2018 (6) TMI 559 – AUTHORITY FOR ADVANCE RULINGS, GUJARAT – 2018 (14) G. S. T. L. 116 (A. A. R. – GST), [2018] 2 GSTL (AAR) 91 (AAR) – Supply of services – Works Contract – determination of time of supply of services – scope of the word 'supply' – Transitional Credit – credit of material bought in pre-GST era – post-implementation situation – Held that:- A contract for any immovable property wherein transfer of property in goods is involved in the execution of such contract fall within the definition of ‘works contract’ – The underground pipeline network created by joining the pipes either by lamination or welding cannot be dismantled without substantial damage and thus cannot be reassembled, therefore the pipeline network so created would be considered as immovable. As the applicant is engaged in the activity of construction of pipeline network which becomes immovable property wherein transfer of property in goods is involved, the said activity falls within the definition of “works c
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avail input tax credit under Section 140(6) of the CGST Act, 2017 and the GGST Act, 2017.
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Ruling:- The work of laying of underground pipeline network falls under the definition of “works contract” provided under Section 2(119) under the CGST Act, 2017 and the GGST Act, 2017. In respect of that part of supply wherein time of supply is on or after the appointed date, Goods and Services Tax is required to be paid.
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Transitional credit – The applicant is not entitled under Section 140(6) of the CGST Act, 2017 and the GGST Act, 2017 to avail input tax credit. – Advance Ruling No. GUJ/GAAR/R/2017-18/3 (In Application No. Advance Ruling/SGST&CGST/2017-18/AR/5) Dated:- 17-1-2018 – Mr. R.B. Mankodi, Member And Mr. G. C. Jain, Member For The Applicant : Shri Soham Mashruwala, CA And Shri Rohit Bodiwala, Partner RULING The applicant submitted that they had bid in a tender issued by the Rajkot Municipal Corporation (RMC) to supply pipes, lay the pipes in desired formation as planned by
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the erstwhile provisions of the Gujarat Value Added Tax Act. The nature of the work of the tender being a works contract, the applicant used to discharge its liability as per the rates specified in the Gujarat Value Added Tax Act without claiming any benefit of the input tax credit on any items purchased (big or small) and used in the work as specified in the tender. 3. The applicant submitted that they had bought pipes for the project of RMC. At the time of purchase, the applicant had paid Central Excise and VAT. Thereafter the applicant had undertaken excavation work whereby trenches are dug in order to lay the pipes. Once the desired level of depth of soil is dug, the work of laying of pipes started. A network of pipes is made by joining the pipes (either by lamination or welding) so that a permanent structure of pipeline network is formed. The inter-connection of the pipes is designed in such a way that the sewage / liquid / water passes through the network without any leakages. O
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work of pipeline Pending and will now be completed in Goods and Services Tax regime 5. In view of the foregoing facts, the applicant raised the following queries :- (A) Does the work executed and invoice to be raised for the pending event of testing and commissioning by the applicant after the implementation of the Goods and Services Tax Act amount to supply, and specifically supply of works contract ? (B) Is the applicant entitled to enjoy proportionate credit worth 10% duty of excise and VAT paid on materials bought vide invoices showing Excise and VAT separately, under the transition provisions so that there is no double taxation i.e. levy of tax on tax is avoided ? 6. The applicant has submitted that the nature of the work is such that an immovable property is created by virtue of the work done by them and unless the specified milestones are completed, the work of the applicant would be incomplete and the property in the goods vests with the applicant. The milestones which are fixe
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ed as a works contract because in pith and substance, the activity is nothing more but continuation of the creation of the immovable property i.e. network of pipelines. They referred to the definition of works contract as provided under Section 2(119) of the CGST Act, 2017 and the GGST Act, 2017 and submitted that the nature of the work executed by them safely leads one to the conclusion that an immovable property is constructed, ipso facto. 8. With respect to second query about the admissibility of the claim of input credit under transition provisions, they referred to Section 140(6) of the CGST Act, 2017 and GGST Act, 2017 and submitted that they are in possession of the duty paid document and the element of Central Excise and VAT can be identified clearly. The recitals of the contract of RMC ensure that a sizeable cost of materials is not released to the applicant lest the project is abandoned half-way. It is submitted that the project being in a semi-finished stage, though physical
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tion for advance ruling and additional submissions made vide letter dated 15.11.2017 at the time of personal hearing. We have also considered the information and views submitted by the Central Excise & GST, Ahmedabad South Commissionerate. 11.1 The definition of works contract has been given under Section 2(119) of the CGST Act, 2017 and GGST Act, 2017 as follows :- (119) works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, 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; 11.2 Thus, a contract for any immovable property wherein transfer of property in goods is involved in the execution of such contract fall within the definition of works contract . 11.3 In the present case, the applicant had undertaken excavation work whereby
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is involved, the said activity falls within the definition of works contract under the CGST Act, 2017 and the GGST Act, 2017. 12.1 As per clause 6(a) of the Second Schedule read with Section 7 of the CGST Act, 2017 and the GGST Act, 2017, the composite supply, namely works contract as defined in clause (119) of section 2 shall be treated as a supply of services. 12.2 The provisions related to determination of time of supply of services are contained in Section 13 of the CGST Act, 2017 and the GGST Act, 2017. As per sub-section 2 of Section 13 ibid, the time of supply of services shall be the earliest of the following dates namely :- (a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or (b) the date of provision of service, if the invoice is not issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of p
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rvice is after implementation of the CGST Act, 2017 and the GGST Act, 2017 are covered by the aforesaid provisions and the applicant is required to discharge Goods and Services Tax liability accordingly. Provisions have been made under sub-section (11) of Section 142 of the CGST Act, 2017 and the GGST Act, 2017 to ensure that the tax is not levied under the existing laws (Chapter V of the Finance Act, 1994 and Gujarat Value Added Tax Act, 2005) as well as under the GST Laws. 13.1 As regards the admissibility of input tax credit on pipes used in pipeline network, the applicant has referred to sub-section (6) of Section 140 of the CGST Act, 2017 and the GGST Act, 2017, which reads as follows :- (6) A registered person, who was either paying tax at a fixed rate or paying a fixed amount in lieu of the tax payable under the existing law shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finish
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rk of Testing and Commissioning of network of pipeline was pending on the appointed date, for which no input in stock was required to be used on or after the appointed date. Therefore, the condition prescribed at clause (i) of sub-section (6) of Section 140 ibid is not fulfilled. Testing and Commissioning of network of pipeline being part of the contract, Goods and Service Tax is leviable, however, since no input / material is required for such Testing and Commissioning of network of pipeline, transitional Input Tax Credit is not allowable. 13.3 In view thereof, the applicant is not entitled to avail input tax credit under Section 140(6) of the CGST Act, 2017 and the GGST Act, 2017. 14. In view of above, we rule as under – RULING (A)The work of laying of underground pipeline network falls under the definition of works contract provided under Section 2(119) under the CGST Act, 2017 and the GGST Act, 2017. In respect of that part of supply wherein time of supply is on or after the appoin
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