2018 (5) TMI 964 – AUTHORITY FOR ADVANCE RULINGS, WEST BENGAL – 2018 (13) G. S. T. L. 217 (A. A. R. – GST), [2018] 2 GSTL (AAR) 67 (AAR) – Levy of GST – Works contract / composite contracts – inclusion of freight in the value of supply – activity of supply of materials and allied services for erection of towers, testing and commissioning of transmission lines and setting up sub-stations collectively called the Tower Package. – The applicant raises separate freight bills on the contractee as per the rate schedule – applicant raises separate freight bills on the contractee as per the rate schedule annexed to the Second Contract – Section 97 (2)(a) & (e) of the CGST / WBGST Act, 2017 – whether applicant is liable to pay tax on such freight bills?
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Held that: – It is immediately apparent that the First Contract cannot be executed independent of the Second Contract. There cannot be any ‘supply of goods’ without a place of supply. As the goods to be supplied under the First Contract in
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a component and not a separate and independent identity, and GST is to be paid at 18% on the entire value of the composite supply, including supply of materials, freight and transportation, erection, commissioning etc. – Case Number 07 of 2018 Dated:- 11-5-2018 – Mr. Vishwanath, Member And Mr. Parthasarathi Dey, Member RULING 1. The Applicant is stated to be a supplier of materials and allied services for erection of towers, testing and commissioning of transmission lines and setting up sub-stations collectively called the Tower Package. His question is related to contracts obtained mainly from M/s Power Grid Corporation of India (hereinafter the contractee). The contractee awards the Applicant contracts for supply of Tower Packages split up into two separate sets of contracts – one for supply of materials at exfactory price (hereinafter the First Contract), and the other for supply of allied services like survey and erection of towers, testing and commissioning of transmission lines
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port agency (hereinafter the GTA) or engaged in insurance business. He will, according to the application, arrange such services and pay the GST as applicable on the consideration paid to the suppliers of such services. His service to the contractee for inland/local transportation, the applicant argues, is exempt under the GST Act. He refers to Notification No. 9/2017 – IT (Rate) dated 28/06/2017, which, according to him, grants exemption on transportation service provided by an entity other than GTA. Since the applicant is not a GTA, his supply of transportation service, he claims, is exempt vide the above notification. 4. Before dealing with the above argument, it needs to be clarified that reference to a notification under the IGST Act should be contract specific, where an inter-state supply is taking place. In this application general nature of a supply is being dealt with rather than the place of any particular supply. Moreover, West Bengal Authority for Advance Ruling has no mand
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ncillary services like in-transit insurance, which are included in the freight bills the contracts referred to above need to be examined. 7. The First Contract includes ex-works supply of all equipment and materials. The scope of the work includes testing and supply of transmission line towers, spares and accessories thereof, and all other materials required for successful commissioning of the transmission line. 8. The Second Contract includes all other activities required to be performed for complete execution of the tower package. The scope of the work includes transportation, in-transit insurance, loading/unloading and delivery of the goods to the contractee s site; detailed survey including route alignment, profiling etc; classification of foundations for the towers and casing of foundations based on the drawing supplied by the contractee; erection of the towers; dismantling of the existing 400kv transmission line; stringing of power line crossing section under live line condition;
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such interdependence of the two contracts. Although awarded under two separate contract agreements, clauses under both of them make it abundantly clear that notwithstanding the break-up of the contract price, the contract shall, at all times, be construed as a single source responsibility contract and the Applicant shall remain responsible to ensure execution of both the contracts to achieve successful completion and taking over of the facilities. Any breach in any part of the First Contract shall be treated as a breach of the Second Contract, and vise versa. It is expressly understood that any default or breach under the Second Contract shall automatically be deemed as a default or breach of this First Contract also and vice-versa, and any such default or breach or occurrence giving the contractee a right to terminate the Second Contract , either in full or in part, and/or recover damages there under. 11. The two contracts are, therefore, linked by a cross fall breach clause that spe
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defines satisfactory performance of the First Contract (supply of goods) as the time when the goods so supplied are installed and finally commissioned in terms of the Second Contract. In other words, the First Contract cannot be performed satisfactorily unless the goods have been transported and delivered to the contractee s site, applied for erection of towers, the transmission lines laid, tested and commissioned in terms of the Second Contract. The two promises – supply of the goods and the allied services – are not separately enforceable in the present context. The recipient has not contracted for ex-factory supply of materials, but for the composite supply, namely works contract service for construction of the Tower Package. 13. The price components of both the First and the Second Contracts, including that for transportation, in-transit insurance etc are to be clubbed together to arrive at the value of the composite supply of works contract service as discussed above, and taxed at
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