GST Rate on Loading of Ballast into Railway Wagons: Karnataka AAR Clarifies Classification Under SAC 996719
Background and Context
A registered partnership firm engaged in executing infrastructure and civil works for Indian Railways approached the Karnataka Authority for Advance Ruling (AAR) seeking clarity on the applicable GST rate for a specific activity — loading of ballast stacked alongside railway tracks into railway wagons using JCB loaders. The ruling, bearing Order No. KAR.ADRG/42/2026 dated 29/07/2026, delivered important findings on the classification of this service and settled the question of whether it could be bundled with the supply of ballast for a lower rate of taxation.
This ruling holds significance for contractors, subcontractors, and firms engaged in railway infrastructure works, as it draws clear lines between composite supply, works contract, and independent taxable service under the CGST Act, 2017.
Profile of the Applicant and Nature of Activities
The applicant, M/s S.K. Swamy and Company, a partnership firm holding GSTIN 29AAPFS7533P1Z4, is registered under both the Central Goods and Services Tax Act, 2017 and the Karnataka Goods and Services Tax Act, 2017. The firm carries out a variety of works for Indian Railways, including:
- Construction of rail under bridges
- Construction of tunnels
- Supply and stacking of ballast
- Earthwork
- Subcontracting of related works
The specific activity in question involved deploying JCB loaders to lift and load ballast — already stacked adjacent to railway tracks — into railway wagons stationed on the tracks, awaiting loading before onward movement by the Railways.
The Core Question Before the Authority
What is the applicable GST rate for loading of ballast stacked adjacent to the railway tracks into railway wagons stationed on the track, using JCB loaders?
The application was admitted under Section 97(2)(e) of the CGST Act, 2017 as it pertained to the determination of tax liability on goods or services or both.
Applicant's Contention
The firm argued that since over 70% of its works contracts with Indian Railways pertained to the supply of ballast — which attracts GST at 5% — the loading charges billed for loading ballast into railway wagons should also be taxed at 5% under the GST Act, 2017. In other words, the applicant sought to treat the loading activity as part of the dominant supply of ballast, thereby attracting the same concessional rate.
During the personal hearing conducted on 20.05.2026, the authorised representative Shri B.K. Srinivas, Advocate, reiterated these contentions and requested the Authority to pronounce an advance ruling under Section 98 of the CGST Act, 2017 read with corresponding provisions of the Karnataka GST Act.
Analysis by the Authority
Step 1: Is the Activity a Works Contract?
The Authority began its analysis by examining whether the loading activity could be classified as a works contract under Section 2(119) of the CGST Act, 2017.
Section 2(119) defines "works contract" as:
"a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, maintenance, repair, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract."
For a supply to qualify as a works contract, the following three conditions must be cumulatively satisfied:
- The activity must fall within the enumerated categories — construction, erection, installation, repair, renovation, alteration, commissioning, etc.
- Such activity must be undertaken in relation to an immovable property
- There must be a transfer of property in goods during the execution of the contract
The Authority examined the facts and concluded: