GST Rate for Utility Shifting Sub-contractors: West Bengal AAR Ruling
The West Bengal Authority for Advance Ruling decided that sub-contracted utility shifting does not qualify for the 12% concessional road construction GST rate.
- Ruling
- 12/WBAAR/2022-23 dated 21.10.2022
- Authority
- 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
- Shree Powertech asked if utility shifting qualifies for a 12% GST rate.
- The authority ruled this activity is not road construction.
- Sub-contractors cannot claim the concessional rate for utility relocation services.
In short
The company asked if their work shifting electrical lines for a road project qualified for a lower 12% Goods and Services Tax (GST) rate. The authority looked at whether this specific task counts as 'construction of a road' under government notifications.
What has changed
How it worked before
Many sub-contractors assumed that any work performed as part of a larger road project would automatically qualify for the same concessional tax rates as the main construction contract.
What has changed
The authority decided that shifting utilities is an independent service, not road construction. This means sub-contractors performing this work must charge the standard GST rate rather than the concessional 12% rate.
Who this affects
Sub-contractors hired to move electrical, water, or other utilities for road or infrastructure projects.
An example
Imagine a company, 'City Cables', is hired by a main contractor to move telephone poles for a new highway. City Cables might want to charge 12% GST, believing their work is part of the road project. Based on this ruling, the tax authority would likely view their work as a separate service and require them to charge the standard GST rate instead.
What you should do
If you perform similar work, do not assume you qualify for the 12% rate. An advance ruling only binds the business that asked and its specific tax office; it is not a law that applies to your business automatically. Consult your tax advisor to determine the correct tax rate for your specific contract.
If you do nothing
If you apply the lower rate without being entitled to it, you risk a tax demand for the unpaid difference plus interest and penalties. A tax officer may disagree with your classification during an audit, leading to costly disputes. Relying on a ruling that does not apply to your specific contract is a significant compliance risk.
The terms explained
- Works contract
- A contract that involves both the supply of goods and services, typically used in construction or property improvement.
- Concessional rate
- A lower tax rate offered by the government for specific types of goods or services to encourage certain industries.
- Nexus
- A direct connection or link between two things, in this case, between the utility work and the actual building of the road.
The ruling in detail
Authority for Advance Ruling
SHREE POWERTECH
12/WBAAR/2022-23 dated 21.10.2022 · West Bengal
Questions before the authority
- Whether in the facts and circumstances of the case, does the activity carried out by the applicant falls under Heading 9954: Entry No. 3(iv)(a) of Notification No. 11/2017-CT(R) and liable to tax @ 12%?
Facts
The applicant is a sub-contractor engaged by M/s KCC Buildcon Private Limited to perform the shifting of electrical utilities for the construction of the 4-laning of the Barasat-Krishnagar section of NH-34. The applicant contends that this activity is a works contract service related to the construction of a road and should therefore be eligible for the concessional GST rate applicable to road construction projects.
Ruling
| Question | What the authority ruled |
|---|---|
| Applicability of Entry No. 3(iv)(a) of Notification No. 11/2017-CT(R) for shifting of electrical utilities | No, the activity cannot be regarded as a composite supply of works contract by way of construction of road. The ruling specifically denies the concessional rate for this sub-contracted activity. |
The Authority ruled that the applicant's activities cannot be classified as a composite supply of works contract by way of construction of a road under the specified notification. Consequently, the applicant is not entitled to the concessional tax rate of 12% under Entry No. 3(iv)(a).
Reasoning
The Authority reasoned that the applicant is providing services to the main contractor, not the NHAI, and that the scope of work is limited to the shifting of utilities. It determined that while such shifting may be ancillary to the main road construction project, the sub-contracted service itself does not constitute the **construction of a road**. The Authority relied on the definition of 'recipient' under Section 2(93) of the GST Act to establish that the service is provided to the main contractor, and cited the Rajasthan AAR ruling in the case of Gaurish Sharma to support the view that there is **no nexus** between the sub-contracted utility shifting and the main road construction contract.
Provisions relied on
- Section 2(93) of the GST Act
- Section 2(119) of the GST Act
- Section 97(1) of the GST Act
- Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017
For the practitioner
This ruling serves as a **negative precedent** for sub-contractors performing utility shifting work, clarifying that such activities are viewed as independent services rather than integral parts of road construction. It highlights the difficulty in claiming concessional rates for sub-contracted services when the scope of work is limited to utility relocation. Practitioners should note that the Authority strictly interprets the 'construction of road' entry to exclude ancillary utility works performed by sub-contractors.
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/AAR/shree_powertech_advance_ruling.pdf
Legibility of the scan, as read: high.
Prepared 20-10-2026.
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