ITC on Electric installation
Query (Issue) Started By: – Hiren Pathak Dated:- 23-2-2019 Last Reply Date:- 2-3-2019 Goods and Services Tax – GST
Got 11 Replies
GST
Dear All,
A company is setting up its manufacturing plant where in power supply by way of supplying and installation of various electric cable connection from main station outside factory premises to company sub station is required from state government. State government instructed company that company can itself set up this electric installation from thier nominated vendor but ultimate ownership of such electric installation (Assets) will remain with state government.
Now question is whether company can claim ITC of such electric installation which mainly constist of supplying and installing various electric cables?
Whether ownership of such electric installation will remain with state govenment and not with compnay, will it have any impact on ITC eligibility?
Reply By Rajagopalan Ranganathan:
The Reply:
S
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hough the Company may get it done through some other person I.e. sub contractor. Also see .Explanation- (ii) to Section 16(2)(b) inserted vide CGST (Amendment) Act, 2018 effective from 1.2.19
Reply By Alkesh Jani:
The Reply:
Dear Experts,
Can we apply Sl.No.25 of Notification No.12/2017 dated 28.06.2017 (as amended time to time) instant case and can we apply the ratio of decision given by the Hon'ble High Court of Gujarat in case of M/s. Torrent Power Ltd Vs. Union of India SCA No. 5343 of 2018. = 2019 (1) TMI 1092 – GUJARAT HIGH COURT
Can we consider as, the installation is undertaken as per the direction of the state government and title is not transferred by way of Invoice or anyother documents.
This is to enrich my knowledge through your guidence and views.
Thanks,
With Regards,
Reply By KASTURI SETHI:
The Reply:
Sh.Alkesh Jani Ji,
Neither Notification nor ratio of High Court judgement is applicable to this situation inasmuch as erection and installation activities ar
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related services be used for any purpose other than for transmission and distribution of electricity. The principal supply and the related/ancillary services go hand in hand and one cannot be provided independent of the other. The upshot of this discussion is that the services provided by the petitioner are in the nature of composite supply and therefore, in view of the provisions of clause (a) of section 8 of the CGST Act, the tax liability thereof has to be determined by treating such composite same as a supply of the principal supply of transmission and distribution of electricity. Consequently, if the principal supply of transmission and distribution of electricity is exempt from levy of service tax, the tax liability of the related services shall be determined accordingly."
In view of above, can we say that such installation is ancillary service provided?
Thanks,
With due regards
Reply By Hiren Pathak:
The Reply:
Kasturi sir,
Little clarification in facts, My question
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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;
Illustration. – Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply;
(47) ”exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply.
108) ”taxable supply” means a supply of goods or services or both which is leviable to tax under this Act;
In view of the above, it can be easily arrived at the conclusion that composite supply consists of two or more taxable supplies and not one taxable and one exempt. Thus exempt supply is excluded from the scope of composite supply. So erection and installation is not ancil
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and second whether electric installation (Lying of electric cable etc from main power supply station situated outside company premises to company manufacturing plant) can be termed as immovable or movable?
Reply By KASTURI SETHI:
The Reply:
Sh.Hiren Pathak Ji,
No doubt yours is a manufacturing company but here is a question of what nature of service you are supplying/providing. In my view (based on various case laws), it is a works contract service which you are providing to State Govt. and no exemption is available to you. Now is the question of vendor's service. The vendor is working for you. In other words, we can say that that person is your job worker. So the vendor's service is also of the nature of service being provided by you. His service an integral part of the works contract service being provided. In Works Contract Service, ITC is available if utilised in providing the same output taxable service.So you can avail ITC on the strength of invoice to be issued by y
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s an immovable property. (Power station is an immovable property for which you will work.)There is a Board's circular to this effect and case laws.
You can easily trace out case laws in your support.
Reply By CASusheel Gupta:
The Reply:
The primary responsibility of laying of cable was of state government. SG authorised the company to purchase cable and install it on behalf of SG. The ownership shall rest with the SG.
The SG shall be required to bill the company including the cost of cabling (covered by section 15(2)(b)). Cost of cable though incurred by company shall be included in the value of supply of SG.
Applying the ratio of Torrent Power, the supply from SG to company shall be exempt supply. Being exempt, ITC should not be availed by company, though the bill in the name of company entitles it to avail ITC.
IMO in case the ownership does not rest with SG, section 15(2)(b) shall not be applicable since it can be presumed that SG has only installed the meter and cable was
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