2018 (9) TMI 545 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2018 (17) G. S. T. L. 65 (A. A. R. – GST) – Levy of GST – operation and maintenance work order given by such Municipal Corporation – Admissibility of ITC (input Credit tax) of purchases against such work order – Determination of responsibility of municipal authority of discharging such GST Liability payable to the contractor – service Contract where labour job Contribute 95% to 98% if Contract Value and 2-3 % as Oil and Lubricant and pertains Purchase to operate the Existing Plant – Pure Services or not?
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Whether the Applicant is exempted from payment of GST on Operation and Maintenance contracts/ work orders entered into by them with Navi Mumbai Municipal (NMMC), Panvel Municipal Corporation (PMG), Municipal Council, Pandharpur (MCP) and City & Industrial Development Corporation of Maharashtra, Ltd. (CIDCO)?
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Whether the Applicant is entitled to Input Credit Tax (ITC), of purchases against such work order and wh
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ceed 25% of value of composite supply. A fact to be noted from the submissions made by the Applicant, is that they themselves were aware that, on implementation of GST, 2017 the said supply of Operation & Maintenance work was taxable as per notification no. 11/2017 dated 28.06.2017 and notification no. 20/2017 dated 22.08.2017. However, the Municipal Corporation has disregarded levying of GST on the said work saying it is exempt and have rejected the claims made by appellant.
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It can be seen from the submissions of the applicant as well as the contracts that along with the services rendered they also supply to the Local Bodies, spares, materials and consumables such as oil, lubricant etc. Hence their services cannot be termed as pure services attracting exemption as per sr.No .3 of under N/N. 12/2017 and the applicant would have to pay the GST on the services provided by them to such Local Bodies – It appears that this ARA has been filed not because the applicant had doubts regard
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racted CGST& SGST @ 9% each with effect from 01.072017 and CGST & SGST @ 6% each with effect from 22.08.2017. Post 25.01.2018, their services would be exempt only subject to the fulfilment of condition that the value of supply of goods does not exceed 25% of value of composite supply. – GST-ARA-04/2017-18/B-28 Dated:- 5-5-2018 – SHRI B.V. BORHADE, AND SHRI PANKAJ KUMAR, MEMBER PROCEEDINGS (under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act ] by KHILARI INFRASTRUCTURE PRIVATE LIMITED, the applicant, seeking an advance ruling in respect of the applicability of GST on: 1) Determination of GST leviable on operation and maintenance work order given by municipal corporations. 2) Admissibility of ITC (input Credit tax
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a registered Civil Contractor, carrying out the business of a. Construction, erection, commissioning of Sewerage treatment plant. b. Operation & Maintenance of Sewerage Treatment and Disposal Plants. as per the Work awarded by various Municipal Corporations / Councils/ Local Authority. 2. During the FY 2016-17 appellant had made the Total Contract Receipts amounting to ₹ 200,89,26,040/-, which included a. ₹ 1,78,11,70,457/- in respect of civil construction contract work for Solid Waste Management and b. ₹ 22,77,55,583/ in respect of Operation Maintenance work for Sewerage Treatment and Disposal Plant. 3. During the year under consideration FY 2017-18 Appellant Company has been awarded work order of Operation & Maintenance contract from various Municipal Corporations and the details are as under: 1. NAVI MUMBAI MUNICIPAL CORPORATION (NMMC); a. Operation & Maintenance of Sewerage Treatment and Disposal Plant at Site Nerul STP Agreement dated 30.11.2017 agai
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n the standard Prescribed under SWM Rule-2000. The Appellate had prepared and submitted the financials bid for the Operation & Maintenance work order considering the old Indirect Tax Laws wherein, Service Tax was exempt as per Notification 25/2012 dated 20.06.2012 entry no. 12. On Implementation of GST, 2017 the said Operation & Maintenance work was taxed as per notification no. 11/2017 dated 28.06.2017 and notification no. 20/2017 dated 22.08.2017. However, the Municipal Corporation has disregarded levying of GST on the said work saying it is exempt under section 243 (W). During the course of discussion with the Municipal Corporation the appellant has submitted the local authority copy of relevant portion of the GST Act, 2017 and also the amended portion, however the local authority have rejected the claims made by appellant. As per discussion with NMMC all such contract related to Operation and Maintenance of STP Plant comes under Rule 243 W and Not Applicable for GST. The se
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e Ref. No. NMNC/E.E. (B)/124/2017 dated 12.12.2017 for Tender vide Ref. No. B-2/ACE/16(01)/2014-15 As per Annexure – 12. e. MUNICIPAL COUNCIL (PANDHARPUR); Comprehensive Contract for Operation & Maintenance of Sewerage Treatment and Disposal Plant at Site PANDHARPUR Agreement dated 25.01.2015 against work order vide Ref. No. OUTNO./PNP/WS/19/15 dated 25.01.2015 for Tender vide Ref. No. OUTNO./PNP/WSS/708/14. As per Annexure – 13. f. PANVEL MUNICIPAL COUNCIL RAIGAD; Comprehensive Contract for Operation & Maintenance of Sewerage Treatment and Disposal Plant at Site PANVEL Agreement dated 09.09.2015 against Letter of Acceptance vide Ref. No. OUTNO./PNP/WS/5233/15 dated 15.09.2015 for Tender vide Ref. No. OUTNO./PNP/ WSS/7/15. As per Annexure -14 II. NAVI MUMBAI MUNICIPAL CORPORATION (NMMC); Daily O & M of Solid Waste Processing Plant (Compost plant) at Site Turbhe SWM dumping yard site Agreement dated 21.08.2017 against Letter of Acceptance vide Ref. No. NMMC/CE/1572/2017 date
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ms of work for Operation & Maintenance as under: As per Annexure – 16 Scope of Work clause no. 2 and section 4 page no. 469 Contract Price clause 32. page no. 491 Taxes & Reimbursement of Tax clause no. 70.2 & 71.1 page no. 448 As per the above work Order of Operation & Maintenance of Sewerage Treatment and Disposal Plant, the major portion of work being labor oriented i.e. 95%) of Sewerage Treatment Disposal Plant and balance 5% consumables are Adhesives, Oil & Lubricants. The Appellate had prepared and submitted the financials bid for the Operation & Maintenance work order considering the old Indirect Tax Laws wherein, Service Tax & VAT was exempt as per Notification no-25/2012 dated entry no. 12. 4. As per the Earlier Indirect Tax Laws i.e. Service Tax (Finance Act,1994) the Operation & Maintenance Service of Sewerage Treatment and Disposal Plant was exempt Under Notification no.25/2012 dated entry no. 12 as per Annexure-3. 5. As per the Goods & S
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st efforts, pursuing the Municipal Corporation/ Councils/Local Authority in connection to levy of GST on the relevant contracts With the appellant during the year. However in spite of repeated reminders the Municipal Corporation/Councils/ Local Authority failed to adhere the same. 03. CONTENTION – AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- Accordingly, the Para-wise comments on the application filed by M/s. Khilari Infrastructures Pvt. Ltd are as follows: Sr. No. 1 to 13.- No Comments. Question -1 -Determination of GST leviable on operation and maintenance work order given by such Municipal Corporation. Comments:- The application and the documents submitted by them have been examined in light of the provisions for Municipal Corporation / of the CGST Act, 2017. Prior to 01.07.2017, their services i.e. operation and maintenance work were exempt from Service Tax vide Notification No. 25/2012 Service Tax dated 20.06.2012. They are now registere
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unicipal authorities that the services under reference are covered by Article 243W of the Constitution and hence exempt from GST does not appear to be correct. As per Not No. 12/2017-Central Tax (Rate) dated with effect from 01.07.2017, pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Govt, State Govt or Union Territory or local Authority or a Governmental Authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243 W of the Constitution or in relation to any function entrusted to a Municipality under Article 243VV of the Constitution are exempt from tax. It can be seen from the submission of the applicant that they use some consumables such as oil, lubricant etc. As such their services cannot be termed as pure services attracting under Not No. 12/2017 and the applicant will have to pay the GST on the services provided by them. However, their services have been e
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t and pertains Purchase to operate the Existing Plant. Comments:- As explained in comments on Question No. 3 above. In view of the above, the application, filed by M/s. Khilari Infrastructures Pvt. Ltd, may be rejected for the period from 01.7.2017 to 24.01.2018. Sr.No. 15:- No Comments as these are facts. Sr.No. 16 to 18: No Comments. 04. HEARING The case was taken up for hearing on dt. 30.01.2018 when Sh. Rohidas Sanap, Chief Financial Officer alongwith Sh. Sidddharth Kheria, (C.A.) appeared and they were orally informed that their application was not specific with respect to contract entered into and their queries are very general queries putting the factual position as per contract entered into before the ARA. In view of this they agreed to submit full details and file revised application with complete details latest by 05.02.2018, otherwise their application was liable to be treated as rejected. In view of this, the applicant has filed fresh application on 05.02.2018. The final he
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discharge such GST Liability payable to the Applicant. The Applicant has submitted that their Company is a registered Civil Contractor, carrying out the business of Construction, erection, commissioning of sewerage treatment plant and Operation & Maintenance of Sewerage Treatment and Disposal Plants work, which is awarded to them by the various Municipal Corporations/Councils/ Local Authority, as mentioned above. For the year under consideration FY 2017-18 they have been awarded work order of Operation & Maintenance contract by various Municipal Corporations, details of which have been submitted by them. As per their submissions the Operation & Maintenance Service of Sewerage Treatment and Disposal Plant was exempt from service tax under Notification no. 25/2012 dated 20.06.2012 entry no. 12 as per Annexure – 3, of the Erstwhile Finance Act, 1994. They have further submitted that all such Contracts related to Operation & Maintenance of Sewage Treatment Plants (STP) and
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and balance 5% pertain to consumables like Adhesives, Grease, Oil and lubricants. Land & Building and Plant & Machinery are owned by NMMC. In this contract it is the applicant's responsibility to run the plant effectively using their own Skill set & Manpower. They have also submitted that, on the implementation of GST, 2017 the said Operation & Maintenance work was taxed as per notification no. 11/2017 dated 28.06.2017 and notification no. 20/2017 dated 22.08.2017. However, NMMC has disregarded levying of GST on the said work saying it is exempt under section Rule 243 (W) of the Constitution of India. Similar work orders have been purportedly received by them from other Local Bodies. They have further cited another work order vide agreement dated 21.08.2017, with NMMC, in respect of Solid Waste Processing Plant (Compost plant) at Site Turbhe SWM dumping yard site, against Letter of Acceptance vide Ref. No. NMMC/CE/1572/2017 dated 19.08.2017 for Tender vide Ref. No.
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/CIDCO/SE(ULWE)/EE(UL-II)/2013-14 detailing terms of work for Operation & Maintenance. Here also they have submitted that as per this work order of Operation & Maintenance of Sewerage Treatment and Disposal Plant, the major portion of work is labor oriented i.e. 95% and balance 5% consists of consumables I.e. Adhesives, Oil & Lubricants. The department has contended that it can be seen from the submission of the applicant that they use some consumables such as oil, lubricant etc. As such their services cannot be termed as pure services attracting exemption under Not No. 12/2017 and they will have to pay the GST on the services provided by them. Under GST law, the Applicant s services attract CGST under Not. No. 11/2017-Central Tax (Rate) dated 28.06.2017 @ 9% with effect from 01.07.2017 and @ 6% with effect from 22.08.2017 vide Notification No. 11/2017-Central Tax dated 28.06.2017 as amended vide Notification No. 20/ 2017-CentraI Tax (Rate) dated 22.08.2017. However, vide E
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cal and electrical equipments which become beyond repair will be done by the operator i.e. the applicant in this case. Ag per para 15.3.1(a) it is the responsibility of the operator to INSTALL HIGH EFFICIENCY LIGHTING SYSTEMS.. As per Para 15.3.1(b) it is the responsibility of the operator to INSTALL CAPACITORS TO REDUCE POWER. As per Para 15.3.1(c) REPAIRING AND REPLACING OLD AND WORN OUT PIPES AND BLOWERS AND COMPRESSORS is the responsibility of the operator. As per Para 15.3.1(c), REPAIRING AND REPLACING OLD AND WORN OUT PIPES AND BLOWERS AND COMPRESSORS is also the responsibility of the operator. As per Para 15.4(b to h), REPLACING DAMAGED PIPES, FITTINGS,VALVES, BEARING, MECHANICAL SEALS, O RING, GASKETS,PUMP IMPELLERS, ETC, by the operator is stated. As per Para 16.2 :- For the work of extension/modification to the sewerage network, improvement to civil structures, etc., the NMMC shall reimburse on the prevailing schedule of rates or the actual cost of procurement by the operator
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or which they have received payments. Under the DETAILED SCOPE OF WORK-OPERATION AND MAINTENANCE OF STP it is mentioned as follows. As per Clause iii, All necessary repairs, preventive and breakdown maintenance, overhaul, replacements, etc. shall be made during the O&M. As per Clause v, the O & M price by the tendered shall include supply of all tools, tackles, spares, oil and lubricants, laboratory chemicals, glassware, chemicals like chlorine, coagulants etc. As per Clause vii, The scope of work shall but not limited to the following items: 'Replacement of electrical, mechanical and electronic equipments which become beyond repair'. 'All the equipment even standby supplied, installed and commissioned by the applicant shall be in operational/ functional condition throughout the O&M period. As per para i page 142 of their submissions, the operator shall replace electrical and mechanical equipments which become beyond repair. As per (j) page 143 under SPARE PARTS
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4.1 (b), the contractor shall not be required to obtain consent for the purchase of materials which are in accordance with the standards specified in the contract. As per Para 8.1, THE CONTRACTOR SHALL PROVIDE ALL SUPERINTENDENCE, LABOUR, MATERIALS, PLANT, CONTRACTOR'S EQUIPMENTS AND ALL OTHER THINGS WHETHER OF A TEMPORARY OR PERMANENT NATURE… As per Para 12.1, THE Contractor shall be deemed to have satisfied himself as to the correctness and sufficiency of the Tender and of the rates and prices stated in the Bill of Quantities, all of which shall, except insofar as it is otherwise provided in the Contract, cover all his obligations under the contract (including those in respect of the supply of goods, materials, plant or services or of contingencies for which there is a provisional sum) and all matters and things necessary for the proper execution and completion of the Works. As per para 37.3, If, at the time……., the materials or Plant are not ready for inspection
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the Contractor to the extent of 90% of the value of such material, worked out on the basis of Schedule of Rates.. In the Price Variation Clause mentioned in paras 70.1 (B) and (C) there is a 'Formula for Materials Component' Component at (B) and there is a separate 'Formula for Petrol, Oil and Lubricant (POL) Component at (C). There are also Price Adjustments for Cement Component, for HYSD/TMT steel component, Structural steel component, CI & DI Pipes, Bitumen. Under the SPECIAL CONDITIONS OF CONTRACT and under the SCOPE OF WORK mentioned in para 2, it is mentioned that The bid is for the work of …………..The work to be carried out…………..shall …………..include all labour, material, tools, plants, ………….. From the above reading of the contracts, copies of which have been submitted by the applicant themselves, it is very clear that their services are not pure services
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which would clearly specify as to what is the correct proportion of services and actual quantity of materials to be used or supplied by the applicant. Hence keeping in mind the provisions of the two contracts mentioned above (since details of other contracts are not forthcoming), it is not difficult to come to a conclusion that the applicant has entered into a contract with the local bodies for both, supply of goods and also supply of materials and therefore there is no question of the same being considered as pure services sontracts. Notification No. 11/' 2017-Central Tax (Rate) dated 28th June, 2017 had notified levy of central tax, on the intra-State supply and as per Sr. No. 3, Heading 9954, (iii) of the said Notification, construction services other than those mentioned at (i) and (ii) of the said Sr. No. 3, Heading 9954 were leviable to tax @ 9%. This Notification was amended by Notification No. 20/2017-Central tax (Rate) dated 22.07.2017, wherein the tax rate was reduced to
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th effect from 22.07.2017. We see that up till 24.01.2018, as per Notification No. 12/2017-Central Tax (Rate), the exemption as per Sr. No. 3 was only in case of pure services. The same is reproduced as under:- Sl.No. Chapter, Section, Heading, Group Service Code (Tarif) Description of Services Rate (per cent.) Condition 3 Chapter 99 Pure Services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union Territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution NIL NIL However on the basis of detailed discussions and findings above, it is very clear that the services provided by the applicant are not pure services and rather involve supply of materials and consumables, the supply wh
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nstitution NIL NIL Here, it is seen that the type of services rendered by the applicant has been exempted with effect from 25.01.2018 subject to fulfilment of certain conditions, Exemption Notification No. 2/2018 Central Tax (Rate) dated 25.01.2018, provided the value of supply of goods does not exceed 25% of value of composite supply. Thus we see that with effect from 25.01.2018, the applicant can avail the benefit of the above said Exemption Notification No.2/ 2018 Central Tax (Rate) dated 25.01.2018 only if the value of supply of goods does not exceed 25% of value of composite supply. A fact to be noted from the submissions made by the Applicant, is that they themselves were aware that, on implementation of GST, 2017 the said supply of Operation & Maintenance work was taxable as per notification no. 11/2017 dated 28.06.2017 and notification no. 20/2017 dated 22.08.2017. However, the Municipal Corporation has disregarded levying of GST on the said work saying it is exempt and hav
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composite supply of goods and services the quantum or value of goods supplied do not exceed 25% of the total value of the value of contract. It can be seen from the submissions of the applicant as well as the contracts that along with the services rendered they also supply to the Local Bodies, spares, materials and consumables such as oil, lubricant etc. Hence their services cannot be termed as pure services attracting exemption as per sr.No .3 of under Noti. No. -12/2017 and the applicant would have to pay the GST on the services provided by them to such Local Bodies. This would answer their query regarding liability to pay GST on composite supply of services/ goods under work orders received from various local bodies. It appears that this ARA has been filed not because the applicant had doubts regarding levy of GST but because the Local bodies have refused to pay them the said GST. With respect to their query' regarding availability of input tax credit on purchases against such
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ods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents title to goods otherwise; (c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under section 39: Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment: Provided further that where recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and ei
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invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier. Subject to the terms and conditions mentioned in Sections 16 to 22 of the CGST Act and Rules 36 to 45 of the CGST Rules, 2017, we are of the opinion that the applicant is Credit for purchases made against the said work orders entered into by them. 05. In view of the extensive deliberations as held hereinabove, we pass an order as follows: ORDER (under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) NO. GST-ARA-04/2017-18/B-28 Mumbai, dt. 05.05.2018 For reasons as discussed in the body of the order, the questions are answered thus – Question -1 -Determination of GST leviable on operation and maintenance work order given by such Municipal Corporation. Answer :- Under GST Act, 2017, their services attracted CGST & SGST @ 9% each with effect from 01.07.2017 and CGST & SGST @ 6% each with effect from 22.08.2
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