In Re: Mr. Kailash Chandra (M/s. Mali Construction)
GST
2019 (2) TMI 834 – AUTHORITY FOR ADVANCE RULING, RAJASTHAN – 2019 (21) G. S. T. L. 565 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, RAJASTHAN – AAR
Dated:- 31-1-2019
ARN No. RAJ/AAR/2018-19/31
GST
J.P. MEENA AND HEMANT JAIN MEMBER
Present for the applicant: Mr. Mudit Jain, (Authorised 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 Mr. Kailash Chandra, (M/s. Mali Construction), situated at Mali Vas, Maandava, Mandwa, Sirohi, Rajasthan – 307001 (hereinafter the applicant) is fit to pronounce advance ruling as it falls under the ambit of the Section 97(2)(a) and (e), given as under :
a. classification of goods and/or services or both
e. determination of the liabil
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in relation to such tender the applicant is required to quote a rate for undertaking all the aforesaid activities which shall be inclusive of all the costs of site visits on the part of the applicant, packaging, forwarding, spare parts, insurance and taxes & duties as may be applicable. Hence, in view of the same the applicant is desirous of knowing its liability of GST in relation to the said activity and therefore seeks the ruling of the advance ruling authority on the below mentioned transaction:
i. The applicant is willing to bid for atender supposed to be floated by P.H.E.D. for designing, providing, installation, commissioning, operation and maintenance of Reverse Osmosis Plants.
ii. The above mentioned work shall comprise the following major activities:
a) Design, supply, install, test and commission Reverse Osmosis Plants to treat ground water and provide potable water of BIS standards, along with raw water and treated water storage tanks, construction of housing structure
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of works contract has been explicitly classified as supply of service under Schedule Il, tax liability on works contract service has been expressly prescribed. Therefore, the concept of works contract should to be discussed and settled first. However under GST, there is a monumental shift in concept of Works Contract which was prevalent under erstwhile VAT and Service Tax regime. In GST, as per definition of works contract service if construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning is for immovable property only, then it will classify as works contract. Hence it means that aforesaid activities, if they are undertaken for a movable property then it will not be works contract service.
1.4. 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
e) If items assembled or erected at site and att
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he firm as successfully completed and certificates to this effect are obtained from the field officers.
1.6. Based on above, it is amply clear that the above transaction is a natural bundle of supply of both goods and services and therefore falls under the ambit of composite supply.
1.7. Further the following facts have been analysed to determine the principal supply of the contract :
* The object of the department behind floating the tender for the given work is installation of Community water purification plants based on Reverse Osmosis (RO) technology by treating the in-situ ground water for providing potable water. Thus, the predominant element is supply of RO plant and its installation; commissioning, operation and maintenance are services availed for better functioning and operation of the RO plant supplied.
* The payment schedule for supply, erection, commissioning and O & M of RO unit also indicate that supply of RO plant is the predominant supply.
1.8. Since the predomi
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s made earlier, alternatively if it is held that given activity undertaken by the applicant is a supply of works contract service, then in that case the applicant submits that the rate of tax in given service shall be determined in accordance with the Notification No 11/2017-CT (Rate) dated 28.06.2017, as amended from time to time.
1.12. Since the given activity undertaken by the applicant culminates into a plant for water supply or treatment and since work is undertaken for PWD which is Government Department, hence according to applicant the rate of tax applicable on given service (if it is a works contract service) shall fall under Entry 3(iii) with HSN Code 99544 and it should be 12%.
That in case of above transaction, the entire work to be awarded shall be composite supply wherein the principal supply shall be supply of goods i.e. RO Plants and the same shall be classified under HSN code 8421 and taxable at the rate of 18%.
Further, if it is considered as a works contract servic
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.
5. FINDINGS ANALYSIS & CONCLUSION:
a. According to Section 8 of Central Goods and Services Tax Act, 2017
8. 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) ………………………………
b. As per Section 2(30) composite supply is defined as
(30) “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;
c. Further principal supply is defined under Section 2(90) as
(90) “principal supply” means the supply of goods or services which constitutes the predominant element of a composite supply and to which an
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e supplies is a principal supply.
g. However, since composite supply of works contract has been explicitly classified as supply of service under Schedule II, the concept of works contract follows that:-
1. 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.
2. In GST, as per definition of works contract service if construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning is for immovable property only, then it will classify as works contract. Hence it means that aforesaid activities if they are undertaken for a movable property then it will not be works contract service.
3. Now whether a supply is a works contract or not is dependent on whether the plant
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inference can be drawn what is movable and what can be immovable from given clarification.
5. As mentioned in the facts above, that in brief, following activities are covered under the scope of works proposed to be undertaken by the applicant:
* Design, supply, install, test and commission Reverse Osmosis Plants to treat ground water and provide potable water of BIS standards, along with raw water and treated water storage tanks, construction of housing structure for RO plant and all the necessary works for operation for such work. Bidder may install containerized RO plants.
* Providing, installation and commissioning of Solar/ Battery operated Cluster dispensers (a standalone Cement Ring Structure having storage water tank) and transporting water from mother Reverse Osmosis Plant to Cluster dispensers, wherever installed, through Water tankers.
* A comprehensive operation and maintenance of the installations for a period of 7 years.
* Delivering potable water from plant site
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ly completed and certificates to this effect are obtained from the field officers.
* As per tender, payment schedule for supply, erection, commissioning and O & M of RO unit will be made for individual installation of RO plants collectively.
I. 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 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.
J. We observe that the activity proposed to be undertaken is a composite supply of works contract, the rate of tax in given service shall be determined in accordance with the Notification No 11/2017-CT (Rate) dated 28.06.2017, as amended from time to time.
On perusal of said Notification under S.
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Provided that where the services are supplied to a Government Entity, they should have been procured by the said entity in relation to a work entrusted to it by the Central Government, State Government, Union territory or local authority, as the case may be;
K. It is therefore, the activity of supply, design, installation, commissioning and testing of reverse osmosis plant and O &M work by the applicant is a Works Contract of Composite Supply. This composite supply is a mixed of goods and services and predominant supply is supply of services. Since this supply is undertaken for a Government Department viz. PHED which is a Government of Rajasthan Department, hence the rate of tax applicable on given service (as it is a works contract service) shall fall under Entry 3(iii) with HSN Code 99544 and it should be IGST@12%(CGST@6%, SGST@6%).
6. Based on above facts along with provision of law the ruling is as follows:-
RULING
The activity of supply, design, installation, commissioning an
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