In Re: Mr. Kailash Chandra (M/s Mali Construction)
GST
2019 (2) TMI 917 – AUTHORITY FOR ADVANCE RULING, RAJASTHAN – 2019 (21) G. S. T. L. 585 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULING, RAJASTHAN – AAR
Dated:- 31-1-2019
ARN RAJ/AAR/2018-19/32
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 called as 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 l
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That 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 a tender supposed to be floated by P.H.E.D. for designing, providing, installation, commissioning, operation and maintenance of solar energy based bore well water pumping systems.
ii. In connection to the said tender, the scope of the to be undertaken by the contractor shall commence from designing, economically and efficiently best suited to site conditions including depth of water table and safe yield of bore well, finalizing alignment of SPV
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il formation. All codes and provisions for RCC design should be followed. The minimum depth of foundation should be 1.50 metre.
e) The structure is to be designed in such a way so as to allow easy replacement and inclusion of any additional module.
f) PV water pumping system must qualify (enclose test reports/ certificate from IEC/NABL accredited laboratory) as per relevant IEC standard. The performance of PV water pumping system shall be tested at STC conditions by any laboratory approved by IEC / MNRE/ accredited by NABL / Solar Energy Centre. The material (of different makes) shall be acceptable only on receipt of satisfactory test report by the Engineer-In-charge.
g) IEC activities like distribution of pamphlets/ posters/ paintings containing PHED al promotional Slogan for using fluoride free water and water saving on prime places like gram panchayat bhawan/ office, school/ govt. building/ main choraha as approved by Engineer-in charge.
h) Providing potable water to village
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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 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. In the given case, the facts have been first perused to understand that it is
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the principal supply.
1.8. Further to determine the principal supply in the given case, it has been explained through facts and the conduct of parties that the main intent of the supply is provision of the solar power based water pumping system which consists of various components such as SPV panels, structures, storage tank, Solar pumping sets, controller, pipe, cables and de-fluoridation units and thus it is the predominant element of the composite supply, to which its installation, commissioning, operation and maintenance is ancillary since these services are provided for better functioning of the system supplied.
1.9. In addition to this, the proportion of the consideration for both supplies as per the payment schedule of the contract indicate that providing the solar energy based water system is the predominant supply.
1.10. On the basis of above facts and interpretation, in the given contract the principal supply is supply of solar power based water system and since such syste
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te) as solar power based device. Thus the rate of tax shall be 5% on supply of given Solar Power Based Devices.
1.13. Activities like civil construction, IEC activities, provision of real time online management and monitoring system for reporting key data/parameters and operation and maintenance of the system are merely incidental to provision of such goods and form an ancillary part of the supply. The service portion of the contract is minimal and the substantial part is supply of goods. This also substantiates the fact that provision of services is incidental to supply of goods and hence, the supply of goods should form the principal supply and the entire contract should be taxed as supply of goods itself.
1.14. 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 contrac
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Jain (Authorised Representative) of applicant appeared for PH. During the PH, he reiterated the submissions made in the application. He further submitted an additional document and requested that the case may be decided at the earliest.
4. COMMENTS OF THE JURISDICTIONAL OFFICER
The jurisdiction officer has stated that on the basis of submissions submitted it is found that the activities undertaken by the applicant is a composite supply of goods and GST is as applicable to it.
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 namely:-
(a) comprising two or more supplies, one of which is a 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 taxab
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perty wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract;
f. We observe that the supply is a composite supply which is ascertained from following:
a. 2 or more taxable supplies of goods or services or both;
b. The taxable supplies are naturally bundled;
c. The taxable supplies are supplied in conjunction with each other;
d. One of the taxable supplies is a principal supply.
g. However, since composite supply of works contract has been explicitly classified as supply of service under Schedule Il, 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,
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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.
Though the concept of excisable is not applicable here but the 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 of solar energy based water pumping systems along with construction of housing structure for this plant and all the necessary works for operation for such work.
* A comprehensive operation and maintenance of the installations for a period of 7 years.
6. On the basis of concepts di
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movable 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. 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
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ms along with construction 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 and testing of solar ener4,' based water pumping systems 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
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