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A contractor repairs a customer's factory shed, which is immovable property, and property in the replacement materials passes to the customer in the course of the repair. How is this supply…

Question and options

A contractor repairs a customer's factory shed, which is immovable property, and property in the replacement materials passes to the customer in the course of the repair. How is this supply classified under the CGST Act, 2017?

  1. A composite supply, with the materials as the principal supply

  2. A mixed supply, taxed at the higher of the two rates

  3. A supply of goods, as property in the materials passes

  4. A works contract, treated as a supply of services

Answer and explanation

Correct answer: D - A works contract, treated as a supply of services

Section 2(119) of the CGST Act, 2017 includes in a works contract the repair, maintenance or renovation of immovable property where transfer of property in goods is involved in executing the contract. Paragraph 6(a) of Schedule II treats a works contract as a supply of services, so the transfer of materials does not make it a supply of goods or a composite supply led by goods.

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