In Re: Super Wealth Financial Enterprises (P) Ltd.
GST
2018 (12) TMI 1155 – AUTHORITY FOR ADVANCE RULING, ODISHA – 2019 (20) G. S. T. L. 505 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, ODISHA – AAR
Dated:- 31-10-2018
Order No. 04/ODISHA-AAR/2018-19
GST
SRI ANAND SATPATHY, AND SRI NILANJAN PAN, MEMBER
Present for the Applicant: Suresh H Shah, Promoter of the Company & Yash Dev Arya, C.A.
Subject: GST Act, 2017-Advance Ruling U/s 98 – Applicability of Entry No. 3 of Notification No. 12/2017-CentraI Tax to the services provided by the applicant by way of providing energy saving street lighting services including OM of the street lighting installations to Bhubaneswar Municipal Corporation (BMC).
1.0 M/s. Super Wealth Financial Enterprises (P) Ltd., (hereinafter referred to as the 'Applicant') assigned with GSTIN 21AAECS9864P1ZN having registered address at Lewis Road, Gouri Vihar, Bhubaneswar, Odisha-751002, have filed an application on 06.08.2018 under Section
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t or any State Government or any Union Territory Administration or any Local Authority or a Government Authority or a Government Entity by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or in relation to any function entrusted to a Municipality under Article 243W of the Constitution.
Entry S/ No. 3 of Notification No. 12/2017 – Central Tax (Rate) Dated 28.06.2017
Sl.No.
Chapter, Section, Heading, Group or Service Code(Tariff)
Description of Services
Rate (%)
Conditions
3.
Chapter 99
Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union Territory or Local Authority or a Governmental Authority by way of any activity in relation to any function entrusted to a Panchayat under article 243 G of the constitution or in relation to any function entrusted to a Municipality under Article 243 W of the Constitut
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ly (of service) of providing lighting service to BMC for a period of 10 years, by using the Energy saving infrastructure installed by the applicant. This would include activities such as Installation of Energy saving equipment on existing street light poles of BMC, its day to day management in order to achieve energy savings and operation and maintenance of the Energy saving equipment.
c) Since there is no transfer of property in goods for a period of 10 years to EMC, the aforesaid supply would qualify as a supply of 'pure service' and hence exempt under Sl. No. 3 of Notification No. 12/2017-C.T.(Rate) dated 28.6.2017.
d) At the end of 10 years, when the ownership of Energy saving equipment is transferred to BMC, the applicant would be making a 'supply of goods' to BMC. Such a supply would not be chargeable to GST, since transfer of capital goods after being put to use are subject to valuation as per Section 18(6) of the CGST Act. As per Section 18(6), in case of supply of capital
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the contracted supply is a case of pure supply of service when there is a significant use of materials for illumination, monitoring and metering of energy consumed. In reply, the representatives of the applicant sought more time to explain the query through a written submission. Therefore. another date for personal hearing was fixed on 29.102018 under due intimation to the Applicant, the Jurisdictional Officer of State GST & the Jurisdictional Officer of Central GST. The Applicant appeared through its representatives i.e. Promoter Shri Suresh H Shah & Chartered Accountant Shri Yash Dev Arya on 29.10.2018. Further, the Jurisdictional Officer of State GST & the jurisdictional Officer of Central GST appeared in person. During personal hearing, the representatives of the applicant have submitted fresh written submission wherein they inter-alia submitted as under.
a) The applicant has a manufacturing unit at Nashik, Maharashtra for manufacturing of components of energy saving equipment. T
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e by the applicant to BMC would be covered by the exemption provided to supply of services under SI. No. 3 of the Notification 12/2017-C.T.(Rate) dated 28 6.2017, the following three aspects are required to be considered.
(i) There is supply of pure service, i.e.' there is no composite supply including supply of goods or supply is not in the nature of Works Contract.
(ii) Supply is made to a local authority
(iii) The supply is made for one of the constitutional functions of the local authority.
e) There is no doubt that the applicant has supplied services to a 'local authority' (a municipal corporation) as defined under Section 2(69) of the CGST Act. Further, provision of public amenities such as street lighting listed under Twelfth schedule of the Constitution is one of the functions entrusted to the municipality under Article 243W of the constitution
f) Since there is no transfer of property in energy saving equipment from the applicant to the BMC during the term of the co
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1-07-2017. It is humbly submitted that mere use of LED lights owned and possessed by the Applicant does not imply supply of LED street lights to the BMC. Therefore, the contract which is running for past four years is of supply of pure service and no material is being supplied under the said contract.
i) The contract only mentions providing necessary illumination by repairing and replacing the street lights, should it fail/fall below the necessary standard to ensure safety and security of citizen. The contract is for supply / provision of services. Hence, there is no supply of goods under the said contract to BMC and accordingly, in the Applicant's view, they are entitled to the exemption under the said notification (supra).
6.0 In the considered opinion of the jurisdictional Officer of State GST & Central GST, the objective of the contract between the applicant and BMC is implementation of energy conservation measures within BMC area and that the applicant besides installation of
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t the activities undertaken by the applicant do not constitute supply of pure services as it involve supply of goods. Therefore, benefit of exemption from tax in terms of S 1.3 of the notification No. 12/2017- Central Tax (Rate), dated 28.06.2017 is not available to the applicant.
7.0 Since the supply under consideration of the Authority is in pursuance to a format existing contract signed between the applicant and BMC, the relevant portion of the contract i.e. the applicant's responsibilities and scope of services listed under para 5 read with schedule-I of the contract/agreement are extracted below:
* Conducting a detailed asset survey, feeder wise marking of pales in Phase 1 and creation and maintenance of asset database during the Term of the Project;
* Metering all fixtures supplied through street lighting phase/feeders considering optimizations required for enabling metering/ installation of feeder panels on switching points:
* Witnessing the TPEA verification and energy
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orting the performance and functioning of street lighting systems covered under the Project to BMC on a daily/weekly/monthly basis in accordance with the stipulated procedures;
* Submitting a monthly Energy Savings report for every billing period along with its invoice for release of payment from BMC,
* Ensuring knowledge transfer and training of BMC staff for operation and maintenance of new energy efficient technologies installed and submitting copies of warranties to BMC;
* Transferring the street lighting system in working condition to BMC at the end of the Term.
7.1 The submissions made by the applicant, both with the application as well as in the written submission furnished at the time of personal hearing were considered. Also considered the considered opinion of the jurisdictional officers with reference to the terms of the contract relevant to this proceeding and the provisions of the CGST/OGST Acts including SI No.3 of Notification No. 12/2017-Central Tax (Rate) da
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he said notification for which it has to be understood by applying the common parlance test and general understanding. As per dictionary, pure means unadulterated and unmixed. Accordingly, pure service should mean pure unadulterated service not mixed with any other element (in this case without any mixture of goods).
7.3 As evident from the terms of the contract, the Applicant is contractually bound to replace the existing street light fittings with the energy efficient sets as per the energy conservation measures and such replacement must be of the standard enumerated in the contract (BIS Standard). During the tenure of the contract the applicant is also contractually bound to repair/replace the fittings to ensure illumination at the contracted level. The contract also involves installation of metering device, monitoring system and control system for regulated illumination. The original contract was for illuminating approximately 18000 points which has been reportedly increased to 45
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s
(a) where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person;”
7.4 Thus, it is not a case of supply of pure service but rather a case of supply with substantial use of goods. At the time of personal hearing, on a query raised by the authority it was explained by the applicant that during the period from 01.07.2017, till the date of hearing materials such as street Lights Control Panel and LED Bulbs etc. of value Rs. 3,89,72,117/- have been moved to Bhubaneshwar project from the manufacturing plant. This is a substantial amount and with material movement at this scale, the ultimate supply to BMC cannot be held as a case of supply of puce service. Thus, on this account, the condition is not fulfilled.
7.5 In addition, the contract between the applic
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fication No. 12/2017-central Tax (Rate) dated 28.06.2017 and matching Notification issued by the State of Odisha.
8.0 In view of the foregoing discussion, it is concluded that the activities undertaken by the applicant do not constitute supply of 'pure services' as it involves significant use of goods/materials. It is also a case of supply of works contract service by the Applicant to BMC. The benefit of exemption from tax in terms of S 1.3 of the notification No. 12/2017- Central Tax (Rate), dated 28.06.2017 is not available to the applicant. The Hon'ble Apex Court in the case of Commissioner of Customs (Import), Mumbai V. Dilip Kumar & Company [2018] 69 GST 239/95 taxman.com 327 (SC) = 2018 (7) TMI 1826 – SUPREME COURT OF INDIA has been pleased to held that “Exemption notification should be interpreted strictly, the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. When there
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