GSTAT Agra Restores 18% GST Demand Against Railway Contractor Who Failed to Show Its Services Qualified for the 12% Works-Contract Rate

In brief

The question

1. Whether the construction and related services supplied by the taxpayer to Indian Railways qualified as a composite supply of works contract covered by entry 3(v)(a) of Notification No. 11/2017-Central Tax (Rate), as amended by Notification No. 20/2017, and were therefore taxable at 12%.

The court held

The Tribunal allowed the Department’s appeal, set aside the first appellate authority’s order dated 16 January 2026, and restored the adjudicating officer’s order dated 28 June 2025, holding that the taxpayer had short-paid tax by applying 12% instead of 18% to the general construction services supplied to Indian Railways.

It also directed

The separate finding concerning ₹43,248 in tax on other income was not before the Tribunal for reconsideration.

01Facts

The taxpayer, a registered joint venture, provided construction and related services to North Central Railway during 2019–20, including earthworks, drains, retaining walls, bridges, and signal-related work.

¶ 2

It invoiced ₹12,13,74,088 and paid GST at 12%.

¶ 2

The proper officer considered the services general construction services taxable at 18% and raised a short-payment demand of ₹72,82,446 under Section 74; a separate tax amount of ₹43,248 relating to other income was confirmed by the first appellate authority and was not challenged.

¶ 2–4

The first appellate authority set aside the principal demand.

¶ 1, 5

The State Tax Department appealed to the Tribunal under Section 112, seeking restoration of the original order.

¶ 1, 5

02Issues

i.1. Whether the construction and related services supplied by the taxpayer to Indian Railways qualified as a composite supply of works contract covered by entry 3(v)(a) of Notification No. 11/2017-Central Tax (Rate), as amended by Notification No. 20/2017, and were therefore taxable at 12%.

¶ 6, 8

ii.2. Whether, absent evidence establishing that the services met the requirements for that concessional entry, the taxpayer’s supplies were taxable at the standard rate of 18%.

¶ 9–10

03Law Applied

The Tribunal considered Section 112 of the CGST/UPGST Acts, under which the Department brought the second appeal, and Section 74, under which the original demand was made.

¶ 1, 4–5

It applied Notification No. 11/2017-Central Tax (Rate), as amended by Notification No. 20/2017-Central Tax (Rate), and treated entry 3(v)(a) as providing a 12% rate for qualifying composite supplies of works contract to Railways; other works contract services were treated as subject to the standard 18% rate.

¶ 10

The Tribunal’s stated approach was that classification as general construction services, without evidence showing that the supply qualified as the specified composite works contract, did not establish entitlement to the concessional rate.

¶ 9–10

Provisions in the judgment · 3 · Linked ones open on LawLens

Central Goods and Services Tax Act, 2017 Section 2 Section 74 Section 112

04Reasoning

The Tribunal accepted that the work involved railway infrastructure, including bridges, earthworks, walls, and signal-related work, but held that the nature of the work and the fact that the recipient was Indian Railways did not, by themselves, establish eligibility for the concessional entry.

¶ 8–10

It relied on the invoices’ description of the services as “general construction services” and found that the taxpayer had not provided structural evidence or billing breakups demonstrating that the supplies met the requirements for the 12% rate.

¶ 9–10

It therefore concluded that the first appellate authority had incorrectly treated the railway construction services as qualifying for the concession.

¶ 10–11