2018 (10) TMI 1146 – AUTHORITY FOR ADVANCE RULING, RAJASTHAN – 2018 (18) G. S. T. L. 652 (A. A. R. – GST) – Input Tax Credit – taxes paid on procurement of goods and services during the Construction period – work contract service – applicant is of the view that it is eligible to claim ITC of taxes paid on procurement of goods and services during the O & M period after reversal of input tax credit as per Section 17(2) Of the CGST Act read with Rule 42 of the CGST rules.
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Whether appellant is eligible to 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 CST? – Held that:- The applicant is a supplier of works contract services for construction of an immovable property and goods and services received by them for construction of immovable property are not owned and capitalised by them, hence restriction contained under clause (c) & (d) ibid is
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d goods and services during the operation and maintenance period. If they are not supplying any exempted goods and services during the O & M periods the provision of section 17(2) of the CGST Act, 2017 are not applicable upon the applicant – The annuity received by the applicant isa payment of the remaining 50% of cost of the project in biannual equal installments on which the applicant would be paying GST during the construction periods. As the annuity so received by the applicant is taxable, there is no need to take apportioned credit under section 17(2) of the CGST Act, 2017.
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Ruling:- The applicant is rendering taxable services during the construction of roads which is liable to tax; hence they are entitled to claim full ITC under the provisions of section 16(1) of the CGST Act. 2017.
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The Applicant is entitled to claim ITC on supplies of goods and services or both procured for use in outward supply of O & M service purpose, as they are paying GST on 100 percent of the am
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dings were passed by any authority. Based on the above observations. the application is admitted to pronounce advance ruling. 1. SUBMISSION OF THE APPLICANT: (a) The Applicant also having Goods and Service Tax (GST) Registration Number 08AAFCN4743H1ZC has been engaged as a Concessionaire wherein the Public Works Department (PWD), Government of Rajasthan has granted concession to construct, operate and maintain the project during the Construction Period which shall commence from the appointed date and will end on Commercial Operation Date (COD) and operate and maintain it for further period of 10 years from the COD. (b) The applicant is a company incorporated as a Special Purpose Vehicle (SPV) and registered under the provisions of Companies Act, 2013 for the purpose of undertaking two-lining/intermediate 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
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and payable from the 180th day of COD. e. The applicant shall also receive Pi-annual payments towards O & M expenses calculated at a specified percentage of the project cost during the O & M period (hereinafter referred to as O &M Payments ) 3. The applicant s contention is that- 3.1 The applicant is of the view that it is eligible to avail full input tax credit (hereinafter referred as ITC) of taxes paid on procurement of goods and services during the Construction period. 3.2 The applicant is of the view that it is eligible to claim ITC of taxes paid on procurement of goods and services during the O & M period, after reversal of input tax credit as per Section 17(2) of the COST Act read with Rule 42 of the CGST rules. 4. Personal Hearing (PH) In the matter, personal hearing was given 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 relate
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ded by the applicant is classifiable under SAC 9954 i e. composite supply provided to Central Government or any other local body for construction of civil structure. The Services by way of access to a road or a bridge on payment of annuity (SAC 9967) has been exempted under Notification 12/2017-CT (rate) dated 28.06.2017 by inserting entry No 23A vide notification No. 32/2017-CT(Rate) dated 13.10.2017. The Jurisdiction Officer is of the view that: (i) The construction of Roads and Bridges classifiable under SAC 9954 are liable to tax hence they are eligible to avail input tax credit on all goods and services used in the said construction. (ii) The applicant s contention that they are is not liable to pay tax for payment of annuity to access a road or a bridge (SAC 9967) vide entry 23A of Notification 12/2017-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
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D and the applicant, under which total length 397 KM road in the state of Rajasthan is to be augmented on design, build, operate and transfer (DBCDT) basis which shall be financed by the Applicant who shall recover its investment and cost through Annuity Payments and O&M payment to be made as per terms and condition set forth. 7.2 The applicant have sought the advance ruling as to (a) whether they are entitled to claim full Input Tax Credit on goods and services used for construction of the project during the construction period and (b) whether they are entitle to 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 O & M payments received are subject to GST. 7.3 Before deciding the issue, it would be appropriate to appre
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ce, 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: 7.5 The applicant has been awarded work contract vide agreement dated 3.3.2017 on Private Pubic Partnership (PPP) basis in which the applicant have to invest 60% of cost of the project. The project is to be completed within 2 years. The applicant shall receive 50% of the project cost (i e cost of construction) during the construction period on the basis of achievement of milestones i.e. achieving specified percentage of physical progress. Thus, public share of 50% will be paid to the applicant during completion of the project. The applicant s share of 50% will be paid in 5 equal biannual 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
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n excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice relating to such excess amount. Explanation.-For the purposes of clauses (a) and (b)- (i) the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment; (ii) the date of receipt of payment shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his bank account, whichever is earlier. in view of the above the applicant is liable to pay tax at the time of issue of invoices or receipt of the payment whichever is earlier 7.7 The applicant is also 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 contend
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o such conditions and restrictions as may be prescribed and in the manner specified in section 49. be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person 7.9 Section 17 of the CGST Act, 2017 is related to apportionment of credit and blocked credit, Section 17 reads as under: 17. Apportionment of credit and blocked credits: 17. (1) Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to 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 Serv
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d shall not be withdrawn during the remaining part of the financial year: Provided further that the restriction of fifty per cent. shall not apply to the tax paid on supplies made by one registered person to another registered person having the same Permanent Account Number. (5) Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (a) motor vehicles and other conveyances except when they are used- (i) for making the following taxable supplies, namely:- (A) further supply of such vehicles or conveyances ; or (B) transportation of passengers; or (C) imparting training on driving, flying, navigating such vehicles or conveyances; (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 s
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r supply of works contract service; (d) goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Explanation.-For the purposes of clauses (c) and (d), the expression construction includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property; (e) goods or services or both on which tax has been paid under section 10; (f) goods or services or both received by a non-resident taxable person except on goods imported by him; (g) goods or services or both used for personal 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 t
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are not owned and capitalised by them, hence restriction contained under clause (c) & (d) ibid is not applicable for the applicant. 7.11 in the given facts and circumstances; we agree with the contention of the applicant for the first question that they are entitled to claim full ITC during the construction period. The applicant is paying applicable GST on full value of the project and they are not supplying any exempted goods and services during the construction period of 2 years, therefore they are entitled to claim full ITC paid on all eligible goods and services: 7.12 We do not agree with the contention of the applicant in respect of second question that they are entitled to claim ITC on procurement of goods 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 discu
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