In Re: M/s Nagaur Mukangarh Highways Pvt. Ltd.
GST
2018 (10) TMI 1146 – AUTHORITY FOR ADVANCE RULING, RAJASTHAN – 2018 (18) G. S. T. L. 652 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, RAJASTHAN – AAR
Dated:- 15-9-2018
ADVANCE RULING NO. RAJ/AAR/2018-19/17
GST
NITIN WAPA AND SUDHIR SHARMA, MEMBER
Present for the applicant: Ms. Khushboo Kundalia and Mr. Madhav Kalani, Authorised Representative
Note: Under Section 100 of the CGST/RGST Act 2017, an appeal against this ruling lies before the Appellate Authority for Advance Ruling constituted under section 99 of CGST/RGST Act 2017, within a period of 30 days from the date of service of this order.
The issue raised by M/s. Nagaur Mukangarh Highways Pvt. Ltd. (hereinafter referred as the applicant also) is fit to pronounce advance ruling as it fails under ambit of the Section 97(2) (a), it is given as under:
(d) Admissibility of input tax credit of tax paid or deemed to have been paid.
Further, the applicant bei
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ate laning of the sections of State highway (hereinafter referred to as Project) on design, build, operate /maintain and transfer (hereinafter referred to as 'DBOT') basis under a contract (hereinafter referred to as 'Project') with Public Works Department (PWD). Government of Rajasthan (hereinafter referred to as 'Authority ).
2. Scope of the Contract:
Under the Contract, the applicant has been engaged as a “Concessionaire' wherein the Authority has granted concession to Construct, Operate and Maintain the Project during:-
a. The construction period shall commence from the appointed date and will end on the COD.
b. A period of 10 years from the (hereinafter referred to as 'DBOT').
c. The applicant shall receive 50% of the project cost (i.e. cost of construction) which shall be paid to the applicant in five equal installments during the construction period on the basis of achievement of milestones i.e. achieving specified percentage of physical progress.
d. The applicant shall re
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to the applicant, Ms Khushboo Kundalia and Mr. Madhav Kalani appeared as representative of the applicant for personal hearing on 10.08.2018 and submitted documents and notifications related to projects. They reiterated the submissions already made in the Advance Ruling Application and requested that the case may be decided at earliest.
5. issues to be decided :
The applicant has sought advance ruling as to whether they are eligible to:
(a) Claim full ITC pertaining to procurement of goods and services for construction of the project during the Construction Period, as the entire revenue received during the said period is subject to GST; and
(b) Claim ITCs pertaining to procurement of goods and services during the O & M period after reversal of ITC as per Section 17(2) of the Central Goods and Services Tax Act, 2017 read with Rule 42 of the Central Goods and Services Tax Rule, 2017 as Annuity Payment received during the said period is exempt whereas 0 & M payments received are subje
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2017-CT (rate) dated 28.06.2017 as amended vide notification No. 32/2017-CT(Rate) dated 13.10.2017.
(iii) The contention of the applicant is tenable because the services provided by the applicant are taxable under SAC 9954 and annuity received by them after completion of work.
(iv) The Entry No 23A inserted vide notification No. 32/2017 ibid in Notification 12/2017-CT (rate) dated 28.06.2017 is not applicable to the applicant.
(v) Entry No 27 and 23A of Notification No. 12:12017 ibid exempts to Toll Fee which was being paid on the spot to access road or bridges or paid as annuity.
(vi) The annuity received by the applicant is liable to tax and cannot be included in entry No. 23A.
7. Findings:
7.1 We have gone through the content of advance ruling application made by the applicant, submission made at the time of personal hearing, and comments of officer concerned and find that the applicant M/s Nagaur Mukangarh Highways Pvt. Ltd is providing 'work contract service' as defined unde
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2017 as Annuity Payment received during the said period is exempt whereas O & M payments received are subject to GST.
7.3 Before deciding the issue, it would be appropriate to appreciate the legal provision 'in this regard It is a fact that the applicant is providing the services of construction of roads and bridges on design, build, operate and transfer (DBOT) basis which is a composite supply as defined under clause 30 of section 2 of the CGST Act, 2017 which reads as under:
“composite (30) supply' means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;
7.4 Further, these supplies are in relation to construction of immovable property like roads and bridges and it can be termed as 'Work Contract' in terms of Section 2(119) of CGST Ac
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l installments along with interest starting from 180 days of COD. Thus the applicant is liable to pay applicable GST on the full value of the project during the construction period of 2 years.
7.6 Section 13 of CGST Act, 2017 specifies time and value of supply of services which is as under:-
13. Time of supply of services-
(1) The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions of this section.
(2) 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 payment, whichever is earlier; or
(c) the date on which the recipient shows
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o awarded the work of Operation & Maintenance of the said project for the period of 10 years, During this period, the applicant will also receive 50% of the project cost, as annuity, alongwith interest. The applicant contended that the said annuity is exempted under entry No. 23A of the Notification 12/2017-CT (rate) dated 28.06.2017. The contention of the applicant is not tenable as entry No 23A ibid pertains to SAC 9967 which is for support services of transport services whereas the services provided by the applicant is classifiable under SAC 9954 which is liable to tax at the applicable rate of GST. In the given circumstances the applicant has to pay GST on full value of cost of project during the period of construction. The annuity received by the applicant is already GST paid during the construction period for which they are also paid interest by the Government.
7.8 Now we come to the main question of the applicant as to whether they are entitled to claim Input Tax Credit in the
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the purposes of his business.
(2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.
(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.
(4) A banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the provisions of sub-
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(ii) for transportation of goods;
(b) the following supply of goods or services or both:-
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;
(ii) membership of a club, health and fitness centre;
(iii) rent-a-cab, life insurance and health insurance except where
(A) the Government notifies the services which are obligatory for an employer to provide to its employees under any law for the time being in force; or
(B) such inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as part of a taxable composite or mixed supply; and
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al consumption;
(h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and
(i) any tax paid in accordance with the provisions of sections 74, 129 and 130.
(6) The Government may prescribe the manner in which the credit referred to in sub-sections (1) and (2) may be attributed.
Explanation. For the purposes of this Chapter and Chapter VI, the expression “plant and machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes-
(i) land, building or any other civil structures;
(ii) telecommunication towers; and
(iii) pipelines laid outside the factory premises.
7.10 The applicant is providing 'work contract service' for construction of road and the issue is to be clarified whether they are restricted to claim input Tax Credit in terms of clause (c) or (d) of sub-sectio
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ods and services after reversing the ITC under Section 17(2) of the CGST Act 2017 read with Rule 42 of the Central Goods and Services Tax Rule, 2017 as Annuity Payment received during the O & M period is exempted and payment received for O&M is subject to GST. As discussed herein above the annuity received by them for the construction of road and bridges is classifiable under SAC 9954 and liable to tax at the applicable rate of GST. The applicant has not spec fled whether they are supplying any other exempted goods and services during the operation and maintenance period. If they are not supplying any exempted goods and services during the O & M period, the provision of section 17(2) of the CGST Act, 2017 are not applicable upon the applicant. The annuity received by the applicant is a payment of the remaining 50% of cost of the project in biannual equal instalments on which the applicant would be paying GST during the construction period. As the annuity so received by the applicant is
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