In Re: Shri Kailash Chandra, (Mali Construction)
GST
2018 (11) TMI 1349 – AUTHORITY FOR ADVANCE RULING, RAJASTHAN – 2018 (19) G. S. T. L. 537 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, RAJASTHAN – AAR
Dated:- 29-10-2018
AAR No. RAJ/AAR/2018-19/22
GST
NITIN WAPA AND HEMANT JAIN MEMBER
Present for the applicant: Shri Yash Dhadda, CA, (Authorized 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 Shri Kailash Chandra, (Mali Construction), situated at Mali Vas, Maandava, Mandwa, Sirohi, Rajasthan 307001 (hereinafter the applicant) is fit to pronounce advance ruling as it falls under ambit of the Section 97 (2) (a) (e) which is as given under:
a. Classification of any goods or services or both;
e. Determination of the liabil
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odel and O&M work. That the activities under ESCO model and O & M contract are so closely linked in a manner that they form a single indivisible supply. The driving factors are:
* A single tender shall be floated for Operation and Maintenance of Fluoride Control Project on ESCO Cum O&M Contract where the preamble of scope specifies that the contract combines ESCO model and O&M work.
* The nature of contract is such that initial activities under ESCO model is the main service and the other services under O&M contract combined with such service are in the nature of ancillary services which help in better operation of main activities under ESCO model and make the model successful.
c. Thus, based on above facts and concept such contract shall be a single supply and cannot be treated as distinct supplies. Since all the conditions of composite supply are satisfied, it is a composite supply.
d. Further, since composite supply of works contract has been specifically classified as supply
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applicant shall be responsible for painting, color/ white washing, distempering etc. to the pumping station building, thrice during the entire contract period.
Transmission Pipelines
The contractor shall be responsible for Patrolling, operation and maintenance of the pipelines, repairing of leakages of pipelines, replacement of burst pipes, repairing of appurtenances of pipelines like air valves, scour valves air vessels system, intermediate OHSR (for vacuum filling system), pressure gauges, joints etc.
Switchyards
He shall be responsible for replacement of transformers if required according to year 2027 designed capacity of pump sets. He shall also be responsible for painting, color/ white washing, distempering etc. to the switchyard stuff thrice during the entire contract period.
Storage Tanks (CWR)
He shall also be responsible for painting, color/ white washing, distempering etc. to the CWR, compound wall, store etc thrice during the entire contract period.
Headworks Campus
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ting of all permanent structures like pumping station building etc. are involved in the contract.
j. Based on above facts and the intent of the proposed activity, it is implied that the given work is a contract for improvement of the pumping system under the Fluoride control project, wherein transfer of property in goods in the form of new pumping machinery and mechanical/electrical equipment shall be involved in the execution of such contract.
k. That Works contract in itself is a composite supply in which construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning etc are involved along with transfer or property in goods.
l. Now whether a supply is a works contract or not is dependent on whether the plant or device or property is a movable or immovable property. To decide whether a property is movable or immovable, the given terms have not been defined under the Act and hence th
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as moveable and will, therefore, not be excisable goods.
p. Further, such a contract can amount to works contract in GST only if the improvement is of any immovable property. Taking references from the concepts evolved from the precedents, it is understood that the properties for which improvement works has been assigned like pump houses, storage tanks, headworks campus etc. cannot be moved from one site to another. All the components of the pumping system are erected at the prescribed location and permanently attached to the earth and they cannot be dismantled and reassembled as such dismantling may cause substantial damage to the system and its components.
Thus, according to applicant the property of improvement is an immovable property and thus the given work should be treated as works contract.
2. OUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT
Whether the activity of O & M of Fluoride control project on ESCO Model and O & M work supply of goods or supply of services and what
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rvices. Now works contract service in itself is a composite supply. The same has been defined under Schedule-Il under Entry 6 which is read under:
“6. Composite supply
The following composite supplies shall be treated as a supply of services, namely:
(a) works contract as defined in clause (119) of section 2; and
(b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration.”
3. The terms and scope of the contract combines ESCO Model and O&M work. That the activities under ESCO model and O&M contract are so closely linked in a manner that they form a single indivisible supply. The driving factors are:
* A single tender is being floated for Operation and Maintenance of Fluoride Control Project on ESCO Cum O&M Contract in which preamble of s
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mp sets or as per site condition. The supply and installation of new pumping machinery and other equipments shall be done as per best engineering practice.
b. The operation and maintenance work shall be carried out of all the electrical and mechanical instruments, pumping machinery etc.
c. The pumping station and its surrounding shall be kept clean and in dry condition, properly ventilated and illuminated. For the purpose of illumination, replacement of fitting/ fixtures shall be done by the contractor, if required.
d. He shall be responsible for painting, color/ white washing, distempering etc. to the pumping station building, thrice during the entire contract period.
e. Transmission Pipelines
The contractor shall be responsible for Patrolling, operation and maintenance of the pipelines, repairing of leakages of pipelines, replacement of burst pipes, repairing of appurtenances of pipelines like air valves, scour valves air vessels system, intermediate OHSR (for vacuum filling sys
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d remote monitoring.
O&M work
The scope of work of O&M contract includes operation and maintenance of rising mains of RWSS/Clusters, OHSR and water treatment plant at Baghera.
5. It is understood based on the scope of work detailed above that ESCO model requires improvement of the whole water supply system involving pump houses, pumping stations, transmission lines, switchyards, storage tanks and headwork campus. Re-modelling of pump foundation and extension of pump house, replacement of fittings/ fixtures and painting of all permanent structures like pumping station building etc. are involved in the contract.
6. Based on above facts and the intent of the proposed activity, it is implied that the given work is a contract for improvement of the pumping system under the Fluoride control project, wherein transfer of property in goods in the form of new pumping machinery and mechanical/ electrical equipment shall be involved in the execution of such contract.
7. That Works contract in
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earth which is temporary in nature or can be shifted from part of earth to another without causing substantial damage to it cannot be treated as immovable property.
11. On the given issue, CBEC has also clarified in its circular number 58/ 1/2002-CX dated 15/ 1/2002 where in para (e) it was clarified that;-
If items assembled or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items involved not be considered as moveable and will, therefore, not be excisable goods.
12.According to definition of works contract under GST regime, the supply of goods and services are done by the supplier simultaneously which is for immovable property. Hence in works contract supply of goods and services together is compulsory.
Thus, based on above facts and concept we find that the contract shall be a single supply and cannot be treated as distinct supplies. Since all the conditions of composi
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nt or a local authority and the supply is by way of an activity in relation to functions entrusted to Municipality under Article 243W of the Constitution then no GST is applicable.
14. The activities entrusted to the Municipality under Article 243W of the Constitution of India and listed under Twelfth Schedule are enumerated as under;
[Article 243-W]
1. Urban planning including town planning.
2. Regulation of land use and construction of buildings.
3. Planning for economic and social development.
4. Roads and bridges.
5. Water supply for domestic, industrial and commercial purposes.
6. Public health, sanitation conservancy and solid waste management.
7. Fire services.
8. Urban forestry, protection of the environment and promotion of ecological aspects.
9. Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded.
10. Slum improvement and up gradation.
11. Urban poverty alleviation.
12. Provision of urban amenities and facili
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2017-CT (Rate) dated 28.06.2017, as amended from time to time.
On perusal of said Notification under S. No. 3(iii), for schedule of rate of Tax on works contract Services, following is mentioned:-
Heading 9954 (Construction services)
CGST Rate %
SGST Rate %
IGST Rate %
Remarks
(iii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of, –
(a) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);
(b) canal, dam or other irrigation works;
(c) pipeline, conduit or
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