2018 (12) TMI 649 – AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2019 (20) G. S. T. L. 401 (A. A. R. – GST) – Levy of GST – rate of tax – transportation charges levied by the Applicant on PGCIL – supply contract/service contract – composite supply – Held that:- The Applicant is registered under Goods and Services Tax (GST) Act 2017 and is engaged in the business of manufacturing and selling various products and solutions as required in Power Transmission and Distribution Sector. The Company has two divisions namely (i) Transformer division and (ii) Project division. The Applicant, as part of its activities has entered into following contracts with Power Grid Corporation of India Limited – As per second contract entered into with PGCIL in respect of various services to be undertaken upto successful commissioning of the project which includes planning, transportation of goods, loading and unloading etc for which seprate invoices and consideration has been stipulated. For the purpose of t
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erein transfer of property in goods (whether as goods or in some other form) is involved in the execution of said contracts. The contract before us thus are clearly covered by the definition of works contract as per section 2(119) of GST Act – The contract before us thus are clearly covered by the definition of works contract as per section 2(119) of GST Act – further, composite supplies in the nature works of contract as defined u/s 2(119) is declared as supply of services as per section 7 r/w entry 6(a) Of Schedule Il of the GST Act.
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The impugned supply of transportation service is not supply of standalone service but integral component of composite supply in the nature of works contract as defined u/s 2 (119) and the entire contract is a supply of services as per entry 6(a) of schedule II of the GST Act and liable to pay GST as per entry at Sr. no. 3(ii) of the Notification No. 1/2017 of Central Tax (Rate) dt. 28/06/2017 and corresponding notification under the MGST Act.
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the rate of GST to be charged on such charges? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGSI* Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / MGST Act would be mentioned as being under the GST Act . 02. FACTS AND CONTENTION – AS PER THE APPLICANT The submissions, as reproduced verbatim, could be seen thus – STATEMENT OF RELEVANT FACTS HAVING A BEARING ON THE QUESTION(S) ON WHICH ADVANCE RULING IS REQUIRED. 1. This Application is being filed by EMCO Ltd.( the Applicant /the Company ), having Goods and Services Tax ( GST ) Registration No.27AAACE2764Q1Z6. The Applicant is engaged in the business of manufacturing and selling
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referred to as Service contract / Second Contract ); and Supply contract As per the Supply contract, the Applicant has agreed to supply various equipment, materials, transmission line towers, insulators, accessories and other spares which are required for commissioning the transmission line. All the materials would be supplied on ex-works basis. The detailed scope of supply is given at Appendix 6 of the Supply contract which is annexed hereto as Exhibit A. As per the Supply contract, PGCIL agrees to pay the Applicant the Contract price along with all the taxes and duties as applicable on the same. Service contract The Applicant has entered into a Service contract with PGCIL in respect of various services to be undertaken for commissioning of the Transmission line. The Service contract inter alia includes planning, survey, transportation of goods, loading and unloading at site, installation and commissioning of the Transmission line. Separate consideration has been decided for various s
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ETERMINATION 2.1 The question/ issue before Your Honor is whether GST is leviable on the transportation charges levied by the Applicant on PGCIL? 2.2 In case the GST is payable, what would be the rate of GST to be charged on such charges? 2.3 The he question / issue placed for determination before Your Honor has to be appreciated in light of the following position of law and its applicability to the activity by the Applicant, discussed hereunder. 3. POSITION OF LAW AND SUBMISSIONS OF THE APPLICANT At the outset, the Applicant would like to refer to Notification 12/2017-Central Tax (Rate) dated 28th June 2017 which exempts various services from the levy of GST. EXEMPTION NOTIFICATION 12/2017-CENTRAL TAX (RATE) 28TH JUNE. 2017 3.1. Entry no. 18 of the Notification No. 12/2017 dated 28th June 2017 exempts services by way of transportation of goods by road except inter alia by a GTA. The relevant extract of the entry is reproduced below: S.No. Chapter, Section or Heading Description of Ser
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o GST. 3.5. Since the transportation services of the Applicant are part of the overall contract with PGCIL, it is also important to refer to the provisions pertaining to composite supply under GST. COMPOSITE SUPPLY AND PRINCIPAL SUPPLY OF THE CENTRAL GOODS AND SERVICES TAX ACT, 2017 (hereinafter referred to as CGST Act ): Composite Supply [Section 2(30) of CGST Act] composite 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; Illustration: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply. 3.6. Principal Supply (Section 2(90) of CGST Act]: principal supply means the supply of goods or services which cons
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ed accordingly. 3.9. A Principal supply would mean the predominant element of supply involved in the Composite supply. The Composite supply can, therefore, be broadly divided into two parts (i) Principal Supply i.e. predominant element (ii) other ancillary supplies. 3.10. As observed from above, a supply would qualify as a Composite supply only in cases where such supply consists of two or more taxable supplies. Therefore, it is crucial to analyze the term Taxable supply as defined under Section 2(108) of CGST Act. The same is reproduced hereunder: taxable supply means a supply of goods or services or both which is leviable to tax under this Act; 3.11 Further, the guidance note released by Central Board of Excise and Customs (CBEC) in respect of Composite supply lays down certain indicators by which one can determine whether the supplies are naturally bundled or not. Some of these indicators are listed as under: Large number of recipients expect such a bundle of supply; Majority of sup
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ice in consideration of the performance of the contractor of its obligations hereunder. The Contract Price Shall be aggregate of INR 1,19,30,24,988/-(Rupees One Hundred Nineteen Crores Thirty Lacs Twenty Four Thousand Nine Hundred Eighty Eight only), or such other sums as may be determined in accordance with the terms and conditions of the Contract. The break-up of the Contract Price is as under: Sr. No. Price Component Amount (INR) 1. Ex-works price 1,19,29,94,308 2. Type Test Charges 30,680 Total Ex-works price for Supply Contract 1,19,30,24,988 4.1. Article 5. of the contract (Para 1): The Contract Agreement No.CC-CS/651-SR1/TW-3573/3/G10/CA-II/7293 has also been made on the 8th June 2017 between Employer and the Contractor for the Services contract (also referred to as the Second Contract ) for the subject package which includes performance of all the services inter alia including inland transportation, insurance, delivery, , unloading, handling, Storage, erection (of all equipment
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Contract for the Complete execution of Tower Package for TW05 for +-800kV Raigarh – Pugalur Transmission Line Part-V associated with HVDC Bipole Link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu)- North Trichur (Kerala). SERVICE CONTRACT- 4.2. THIS CONTRACT AGREEMENT No. CC-CS/651-SR1/TW-3573/3/G10/CA-II/7293 (also referred to as Service Contract/the Second Contract ) is made on the 8th June 2017; 4.3. WHEREAS, the Employer desires to engage the contractor for providing all the services inter-alia including inland transportation, insurance, delivery,, unloading, handling, storage, erection (of all equipment and material) including associated civil works, detailed survey including route alignment, profiling, tower spotting, optimization of tower locations, soil resistivity measurement and geotechnical investigation (including special foundation locations viz. pile/well foundation locations, whenever applicable and covered under BPS), check surv
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ject to the terms and conditions hereinafter appearing. 4.4. Article 2 – Contract Price and Terms of Payment 2.1 Contract Price: The employer hereby agrees to pay to the contractor the contract price in consideration of the performance of the contractor of its obligations hereunder. The Contract Price shall be aggregate of INR 80,43,90,567/-(Rupees Eighty Crores Forty Three Lacs Ninety Thousand Five Hundred Sixty Seven only), or such other sums as may be determined in accordance with the terms and conditions of the Contract. The break-up the Contract Price is as under: Sr.No. Price Component Amount (INR) 1. Transportation, Insurance and other incidental Services 5,95,56,644 2. Installation Charges 78,48,33,923 Total Service Contract Price 80,43,90,567 5. PRAYER In the light of the above background and facts, a Ruling is sought from the Hon ble Authority on the following: Whether GST is leviable on invoice raised by Applicant towards freight and other incidental expenses outsourced by t
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, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. Illustration: where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply. Taxability of Composite Supply (Section 8 of the CGST Act) 1. The tax liability on a composite or a mixed supply shall be determined in the following manner, namely: a. A composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; and b. A mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. 2. Upon reading of the above provisions, it can be seen that in cases where two or more taxable supplies of goods or services or both are naturally bundled in the course or furtherance of busines
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f work of tower project Pugalpur Transmission Line Part-V associated with HVDC Bipole link between Western Region (Raigarh, Chhattisgarh) and Southern Region (Pugalpur, Tamilnadu) – North Trichur (Kerala) and made with contract for supply and also service on 08.06.2017. The contract is supply of material, supply of accessories and installation commissioning, etc. Another contract is service contract which includes performance of all services inter alia including inland transportation, insurance, delivery, unloading, handling, storage, etc. Citation:- 1. Advance Ruling No. KAR ADRG 03/2018 Dated: 21st March, 2018 Skill tech Engineers & Contractors Pvt Ltd. = 2018 (6) TMI 111 – AUTHORITY FOR ADVANCE RULINGS, KARNATAKA 2. Judgement of Supreme Court of India M/s. India Meters Ltd vs State of Tamil Nadu on 7th September, 2010 = 2010 (9) TMI 878 – SUPREME COURT OF INDIA 3. Judgement of Supreme Court of India Hindustan Sugar Mills Etc vs State of Rajasthan And Others on 22nd August, 1978
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with Sh. Jigar Vachharajani Advocate, Mr. Suresh Disale, Manager Tax and Ms. Priya Sarkar Dy. Manager Taxation appeared and made oral and written contentions as per details in their ARA. Jurisdictional Officer, Sh. S. D. Tandale, Dy. Commissioner of S.T. (E- 643) LTU-04, Mumbai appeared and made written submissions. 05. OBSERVATIONS We have gone through the facts of the case, documentary evidences like copies of agreement and written submission made by the applicant and the officer. We find that the Applicant is registered under Goods and Services Tax ( GST ) Act 2017 and is engaged in the business of manufacturing and selling various products and solutions as required in Power Transmission and Distribution Sector. The Company has two divisions namely (i) Transformer division and (ii) Project division. The Applicant, as part of its activities has entered into following contracts with Power Grid Corporation of India Limited (hereinafter referred to as PGCIL ) as under: (i) Supply of Tow
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ack basis issues invoices and charges separate consideration for transportation services to PGCIL. It is this transportation charges/freight recovered by the applicant from PGCIL which is the subject matter of present application. Applicants submits that they do not issue any consignment note in the course of providing transport service to PGCIL This being the case, the applicant is of the view, that it does not qualify as a Goods Transport Agency and thus transportation services provided by them may not be liable to GST. Thus applicants main contention is based on the premise that various services undertaken by them including transportation services as per second contract for which applicant issues separate invoice and separate consideration as has been decided in the contract shall be considered as stand alone service and should be taxed accordingly. In order to examine this view of the applicant we examine the terms of the contract executed between the applicant and the PGCIL. The c
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l equipment and materials including Type Testing to be conducted, for the complete execution of the Tower Package TW05 for +800KV HVDC Raigarh- Pugalur Transmission Line Part-V associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu)- North Trichur (Kerala), as detailed in the Bidding Documents referred hereinabove. The scope of work inter-alia includes the following: (i) Fabrication and supply of all type of transmission line towers, including River crossing towers (wherever applicable) as per Employer s design/ drawings including fasteners, step bolts, hangers, D-shackles etc.; (ii) Supply of all types of tower accessories like phase plate, circuit plate (where ever applicable), number plate, danger plate, anti-climbing device, Bird guard(where ever applicable); (iii) Supply of Earthwire. (iv) Supply of Tower Earthing. The scope of work under this Notification of Award (NOA) shall also include all such items which are n
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icable & covered under BPS), check survey, classification of foundation for different type of tower and casting of foundation for tower footings as per POWERGRIDs foundations drawing, tack welding of bolts and nuts including supply and application of zinc rich paint, fixing of insulator strir stringing of conductors and earth wires/ OPGW along with all necessary accessories; Stringing of Power line crossing section under Live Line Condition (wherever applicable); Painting of towers & supply and erection of span markers, obstruction lights (wherever applicable) for aviation requirements (as required), testing and commissioning of all equipment and materials supplied under this Ex Works Supply Contract has been issued on you vide our NOA no. CC-CS/651-SR1/TW-3573/3/G10/NOA-11/7293 dated 17.05.2017 (hereinafter called the Second Contract or Services Contract ). Notwithstanding the award of work under two separate Contracts in the aforesaid manner, you shall be overall responsible
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er this First Contract , when erected, installed & commissioned by you under the Second Contract shall give satisfactory performance in accordance With the provisions of the Contract. 3.2 Notwithstanding the break-up of the Contract Price, the Contract shall, at all times, be construed as a single source responsibility Contract and any breach in any part of the Contract shall be treated as a breach of the entire Contract. Second contract is for the supply of services – THIS CONTRACT AGREEMENT No. CC-CS/651-SR1/TW-3573/3/G10/CAII/7293 (also referred to as Services Contract/ the Second Contract ) is made on the – 8th June 2017 This Services contract for Tower Package Two5for + 800RV/HVDC Raigarh- Pugalur Transmission Line Part-V associated with HYDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu – North Trichur (Kerala)Contract Agreement No. CC-CS/651-SRVIW-3573/3/G10/CA-II/7293 Scope of work WHEREAS the Employer desires to engage
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f span markers, obstruction lights (wherever applicable) for aviation requirements as required), testing and commissioning of all equipment and materials, etc. for the complete execution of the Tower Package TW05 for 1800k V HVDC Raigarh- Pugalur Transmission Line Part-V associated with HVDC Bipole link between Western region (Raigarh, Chhattisgarh) and Southern region (Pugalur, Tamil Nadu)- North Trichur (Kerala) as detailed in the Contract Document ( the Facilities ), and the Contractor has agreed to such engagement upon and subject to the terms and conditions hereinafter appearing, Article 2. Contract Price and Terms of Payment for service contract:- 2.1 Contract Price (Reference GCC Clause 7) The Employer hereby agrees to pay to the Contractor the Contract Price in consideration of the performance by the Contractor of its obligations hereunder. The Contract Price shall be the aggregate of INR 80, 43,90,567 / (Rupees Eighty Crores Forty Three Lakh Ninety Thousand Five Hundred Sixty
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er in full or in part, and/or recover damages there under shall give us an absolute right to terminate this Contract, at your risk, cost and responsibility, either in full or in parts and/or recover damages under this Second Contract as well. However, such default or breach or occurrence in the first Contract , shall not automatically relieve you of any of your obligations under this First Contract. It is also expressly understood and agreed by you that the equipment/ materials supplied by you under this Second Contract , when installed & commissioned by the contractor under this Second Contract shall give satisfactory performance in accordance with the provisions of the Contract. From the conjoined and harmonious reading of various clauses of first contract and second contact, it can be safely concluded that the agreement for setting up Tower Package TW05 for +800KV transmission Line Project is a single indivisible contract. As the contract consists of two or more taxable supplies
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les tax on imported items is leviable due to future enactment of sale/interpretation of law/interpretation of law by court, the same will be reimbursed by N.T.P.C. to the company at actuals against documentary evidence. 11. 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 tantamount to default in another and whole contract was liable to be cancelled. The next issue to be decided is whether this composite supplies constitute works contract as defined u/s 2(119) of the GST Act. We reproduce the section as below: 2(119) works contract means a contract for building, construction, fabrication, completion, erection, installati
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upplies in the nature works of contract as defined u/s 2(119) is declared as supply of services as per section 7r/w entry 6(a) Of Schedule Il of the GST Act. In view of above discussion we find that the impugned supply of transportation service is not supply of standalone service but integral component of composite supply in the nature of works contract as defined u/s 2 (119) and the entire contract is a supply of services as per entry 6(a) of schedule II of the GST Act and liable to pay GST as per entry at Sr. no. 3(ii) of the Notification No. 1/2017 of Central Tax (Rate) dt. 28/06/2017 and corresponding notification under the MGST Act. 6. In view of the deliberations as held hereinabove, we pass the order as under: 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-16/2018-19/B-74 Mumbai, dt. 25/07/2018 For reasons as discussed in the body of the order, the question is answered thus – Question: – 1.
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