In Re: Pew Engineering Pvt. Ltd.
GST
2018 (12) TMI 1277 – AUTHORITY FOR ADVANCE RULINGS WEST BENGAL – 2019 (20) G. S. T. L. 660 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULINGS WEST BENGAL – AAR
Dated:- 21-12-2018
29/WBAAR/2018-19 Case No. 27 of 2018
GST
SYDNEY D'SILVA AND PARTHASARATHI DEY MEMBER
Applicant's representative heard: Sri Sandeep Choraria, Advocate Sri Akshat Agarwal, Advocate
1. The Applicant, stated to have received a tender from the Indian Railways (hereinafter referred to as “the Contractee”) for retro-fitment of Twin Pipe Air Brake Systems on wagons, seeks a Ruling as to whether such activity under contract is to be treated as Composite Contract or Works Contract, and If it is determined to be a Composite Contact, whether the Principal Supply will be the supply of the Twin Pipe Air Brake Systems or the supply of services of fitting these goods to the wagons, and what should be the appropriate classification of the supply and rate of tax.
Advance
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do on-site inspection of fabrication and assembly at various stages of the work in progress and also the final inspection of the complete wagon before issuance of the completion/inspection certificate for each wagon. The Applicant shall provide the necessary facilities for the inspection.
Scrap generated during fabrication and assembly work shall be retained by the Contractee.
3. The Applicant argues that the contract is a single indivisible contract for a Composite Supply, where the supply of goods (i.e. the twin pipe air brake systems) is the Principal Supply constituting about 90% of the contract value, and, hence, should be treated as the predominant element of the supply.
The service of fitting the brake to the wagon, the Applicant submits, is ancillary to the supply of these goods.
4. The contract is for retro-fitment of twin pipe air brake system on wagons. Retro-fitment of twin pipe air brake system involves supply of goods, the air brake system, and supply of service for
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y. No payment is made separately for the supply of goods. Also, the provision for on account payment based on progress of work indicates that the supply of goods is inseparably linked with the supply of service. Mere delivery of the Twin Pipe Air Brake Systems is not sufficient discharge of contractual obligation. Work is measured based on its assembling and fitting on the wagon. In fact, the contract is not only for supply of the air brake system, but also for its retro-fitment. It is, therefore, evident that the two supplies, as far as the terms of this contract, are naturally bundled in the ordinary course of business.
6. In the context of the contract, the supply of the service of fitting the Twin Pipe Air Brake Systems to the wagon cannot be made unless the goods have already been supplied. The supply of services of the fitting is, therefore, dependent upon and ancillary to supply of the Twin Pipe Air Brake Systems. Predominant supply is, therefore, of the Twin Pipe Air Brake Sys
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y of Twin Pipe Air Brake Systems.
8. Twin Pipe Air Brake System is classifiable under Tariff Head 8607 21 00 [Parts of Railway….Air Brakes and part thereof] which is taxable @ 5% under Serial No. 241 of Schedule I of Notification No. 01/2017 – CT (Rate) dated 28/06/2017 with no benefit of refund of the unutilized input tax credit (as per TRU Clarification issued under F.No.354/1/2018-TRU dated 25/01/2018).
In view of the foregoing we rule as under
RULING
The Applicant's contract for retro-fitment of Twin Pipe Air Brake System on Railway Wagons is to be treated as Composite Supply, where the Twin Pipe Air Brake System is the Principal Supply.
Twin Pipe Air Brake System is classifiable under Tariff Head 8607 21 00 and is taxable @ 5% [in terms of Serial No. 241 of Schedule I of Notification No. 01/2017 – CT (Rate) dated 28/06/2017] with no refund of the unutilized input tax credit [as clarified in TRU Clarification issued under F.No.354/1/2018-TRU dated 25/01/2018].
This Ruling i
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