the scan, as read: high.
Prepared 13-10-2026.
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