2018 (12) TMI 533 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – TMI – Exemption from GST – supply of transportation services – The Applicant is engaged in the work of Supply, Laying and Terminating of 220kV U/G cables package to the recipient. – Sl. no. 18 of the Notification No. 12/2017 – Central Tax (Rate) dated 28th June, 2017 – composite supply or not – Held that:- In the present application the applicant has stated and claimed that that they are engaged in the work of supply, laying and terminating of 220 KV U/G cables package to the recipient and the engagement comprises of two separate agreements with respect to supply of goods and services – also, the applicant in their application has clearly stated that each of the contracts referred above consists of a ‘Cross Fall Breach Clause’ deeming any breach in either of the contract would be a breach of the other contract as well and would provide the recipient with an adsolute right to terminate both the contracts or claim damages.
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
) dated 28.06.2017 & artificial bifurcation of contracts & scope of work as claimed by the applicant to go out of the scope of correct tax liability is not legal and proper.
–
Ruling:- The supply of transportation services, rendered by the Applicant, will not be exempt from the levy of GST in terms of Sl. no. 18 of the Notification No. 12/2017 – Central Tax (Rate) dated 28th June, 2017 – GST-ARA-63/2018-19/B-134 Dated:- 3-11-2018 – 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 Cable Corporation of India Limited, the applicant, seeking an advance ruling in respect of the following issue. Whether the supply of transportation services, ren
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ji Vallabhdas Marg, Ballard Estate, Mumbai, Maharashtra 400001, is a leading manufacturer and distributor of a wide range of power and control cables in India. 2. The Applicant was registered under the erstwhile tax regime, and was discharging excise duty, service tax and value added tax (VAT) on the manufacture, on commission and sale of the products, as applicable. 3. Under the current regime, the Applicant is registered as per the provisions of the GST Laws. 4. The Applicant is engaged in the work of Supply, Laying and Terminating of 220kV U/G cables package to the recipient. The engagement comprises of two separate agreements with respect to the supply of goods and services envisaged, which are as follows – a) A supply of goods contract regarding the engineering, manufacturing, supply and type testing of Cable Package-C ( Goods ); b) A Services Contract for Cable Package-C (which includes Detailed Route Survey, Planning, Transportation, Insurance, Delivery at site, Unloading, Handl
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
herewith as Exhibit-B. 7. Notification No. 12/2017 – Central Tax (Rate) provide for a list of services, supply of which shall be exempt from the levy of GST. One of such services so specified is that of transportation of goods services made by a supplier other than a GTA or courier agency. 8. In the light of the same, the question which is arising is whether the supply of transportation services, being rendered by the Applicant under the contract for services, will be exempt from levy of GST in terms of Sl. no. 18 of the Notification No. 12/2017 – Central Tax (Rate) dated 28th June, 2017 9. Under the said factual scenario, the Applicant requests the Hon ble Maharashtra Authority for Advance Ruling to issue a ruling on the following question (A) Whether the supply of transportation services, rendered by the Applicant under the aforesaid facts or circumstances will be exempt from the levy of GST in terms of Sl. no. 18 of the Notification No. 12/2017 – Central Tax (Rate) dated 28th June,
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
rier agency, from the levy of GST. The relevant portion maybe extracted as follows: Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent.) Condition 18 Heading 9965 Services by way of transportation of goods (a) by road except the services of- (i) a goods transportation agency; (ii) a courier agency; (b) inland waterways Nil Nil C.2 In other words, the Applicant shall be eligible to claim exemption from the levy of GST in relation to such transportation services supplied by it under the contract for services, vide the above discussed Notification, provided it is neither GTA nor a courier agency. C3. Now, GTA has been defined in the Explanation to Sl. no 9 and 11 of Notification No. 11/2017 dated 28th June, 2017 as follows: goods transport agency means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called. C.4 In the instant case, Applicant is engaging a GTA to und
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
d be squarely covered by Sl. No. 18 of the Notification No. 12/ 2017 – Central Tax (Rate). Thus, the Applicant shall be eligible to claim exemption from the levy of GST in relation to such transportation services supplied by it under the contract for services. Transportation charges collected from the customer is a principal supply in itself. C.6 The contract of services entered between the Applicant and the recipient contemplates separate consideration for the supply of the following services: a. Transportation and Insurance charges; b. Installation charges; and C. Training charges C.7 Now as per the above discussed Notification, the exemption available is only with respect to the supply of transportation of goods services by a supplier, not being a GTA or courier agency, from the levy of GST. Thus, for determining the applicability of the notification, it is to necessary to examine whether all the supply of services provided for in the services contract will constitute a composite su
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
upply forming part of that composite supply is ancillary; C.11 Thus, a combined reading of the definition of composite supply and principal supply indicates that a composite supply has only one principal supply. If a particular contract has more than one principal supplies, the supply under the said contract will cease to be composite supply. C.12 Further, there is no strait-jacket formula to determine as to what constitutes a composite supply . The determination as to whether a supply constitutes a composite supply or separate supplies is very subjective and is required to be determined on the basis of the facts and circumstances of each case. C.13 In the light of the above, reference may be made to the observations of the Supreme court in cases to get some guiding principles. The Court, in the case of State of Madras vs Gannon Dunkerley and Company (Madras) Ltd [2015 (330) ELT 0011 SC] = 1958 (4) TMI 42 – SUPREME COURT OF INDIA, while extensively discussing the divisibility of contra
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
Industries Limited v. Director of Income Tax, Mumbai reported [2007 (6) STR 3 (SC)] = 2007 (1) TMI 91 – SUPREME COURT. The contract under consideration was a turnkey agreement between the parties which separately provided for the offshore supply of goods and service, onshore supply of goods and services and the services of construction and erection. It was held by the Hon ble Supreme Court that very fact that in the contract, the supply segment and Service segment have been Specified in different parts of the contract is a pointer to show that the liability of the Appellants thereunder would also be different. C.15 In the light of the above observations, the following points maybe noted with respect to the instant scenario: a. The supply of services under consideration are mutually exclusive and independent and are not intrinsically linked to each other in any manner. b. The services contract provides for supply of transportation services, installation Services and testing services al
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
linked with each other. Also, while the installation and testing services are provided by the Applicant itself, the transportation services are being sub-contracted by the Applicant. C.17 Thus, in the light of the above, it is submitted that the supply of services envisaged under the services contract are distinct and independent. The fact that a single contract provides for all the supply of services, cannot be a conclusive indicator of the supplies constituting a composite supply . The fact that the contract envisages different considerations for each supply, it is indicative of the parties intention to consider each of them to be separate and independent C.18 Further, it is pertinent to note that even though the contract envisages a single consideration for transportation and insurance services, the Applicant is charging majorly for the transportation services only. The economic reality of the supply is such that the Applicant has a common insurance cover for all such transportation
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
CANT S UNDERSTANDING. Questions D.1 Whether the supply of transportation services, rendered by the Applicant under the contract for services, will be exempt from the levy of GST in terms of Sl. no. 18 of the Notification No. 12/ 2017-CT (Rate) dated 28.06.2017. Applicants understanding D.2 As explained in the above para C, the Applicant is making an independent supply of transportation of goods service. Further, it is neither a GTA transportation agency nor a courier agency and thus is eligible to claim exemption from levy of GST under Notification No. 12/2017 dated 27.06.2017. 03. CONTENTION – AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- Please refer to letter No. NSK-II Div/29/T-II/2-17-18 dated 25.09.2018 the above subject wherein Application for Advance Ruling filed by M/s. Cable Corporation of India Ltd. (M/s CCL) before the Member (CGST & SGST) of the Advance Ruling Authority, Maharashtra, Mumbai was forwarded. 2. M/s Cable Corporat
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ants exemption on transportation service provided by an entity other than GTA. As the applicant is not GTA, his supply of transportation service, he claims, is exempt vide the above notification. In this case as the M/s CCL is hiring the service of GTA therefore, he is the recipient of such services and not a supplier thereof, The question of the Applicant providing transportation service therefore is not correct. (iii) To decide the issue of taxability of the consideration payable under the Second Contract for inland/local transportation and ancillary services like in-transit insurance, which are included in the freight bills the contracts referred to above needs to be examined. The First Contract includes ex works supply of all equipments and materials. The scope Of the works includes testing and supply of Cable Package required for Successful commissioning. The second contract includes all other activities required to be performed for complete execution of the Cable package. The sco
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ts. Although awarded under two separate contract agreements, clauses under both them make it abundantly clear that notwithstanding the break up of the Contract Price, the contract shall, at all times, be construed as a single source responsibility and the Applicant shall remain responsible to ensure execution of both the contracts to achieve successful completion. Any breach in any part of the First Contract shall be treated as a breach of the Second Contract, and vice versa. The two contracts are, therefore, linked by a cross fall breach clause deeming that any breach in either of the contracts to be a breach of the other contract as well, providing the recipient with an absolute right to terminate both the contracts or claim damages. The cross fall breach clause , settles unambiguously that supply of goods, their transportation to the contractee s site delivery and related services are not separate contracts, but only form parts of an indivisible composite works contract supply, as d
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
serial No.18 of the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. 6. The above view is supported by the following decisions of Advance Ruling Authorities of Maharashtra and West Bengal. (1) Maharashtra Authority for Advance Ruling has decided the application filed by Shri Dinesh Kumar Agarwal, Mumbai whether transportation charges received by the applicant are liable to GST, especially when the applicant is not a goods transport agency (GTA). Maharashtra Authority for Advance Ruling vide Order No. GST- ARA-36/2017-18/B-43 dated 04.06.2018 = 2018 (7) TMI 1691 – AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA answered in the affirmative that the same is liable to tax as a works contract as per the provisions of Section 2(119) of the GST Act. (ii) The Authority for Advance Ruling under GST, West Bengal vide Order in case no.7/2018 dated 11.05.2018 in the case of EMC Ltd. [2018 (13) GSTL 217 ( A.A.R.-GST) = 2018 (5) TMI 964 – AUTHORITY FOR ADVANCE RULINGS, WEST BENGAL ruled that
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
issions for admission of application . Jurisdictional Officer was not present during the hearing. The application was admitted and called for final hearing on 19.09.2018, Sh. Chaitanya Bhatt, Advocate along with Ms. Meghna Mohpatra, Advocate appeared and made detailed oral and written contentions. Jurisdictional Officer, Sh. Pradip Zode, Supdt., Division – II, Nashik CGST & Central Excise Commissionerate appeared and stated that they have received the documents and application very late and therefore be granted 20 days time to make their submissions and made written submissions. 05. OBSERVATIONS We have gone through the facts of the case, oral & written submissions made by the applicant as well as the jurisdictional officer & the applicable provisions of the GST laws in this regard. We find that the applicant is a leading manufacturer & distributor of a wide range of power and control cables in India. We find that in the present application the applicant has stated and
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
rovide the recipient with an adsolute right to terminate both the contracts or claim damages. In view of these facts we find that the applicant has raised the question as under:- Whether the supply of transportation services, rendered by the Applicant, will be exempt from the levy of GST in terms of Sl. no. 18 of the Notification No. 12/2017 – Central Tax (Rate) dated 28th June, 2017 . We also find from the facts and documents put up before us by the applicant as well as the jurisdictional officer that, the applicant is not transporting the goods but is hiring the services of a GTA to undertake the transportation of goods by road & is claiming to be discharging GST liability under Reverse Charge Mechanism and in such a situation he is a recipient of such service and is not a supplier thereof. Further, from the submissions made before us, we clearly find that the first contract referred to above includes ex-works supply of all equipments and materials which includes testing and supp
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
nt and/or installation at the site, the place of supply shall be the location of the goods at the time when movement of the goods terminates for delivery to the recipient or moved to the site for assembly or installation refer to Section 10(1)(a) & (d) of the IGST Act, 2017). The First Contract however does not include the provision and cost of such transportation and delivery. It, therefore, does not amount to a contract for supply of goods unless tied up with the Second Contract. The First Contract has no leg unless supported by the Second Contract. It is no contract at all unless tied up with the Second Contract. The Contractee is aware of such interdependence of the two contracts. Although awarded under two separate contract agreements, clauses under both them make it abundantly clear that notwithstanding the break up of the Contract Price, the contract shall, at all times, be construed as a single source responsibility and the Applicant shall remain responsible to ensure execu
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
the goods & allied services are not separately enforceable The recipient has not contracted for ex-factory supply of materials, but for the composite supply, namely Works Contract for Supply, Laying and Terminating or 220KV U/G Cables. In respect of the proposition of law as made by the jurisdictional officer, we find support from the judgement of Hon. Supreme Court in case of M/s. Indure Ltd. & Anr. vs Commercial Tax Officer & Ors. on 20 September, 2010 C.A. NO. 1123 of 2003 = 2010 (9) TMI 883 – SUPREME COURT OF INDIA, wherein the Hon. SC held as under: By way of letter of award dated August 16, 1988, N.T.P.C. awarded two contracts to the company for performing the work of erection of aforesaid plant on turnkey basis. Even though two contracts were entered into between the parties but in nutshell it was only one contract for the simple reason that N.T.P.C. kept a right with it with regard to cross-fall breach clause meaning thereby that default in one contract would tanta
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =