2019 (1) TMI 1367 – AUTHORITY FOR ADVANCE RULINGS, HYDERABAD TELANGANA – 2019 (20) G. S. T. L. 482 (A. A. R. – GST) – Classification of services – “Works Contract” or “Composite Supply” – rate of tax – combination of services of excavation of sand including loading with machinery at reach, formation of Ramps and maintenance of Roads, transportation charges for the tractors/ tippers of sand from reach to stockyard and loading cost of sand from stockyard to lorries – difference of opinion.
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Held that:- Since there is no uniform opinion arrived by the Members representing Central Tax and State Tax and they have expressed two different views on classification of services and applicable rate of tax on the services rendered by the applicant, the application filed by M/s. R. Vidyasagar Rao Constructions, Plot No. 98 & 99, Lumbini layout, near Euro School, Gachibowli, Hyderabad-36 (GSTIN No. 36AAGFR6627L12Q), is being referred to the Appellate Authority for Advance Ruling for the State o
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the rate of tax applicable on the consideration received there for. 2. The applicant submitted the application in Form GST ARA-01 and Statement containing the applicant's interpretation of law & relevant facts and requested for advance ruling on classification of services rendered by them and rate of tax applicable. They have submitted a copy of Challan evidencing payment of application fee of ₹ 10,000/-. 3. A personal hearing was held in this case and the assessee have appeared for personal hearing on 3-4-2018 along with their Advocate Dr. T. Ramesh Babu and explained their case as under : (a) The applicant is a contractor to Telangana State Mineral Development Corporation Limited (TSMDC). TSMDC has entrusted the following work to the applicant: excavation of sand including loading with machinery at reach transportation of above sand from the reach to stockyard loading the so stocked sand to the lorries for further transportation by the contractee formation of ramps, ro
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n of the ramps and roads, the 'works contract' takes place. After formation of ramps and roads, the so formed immovable property would become the permanent property of the contractee. (d) The ramps and roads so formed, while certain of them would be submerged in water when the irrigation project comes into existence, certain of them would remain as they are for use by the public. (e) Therefore, the activity of the applicant would fit into the ambit of 'works contract' as defined under sub-section (119) of Section 2 of the GST Acts. Such works contract falls under paragraph No. 6(a) of Schedule-II to the GST Acts. (f) In respect of the rate of tax applicable, the applicant is of the view that they are required to pay CGST 2.5% + SGST 2.5% = 5% as given in the CBEC Notification No. 31/2017, dated 13-10-2017 issued in G.O. Ms No. 253, Revenue (CT-II) department dated 23-11-2017. (g) The applicant is also under strong belief that the activities they are rendering to the con
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as L1 Bidder by quoting ₹ 74.36 per CBM of sand for excavation of 15,60,000 CBM of sand from Block III, Damerakunta-III, over an extent of 52 Ha., at submergence areas of Annaram Barrage, Kaleshwaram Project and transport the same quantity of sand to nearby stockyard (within 1 Km from the submergence area) and again loading of sand into Lorries at stockyard. TSMDC had issued the letter of intent to the contractor on 27-1-2017 for execution of the agreement for excavation of the sand as mentioned above. (a) On perusal of the scope of the work specified in the said agreement, it is found that the contractor shall excavate sand and transport the same to the stockyard and again load the same into the lorries at stockyard. The equipment/vehicles and manpower required for the said activities is the responsibility of the contractor. The services to be rendered by the contractor as part of the agreement consists of the following components. (i) excavation of sand; (ii) transportation of
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Sand Mining Rules, 2015, for execution of the work. (e) It is the sole responsibility of the contractor to lay/ form required road from stockyard to nearby connectivity road for plying of lorries/vehicles, any incidental expenditure incurred and involved thereon for laying & maintenance of roads shall be borne by the contractor. 2. Thus it is very clear from the agreement entered between the contractor and the contractee, the main work to be rendered by the contractor involves excavation of sand at submergence areas of Annaram Barrage and transport the same quantity of sand to nearby stockyard and again loading of sand into lorries at stockyard. Laying of roads from stockyard to nearby connectivity roads for plying of lorries is incidental to transport of sand excavated from the submergence areas of Annaram Barrage to nearby stockyard. Hence the claim made by the applicant that the activity rendered by them falls under works contract is not tenable. 3. The service supplied by the a
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' and hence excavation of sand is the principal supply in the composite supply of the services rendered by the applicant. In view of the above discussion, the contention of the applicant that the impugned contract needs to be treated as 'Works contract' is not acceptable and hence the question of application of tax rate of 5% (2.5% + 2.5%) as per Notification No. 46/2017-CGST (Rate), dated 14-11-2017 and Notification No. 31/2017 of TGST Act in G.O.Ms. No. 23-11-2017 does not arise. 4. The alternate argument put forth by the applicant during the time of personal hearing is that even if the contract is treated as Composite supply other than 'Works Contract', the predominant and the object of the contract is 'transportation of goods' in a vessel i.e. container on which GST rate 5% (2.5% + 2.5%) is applicable and hence the applicant pleaded for the ruling of the same. 5. The Sl. No. 9 of the Notification No. 11/2017-Centra1 Tax (Rate), dated 28-6-2017 is extract
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alled. 2.5 Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation no. (iv)] (iv) Transport of goods in containers by rail by any person other than Indian Railways. 6 – (v) Goods transport services other than (i), (ii), (iii) and (iv) above. 9 – 6. The Tariff Heading 9965 (Goods transport services) specified against Sl. No. 9 covers five categories of services of goods transport. The claim of the applicant is that their composite supply falls under 'Transport of goods in a vessel.' Specified at (ii) under column (3) against Sl. No. 9. The said category of transport covers goods transport in a vessel. The 'vessel' referred to in the above said notification means ship/ large boat used for transport of goods by sea/inland waters. Hence the case on hand do not fall under '(ii) Transport of goods in a vessel.' as claimed by the applicant. The word 'vessel' has been defined u
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olumn (3) against Tariff Heading 9965 (Goods transport services) in the Notification No. 11/2017. 8. Thus in view of the above discussion, and the service rendered by the applicant being a composite supply with three components of services viz., (i) excavation of sand at submergence areas of Annaram Barrage, (ii) transportation of such excavated sand to stockyard nd (iii) loading of the sand into lorries at the stockyard; and the principle supply being excavation of sand as mentioned in the scope of work of the agreement between the applicant and TSMDC, theservices rendered by the applicant are classifiable as Excavating and Earthmoving Services under Heading 995433 of GST tariff and rate of tax applicable is 9% CGST + 9% SGST. II. Opinion expressed by the member representing State Tax: Facts: (a) The applicant is a contractor to Telangana State Mineral Development Corporation Limited (TSMDC). TSMDC has entrusted the following work to the applicant: Tender Document Reference: TSMDC/SAN
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ding cost of sand from Stockyard to lorries: 30% Agreement Dated 18-3-2017: Contractee: TSMD Corporation – Contractor: R. Vidya Sagar Rao – Partnership firm) Contractee accepted the tender submitted by the Contractor, who emerged as L1 Bidder by quoting ₹ 74.36 per CBM of sand for excavation of 15,60,000 CBM of sand from over an extent of 52 Ha. At submerged areas of Annaram Barrage, Kaleswaram Project and transport the same quantity of sand nearby Stockyard and again loading of sand into the lorries at Stockyard…….Page 2 & 3. Laying roads: It is the sole responsibility of the Contractor to lay/ form required road from stockyard to nearby connectivity road for plying of lorries/vehicles, any incidental expenditure incurred and involved for laying & maintenance of roads shall be borne by the Contractor…… Page 8. Letter of intent dated 27-1-2017: At its page 1 the acceptance of price for CBM consisting the above contract fixed at ₹ 74.36 and accepted and commu
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of Section 2 of the Central Goods and Services Tax Act, 2017, involving predominantly earth work (that is, constituting more than 75 percent. of the value of the works contract) provided to the Central Government, State Government, Union territory, local authority, a Governmental Authority or a Government Entity. 2.5 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 2. Secondly, he states the supply being composite supply it is Goods Transportation supply on vessel as per notification No. 11/2017, dated 28-6-2017 as per G.O.Ms No. 110, Revenue (CT-II) Department, dated 29-6-2017, which is as under : Sl. No. Chapter, Section or Heading Description of Service Rate (percent.) Condition (1) (2) (3) (4) (5) 9 Heading 9965 (Goods transport services) (i) Transport of goods by rail [other
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an Indian Railways. 6 – (v) Goods transport services other than (i), (ii), (iii) and (iv) above. 9 Analysis of the facts & Conclusions: 1. Before proceeding further, it needs to kept in view that in ₹ 74/- the same ratios as mentioned above are there for the independent components of supplies since there is no change in the denoted supplies in the tender and the agreement, the change is in overall price only. Basis for the agreement is the tender and such fact is not to be ignored. 2. For brevity in the foregoing paragraphs, TSMDC is referred to as 'receiver' and the applicant is as 'provider'. 3. In order to address the above questions, it is necessary to examine whether or not the work entrusted to the provider by the receiver is just for a supply simplicitor or does it involved with more than one 'supply' viz.: in combination of supply of goods and supply of services or 'supply of different services joined together' in the event of which the
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of excavation as such and the same is to be ascertained out of ₹ 30/- referred for loading charges for machinery at reach i.e. source where from the sand acquired. Such fact makes it clear that out such ₹ 30/- only a portion whatsoever is to be apportioned excavating sand from the source and the rest such would remains to be for loading the sand so culled out to the machinery available for transportation. 6. Therefore the first part being the excavation and loading work in this contract. This activity to be started with laying ramps and roads to enable the containers in which the excavated sand is to be loaded reach the resource of sand. As the provider only to do this job with his cost which means it is to be born out of ₹ 74…agreed upon between him and the recipient. 7. Therefore, formation of these ramps and roads in which supply of goods and services involved which amount to composite supply of works contract as defined under Section 2(119) of the Act. Such WCT
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ontractual terms it is very clear that this service is to be done by the provider only. Then only the so loaded lorries would ply on the so formed roads which needs to be maintained by the provider only Hence the last actions of the provider ends with maintenance of roads formed by him only which too require men and material/ service and labour which again amounts to Works contract. These roads also facilitate the transportation of sand. 12. Important to notice laying ramps and roads and maintenance thereof is not for the provider himself but it is a part of the whole activity. 13. Thus formation of ramps, internal roads, formation of external roads and their maintenance are works contract only but they are facilitating supplies to the main supply of transportation of sand from one place to other. Hence, transportation of goods needs aid of laying ramps and roads rather than the excavation needing laying of ramps and roads. 14. In view of the above analysis, the request of the applican
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In a composite supply the taxability under the scheme of the Act is on the basis of principle supply 18. Sub-section (30) of Section 2 of the TGST Act, 'Composite supply' is defined as: 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"; Example in for composite supply under the Act is as under : 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. 19. A plain reading of the above definition makes it clear that 'Composite supply' is one which consists more than one supply naturally bundled to each other and the example given above is one for the same amongst the
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of services and it is possible in these types of contracts. 22. The intention behind the contract is to shift the goods viz. sand from one place to other distinguishable from 'excavation' simplicitor. 23. The value of transportation being 32.5% and the value 7.5% i.e. of formation of internal ramps and roads and external roads and their maintenance which are interlinked and for transportation of sand put together comes to 45%. 24. Here, it is pertinent to go through the Section 8 of TGST Act, 2017: Section 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) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. 25. A careful reading of the above Section and keeping in view of the abov
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not been taken [Please refer to Explanation no. (iv)] (iii) Services of goods transport agency (GTA) in relation to transportation of goods (including used household goods for personal use). Explanation. – goods transport agency means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called. 2.5 Provided that credit of input tax charged on goods and services used in supplying the service has not been taken [Please refer to Explanation no. (iv)] (iv) Transport of goods in containers by rail by any person other than Indian Railways. 6 – (v) Goods transport services other than (i), (ii), (iii) and (iv) above. 9 28. The applicant is not engaged in transpiration of goods or passengers by rail, not engaged as a Goods Transport Agency also. 29. The left over tariffs are Transportation of goods by Vessel i.e. 2.5% CGST and 2.5% SGST, or 18% under residuary entry. 30. The applicant stated in the application for ruling and als
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r carry the disentitlement of input tax credit and the latter carries no such disentitlement. 35. In view of the above discussion, and the service rendered by the applicant supply with the components of services viz, (i) Laying internal ramps and roads, (ii) excavation of sand at submergence areas of Annaram Barrage, (iii) transportation of such excavated sand to stockyard and (iv) loading of the sand into lorries at the stockyard; and laying and maintenance of external roads within the price of ₹ 74/- per CBM is a composite supply and the principal supply being transportation of sand 'scope of work' of the agreement between the applicant and TSMDC, the services rendered by the applicant are classifiable as Goods Transporting by Vessel and GST tariff and rate of tax applicable is 2.5% CGST + 2.5% SGST subject to condition that the applicant not entitled to ITC to the extent mentioned in the proviso in column 5 of (v) entry as mentioned above as per G.O.Ms No. 110, Revenue
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