2019 (2) TMI 834 – AUTHORITY FOR ADVANCE RULING, RAJASTHAN – TMI – Classification of supply – Supply of goods or supply of services – activity of supply, design, installation, commissioning and testing of reverse osmosis plant – rate of GST – composite supply of works contract – CBEC Circular 58/1/2002-CX dated 15/1/2002 – Held that:- The supply of Reverse Osmosis plant along with its installation, commissioning and operation and maintenance is a single supply.
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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.
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The activity proposed to be undertaken is a composite supply of works
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ore 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 liability to pay tax on any goods or services or both Further, the applicant being a registered person (GSTIN is 08ALVPC2862Q1ZA, as per the declaration given by him in Form ARA-01) the issue raised by the applicant is neither pending for proceedings nor proceedings were passed by any authority. Based on the above observations, the applicant is admitted to pronounce advance ruling. 1. SUBMISSION AND INTERPRETATION OF THE APPLICANT: 1.1. The applicant is engaged in providing the
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he 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 for RO plant and all the necessary works for operation for such work. Bidder may install containerized RO plants. b) 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. c) Transporting water from mother Reverse Osmosis Plant to Cluster dispensers, whereve
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, 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 attached by foundation to earth cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as moveable and will, therefore, not be excisable goods. 1.5. The supply of Reverse Osmosis plant along with its installation, commissioning and operation and maintenance is a single supply owing to the following factors A single tender shall be floated for the supply, installation and operation and maintenance of the RO
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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 predominant element of the supply shall be supply of RO plant, thus the proposed work should be treated as a supply of goods and not a supply of service. The installation, commissioning, operation and maintenance of the plant, construction of waste water disposal system shall be the ancillary services. 1.9. Since RO plant is a system consisting of various individual components such pumps, filtration units, tanks, controllers etc. interconnected by various devices and cluster dispensers being a part of the
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artment, 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 service then the aforesaid activity should be taxable under Entry No. 3(iii) of Notification No. 11/2017-CT (Rate) with HSN Code 99544 and should be taxable at the rate of 12%. 2. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT Whether the activity of supply, design, installation, commissioning and testing of reverse osmosis plant supply of goods or supply of services and what shall be e rate of GST on it? 3. PERSONAL HEARING In the matter personal hearing was given to the applicant on 11.01.2019 at Room no. 2.
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efined 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 any other supply forming part of that composite supply is ancillary; d. Further, clause 6 of the Schedule II is read as under The following composite supplies shall be treated as a supply of services, namely:- i. works contract as defined in clause (119) of section 2 e. The term works contract has been defined under Section 2(119) as (119) works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, impro
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oods. 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 or device or property is a movable or immovable property. To decide whether a property is movable or immovable, the given terms have not been defined under the Act and hence the reliance needs to be placed on other laws and judicial precedents. Under the General Clauses Act 1897 the term immovable property has been defined under Section 3(26) as immovable property' shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to
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essary 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 that meets BIS norms at all times. Providing potable treated water to be supplied to the general public at the site of RO plant on charging prescribed rates. 6. On the basis of concepts discussed above, the supply of Reverse Osmosis plant along with its installation, commissioning and operation and maintenance is a single supply owing to the following factors:- A single tender shall be floated for the supply, installation and operation and maintenance of the RO plant. The contractor is required to provide
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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. No. 3(iii), for schedule of rate of Tax on works contract Services, following is mentioned:- Heading 9954 (Construction services) CGST Rate % SGST Rate % IGST Rate % Remarks (iii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity by way of construction, erection, commissioning, installation, completion, fitting
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ce 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 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 proposed to be undertaken for a Government 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%). – Case laws – Decisions – Judgements – Orders – Tax Management India – taxmanagementin
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